4 Common Life Insurance Contractual Provisions and Riders

What is a collateral assignment?

A collateral assignment assigns the policy to another as collateral for a loan. A collateral assignment transfers only certain policy rights to a creditor.

The purpose of the guaranteed insurability rider for a life insurance policy is to Select one: A. Guarantee the insured's future insurability even though he or she might develop poor health. B. Allow the insurer the option of nonrenewing the policy if the insured misrepresents his or her insurability on the application. C. Guarantee the insured's future insurability even though he or she might allow the policy to lapse due to nonpayment of the premium. D. Allow the insurer the option of canceling the policy if the insured misrepresents his or her insurability on the application.

A. Guarantee the insured's future insurability even though he or she might develop poor health.

An insured with an accelerated death benefits rider attached to his life insurance policy has the right to receive some or all of the available life insurance proceeds before death occurs if Select one: A. He or she contracts a catastrophic or terminal illness. B. He or she becomes totally disabled before a certain age. C. He or she becomes unemployed for a period that exceeds one year. D. He or she becomes seriously injured as a result of an accident.

A. He or she contracts a catastrophic or terminal illness.

The purpose of the suicide clause in a life insurance policy is to Select one: A. Provide the insurer with some protection against an insured who purchases a life insurance policy with the intention of committing suicide. B. Enable the insurer to retain paid premiums if an insured commits suicide and the insurer denies the claim. C. Provide payment of death proceeds anytime during the policy period as a public service to the family members. D. Exclude all death benefits that result from suicide to discourage policyholders who might contemplate ending their lives.

A. Provide the insurer with some protection against an insured who purchases a life insurance policy with the intention of committing suicide.

Malvern Life provides ordinary life insurance at the following premiums: Age Premium 25 $10 per $1,000 of insurance 26 $11 per $1,000 of insurance Lee purchases $110,000 of insurance for $1,100 per year, stating her age as 25 rather than her correct age of 26. How much will Malvern Life pay if Lee dies? Select one: A. $0 B. $89,000 C. $100,000 D. $110,000

C. $100,000 CorrectCorrect. The misstatement of age provision states that if the insured's age is misstated, the death benefit will be the amount the premium paid would have purchased at the correct age. ($1,100÷ $11 = 100; 100 X $1,000 of coverage, or $100,000).

A reinstatement clause in a life insurance policy Select one: A. Continues a life insurance policy in force for 30 days after the premium due date, allowing the policyowner the opportunity to pay the overdue premium to reinstate the policy. B. Continues a life insurance policy in force for 60 days after the premium due date, allowing the beneficiaries the opportunity to pay the overdue premium to reinstate the policy. C. Gives the policyowner the right to reinstate a life insurance policy that has lapsed for nonpayment of premium. D. Gives the insurer the option, but not the obligation, to reinstate policies for lapsed policyholders who wish to reactivate coverage.

C. Gives the policyowner the right to reinstate a life insurance policy that has lapsed for nonpayment of premium.

Which one of the following best describes "double indemnity" regarding a life insurance policy? Select one: A. Death as the result of suicide will pay no more than half the face value. B. The death benefit is doubled if death occurs in the first two years. C. The death benefit doubles if death is the result of an accident. D. If two policies are issued on the same life, only one policy must pay in the event of death.

C. The death benefit doubles if death is the result of an accident. CorrectCorrect. "Double indemnity" refers to the accidental death benefit policy provision that doubles the face amount of insurance if the insured dies as a result of an accident.

All of these are dividend options for life insurance policies, EXCEPT: Paid-up additions Cash surrender value Cash option Premium reduction option

Cash surrender value

The assignment clause of a life insurance policy provides which one of the following? Select one: A. Dividends are assigned in accordance with the option selected. B. The order of beneficiaries is assigned by a formula. C. If the policyowner and the insured are not the same person, policy rights are assigned to the insured. D. Ownership rights in the policy can be transferred to another party.

D. Ownership rights in the policy can be transferred to another party.

A cash value life insurance policy may allow a loan to be taken against the policy cash value. What happens if the insured dies before repaying the loan? Select one: A. The obligation is forgiven. B. Repayment becomes an obligation of the insured's estate. C. No insurance payment is made. D. The death benefit amount is reduced by the outstanding loan amount.

D. The death benefit amount is reduced by the outstanding loan amount.

Which one of these life insurance settlement options pays death benefits in fixed amounts at predetermined intervals? -Life income option -Fixed-period option -Interest option -Fixed-amount option

Fixed-amount option

What is an accelerated death benefit rider?

In the case of a catastrophic or terminal illness the insured may need to access life insurance benefits to finance medical expenses before death

What is Waiver of premium rider?

Under the waiver of premium rider, the insurer agrees to waive the payment of any premium falling due while the policyowner or insured is disabled, as defined in the waiver of premium provision. To be eligible for the benefit, the policyowner must have incurred a disability before the age stipulated in the contract.

What are some dividend options under life insurance?

• Cash option • Accumulated option • Premium reduction option • Paid-up additions • One-year term insurance

The waiver of premium rider that can be added to a life insurance policy Select one: A. Eliminates premium payments during a period of unemployment if the duration of the unemployment is one year or more. B. Reduces or waives premium payments for a whole life policy when the insured reaches a maximum age threshold. C. Reduces or waives premium payments for a whole life policy if interest rates exceed an established percentage. D. Waives premium payments during a period of disability as defined in the policy if the disability occurs before a stipulated age.

D. Waives premium payments during a period of disability as defined in the policy if the disability occurs before a stipulated age.