Ch. 10 Quiz Riders

Exercise 10.A 1. Nelson increases the face amount of his life insurance policy without having to submit proof of insurability. 2. Cody's policy will pay an additional amount at death that equals the premiums paid on the policy up to that time. 3. Sharon's policy automatically increases the amount of insurance protection according to an inflation index.

1. B. Future Increase Option Rider. 2. A. Return of premium rider 3. C. Cost of living rider

13. All of the following statements about accelerated living benefits are correct EXCEPT A. the proceeds must be spent on the insured's medical expenses B. they are standard in life insurance policies C. they allow access to the policy's face value D. they are provided at no additional cost to the policy owner

A. Accelerated benefits provisions are standard in life insurance policies and are included at no additional cost to the policyowner. They allow access to the policy face value if the insured suffers from a terminally illness or injury. (The death benefit, less any accelerated payment, is still payable) The insured can spend the proceeds in any manner. - Are standard in most individual and group life insurance policies. Through these provisions, people who are terminally or chonically ill have tax free access to policy death benefits. People suffering from AIDS, cancer, heart disease, Alzheimers disease, or other terminal or severe chronic illnesses often experience devastating financial hardship. Effect On Death Benefit - Whatever amount is withdrawn will be deducted from the face amount when death occurs. Accelerated death benefits are received income tax free as long a the insured is terminally ill. This provision is given without an increase in premium.

9. Which of the following is a guarantee that at specified ages, dates, or events, the insured may buy additional insurance without a medical exam? A. Guaranteed insurability B. Return of premium C. Accidental death D. Waiver of premium

A. Guaranteed Insurability -Allows a policyholder to purchase specified amounts of additional insurance without evidence of insurability. The new insurance is issued at standard rates on the basis of the insureds attained age when the option is exercised. In most cases, this benefit allows an insured to purchase additional insurance coverage at three year intervals beginning with the policy anniversary nearest the insureds 25th birthday and terminating with the anniversary nearest the insureds 40th birthday. The amount of additional insurance that may be purchased on each of the specified dates is equal to the face of the original policy or $10,000, whichever is less.

10. The amount of money paid by an accidental death benefit rider if the insured dies in an accident is referred to as A. the principal sum B. the principle sum C. the capital sum D. the capitol sum

A. The Principal Sum Accidental Death and Dismemberment -This also provides benefits for death due to an accident, or for the loss of one or more hands, feet, arms, legs or loss of sight. The principal sum would be paid for death or loss of two or more of the primary parts. The capital sum is paid for loss of one of the primary parts.

5. Alberta is concerned that if she became totally and permanently disabled, she would not be able to pay her life insurance premiums and the policy will lapse. Which type of rider should she consider to protect against this possibility? A. Waiver of premium rider B. Accidental death and disability rider C. Disability income rider D. Payor rider

A. Waiver of Premium rider -The wavier of premium rider found in a life insurance contract states that if an insured becomes permanently and totally disabled during the term of the policy, premium payments will be waived during the period of disability. The contract will remain in force just as if the premiums were paid. AN additional premium is charged for this benefit, and it is subject to a waiting period (typically three to six months). if the insured is still totally disabled after this period, premiums are waived retroactively from the date of disability.

6. Which of the following riders is increasing term insurance that always equals the total premiums paid during the time the policy is in effect? A. Guaranteedinsurability B. Return of premium C. Accidental death D. Waiver of premium

B. Return of Premium -This rider was developed primarily a sales tool to enable the agent to say, for example, "I addition to the face amount payable at your death, we will return all premiums paid if you die within the first 20 years". The rider is simply an increasing amount of term insurance that always equals the total of premiums paid at any point during the effective years. In reality, the rider does not return premium but pays an additional amount at death that equals the premiums paid up to that time, as long as the death falls within the time specified by the rider. By purchasing this rider, the policy owner is buying term insurance and is charged for it accordingly.

1. Garth has a $100,000 whole life insurance policy that has been in effect for 10 years. The policy includes a double indemnity rider. Garth jumps off a bridge and dies. How much will the policy pay? A.Nothing because all policies exclude death resulting from suicide B. $100,000 because the base policy excludes death resulting from suicide, but the multiple indemnity rider does not C. $100,000 because the multiple indemnity rider excludes death resulting from suicide, but the base policy's suicide exclusion has expired D. $200,000 dollars because death was accidental

C. 100,000 because the multiple indemnity rider excludes death resulting from suicide, but the base policy suicide exclusion has expired. Double indemnity rider - An accidental death benefit rider may be added to a life insurance. This benefit is sometimes referred to as double indemnity because it provides double the face amount of the policy if the insured dies due to an accident. An additional premium will be charged. To be covered, death must occur within 90 days of an accident. The basic purpose of this restriction is to make sure that the accident is the only cause of death.

2. Tammy has a total of $10,000 loan and interest outstanding against her $100,000 policy. The policy has a double indemnity rider. Tammy is killed in an automobile accident. How much will the policy pay? A. Nothing until the outstanding loan is repaid B. $180,000 C. $190,000 D. $200,000

C. 190,000 - The policy will pay a death benefit of 200,000 (double the policy) minus the outstanding loan policy. Its double the policy because of the double indemnity ride. (Tammy was killed in an automobile accident)

7. Double payment may be made because of which occurrence? A. Guaranteed insurability B. Return of premium C. Accidental death D. Waiver of premium

C. Accidental Death - The Double Indemnity Rider will pay twice the amount of the policy if the death is made by an accident.

3. Kumar has a life insurance policy with a rider that will pay him $1,000 per month if he is totally and permanently disabled. Which type of rider does he have? A. Waiverofpremiumrider B. Accidental death and disability rider C. Disability income rider D. Payor rider

C. Disability income rider -This rider waives premium payments while the policy owner is totally disabled and pays specified amount each month (income) to the policy owner while the disability continues. The amount of the income is usually based on the face amount of the policy - for instance, $X per month per $1000 of coverage. Ex. If a policy owner has the disability income rider on a $100,000 policy and the company guarantees $10 per month on each $1,000 of coverage, the policy owner will receive $1,000 per month.

11. The amount of money paid by an AD&D rider if the insured is disabled in an accident is referred to as A. the principal sum B. the principle sum C. the capital sum D. the capitol sum

C. The Capital Sum Accidental Death and Dismemberment -This also provides benefits for death due to an accident, or for the loss of one or more hands, feet, arms, legs or loss of sight. The principal sum would be paid for death or loss of two or more of the primary parts. The capital sum is paid for loss of one of the primary parts.

12. For the waiver of premium to apply under a waiver of premium rider, the disability must be A. total B. permanent C. total and permanent D. total, permanent, and disfiguring

C. Total and permanent Waiver of Premium -The wavier of premium rider found in a life insurance contract states that if an insured becomes permanently and totally disabled during the term of the policy, premium payments will be waived during the period of disability. The contract will remain in force just as if the premiums were paid. AN additional premium is charged for this benefit, and it is subject to a waiting period (typically three to six months). if the insured is still totally disabled after this period, premiums are waived retroactively from the date of disability.

4. Paul has a life insurance policy on his son for which he pays all the premiums. A rider to this policy states that if Paul becomes permanently and totally disabled, the premiums will be paid until his son reaches age 21, at which point his son will take over the premium payments. Which type of rider does he have? A. Waiver of premium rider B. Accidental death and disability rider C. Disability income rider D. Payor rider

D. Payor Rider - This rider or provision may be added to a. life insurance contract which provides for the continuance of insurance coverage on the life of a juvenile in the event of the death or total disability of the individual responsible for the payment of the premiums ( a parent or guardian). The premium payor must prove insurability. This benefit provides that premiums will be waived until the insured attains a specified age or the maturity date of the contract, whichever is earlier, in the event that the payor dies or becomes totally disabled

8. Which of the following is waiver of all future premiums in the event of total and permanent disability? A. Guaranteed insurability B. Return of premium C. Accidental death D. Waiver of premium

D. Waiver of premium -The wavier of premium rider found in a life insurance contract states that if an insured becomes permanently and totally disabled during the term of the policy, premium payments will be waived during the period of disability. The contract will remain in force just as if the premiums were paid. AN additional premium is charged for this benefit, and it is subject to a waiting period (typically three to six months). if the insured is still totally disabled after this period, premiums are waived retroactively from the date of disability.