Ch. 3: Life Policy Provisions, Riders and Options
Which of the following most likely would NOT be required to complete continuing education hours in the state? a. Nonresident producers b. Insurance brokers c. Resident producers d. Insurance consultants
a.
The Ownership provision entitles the policyowner to do all of the following EXCEPT a. Set premium rates. b. Receive a policy loan. c. Assign the policy. d. Designate a beneficiary.
a.
According to the Entire Contract provision, a policy must contain a. Listing of the insured's former insurer(s) for incontestability provisions. b. A copy of the original application for insurance. c. A declarations page with a summary of insureds. d. Buyer's guide to life insurance.
b.
During partial withdrawal from a universal life policy, which portion will be taxed? a. Loan b. Interest c. Cash value d. Principal
b.
What is the other term for the cash payment settlement option? a. Proceeds. b. Lump sum. c. Principal amount. d. Face amount.
b.
What are the 3 nonforfeiture options?
Cash Surrender Value, Extended Term, and Reduced Paid-up Insurance
Which rider allows an insured to purchase additional coverage without evidence of insurability?
Guaranteed insurability rider
What constitutes the entire contract?
The insurance policy with a copy of the application, and any riders and amendments.
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a. Cost of living provision. b. Nonforfeiture option. c. Guaranteed insurability rider. d. Paid-up additions option.
c.
What is the benefits of choosing extended term as a nonforfeiture option? a. It allows for coverage to continue beyond maturity date. b. It can be converted to a fixed annuity. c. It has the highest amount of insurance protection. d. It matures at age 100.
c.
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? a. Reinstatement. b. Reduced paid-up option. c. Automatic premium loan. d. Extended term.
c.
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? a. Alien b. Domestic c. Unauthorized d. Foreign
d.
If an insurer and insured have a dispute about whether a particular loss is covered under a policy, which authority will settle the dispute? a. Commissioner b. Federal Insurance Regulation Board c. Consumer Protection Agency d. Court system
d.
Under which of the following circumstances would an insurer pay accelerated benefits? a. A couple is nearing retirement and needs a steady stream of income. b. An insured is looking for a way to put her daughter through college. c. A couple wants to build a house and would like to make a larger down payment. d. An insured is diagnosed with cancer and needs help paying for her medical treatment.
d.
What happens when a policy is surrendered for its cash value? a. Coverage ends but the policy can be reinstated at any time. b. The policy can be reinstated by paying back all policy loans and premiums. c. The policy can be converted to term coverage. d. Coverage ends and the policy cannot be reinstated.
d.
All of the following are true regarding the guaranteed insurability rider EXCEPT a. This rider is available to all insureds with no additional premium. b. The insured may purchase additional coverage at the attained age. c. The insured may purchase additional insurance up to the amount specified in the base policy. d. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events.
a.
The accelerated benefits provision will provide for an early payment of the death benefit when the insured a. Becomes terminally ill. b. Needs to borrow money. c. Has earned enough credits. d. Becomes disabled.
a.
Which of the following policy components contains the company's promise to pay? a. Entire contract provision. b. Insuring clause. c. Premium mode. d. Owner's rights.
b.
Which is TRUE about the cash surrender nonforfeiture option? a. The policyholder receives the original cash value of the policy. b. Funds exceeding the premium paid are taxable as ordinary income. c. After the cash surrender, the insured is covered for a grace period of 1 month. d. The policy remains active for some time after the policyholder opts for cash surrender.
b.
Which of the following statements about the reinstatement provision is true? a. It guarantees the reinstatement of a policy that has been surrendered for cash. b. It requires the Policyowner to pay all overdue premiums with interest before the policy is reinstated. c. It permits reinstatement within 10 years after a policy has lapsed. d. It provides for reinstatement of a policy regardless of the insured's health.
b.
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a. $0 b. $50,000 (50% of the policy value) c. $100,000 d. $300,000 (triple the amount of policy value)
c.
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the a. Aleatory contract. b. Complete contract. c. Entire contract. d. Total contract.
c.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a. One-year term option. b. Paid-up option. c. Accelerated endowment. d. Paid-up additions.
a.
When an insurance producer negotiates for an insurance contract on behalf of a client, the producer is acting as a(n) a. Broker b. Solicitor c. Consultant d. Agent
a.
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a. The same as the original policy minus the cash value. b. Equal to the original policy for as long as the cash values will purchase. c. In lesser amounts for the remaining policy term of age 100. d. Equal to the cash value surrendered from the policy.
b.
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident? a. Spendthrift Clause. b. Settlement Clause. c. Nonforfeiture Clause. d. Common Disaster Clause.
d.
Which of the following settlement options in life insurance is known as straight life? a. Fixed amount b. Life income c. Single life d. Life with period certain
b.
Which of the following statements is TRUE about a policy assignment? a. It authorizes an agent to modify the policy. b. It transfers rights of ownership from the owner to another person. c. It is the same as a beneficiary designation. d. It permits the beneficiary to designate the person to receive the benefits.
b.
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a. Additional insured rider. b. Family term rider. c. Spouse rider. d. Children's rider.
b.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a. Juvenile rider. b. Payor rider. c. Other-insured rider. d. Change of insured rider.
c.
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and expertise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a. $20,000 b. $25,000 c. $50,000 d. The face amount will be determined by the insurer.
c.
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? a. $0 b. $100,000 c. $200,000 d. $100,000 plus the total of paid premiums
c.
If an insured continually uses the automatic premium loan option to pay the policy premium, a. The cash value will continue to increase. b. The insurer will increase the premium amount. c. The policy will terminate when the cash value is reduced to nothing. d. The face amount of the policy will be reduced by the automatic premium loan amount.
c.
Life income joint and survivor settlement option guarantees a. Payout of the entire death benefit. b. Equal payments to all recipients. c. Income for 2 or more recipients until they die. d. Payment of interest on death proceeds.
c.
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the a. Insuring clause. b. Misstatement of Age clause. c. Incontestability clause. d. Reinstatement clause.
c.
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy? a. Decreasing term. b. Premature death. c. Return of premium. d. Cost of living.
c.