CH 4: Life Insurance Policy Provisions, Riders, Options

What is the benefit 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 it has the highest amount of insurance protection

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? A Children's rider B Additional insured rider C Family term rider D Spouse rider

C family term rider

What is the purpose of a fixed-period settlement option? A To settle the insurance company's liability B To provide a guaranteed income for life C To provide a guaranteed amount of money each month D To provide a guaranteed income for a certain amount of time

D to provide a guaranteed income for a certain amount of time

What limits the amount that a policyowner may borrow from a whole life insurance policy? A Cash value B Premiums paid C Amount stated in the policy D Face amount

A cash value

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A Length of income period B Amount of interest C Size of each installment D Predetermined length of time stated in the contract

C size of each installment

All of the following are dividend options EXCEPT A Paid-up additions. B Fixed-period installments. C Accumulated at interest D Reduction of premium.

B Fixed period installments

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? A 1 year B 2 years C 5 years D 7 years

B 2 years

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise 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 $50,000

Which settlement option provides a single beneficiary with income for the rest of his/her life? A Fixed Amount B Lump Sum C Retained Assets D Single Life

D single life

Which of the following is TRUE about a class designation? A Beneficiaries are not identified by name. B Beneficiaries must be part of the insured's immediate family. C It is not allowed. D It determines the succession of beneficiaries.

A beneficiaries are not identified by name

Which of the following statements about the reinstatement provision is true? A It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. B It permits reinstatement within 10 years after a policy has lapsed. C It provides for reinstatement of a policy regardless of the insured's health. D It guarantees the reinstatement of a policy that has been surrendered for cash.

A it requires the policyowner to pay all overdue premiums with interest before the policy is reinstated

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? A It is increased when extra premiums are paid. B It decreases over the term of the policy. C It remains the same as the original policy, regardless of any differences in value. D It is reduced to the amount of what the cash value would buy as a single premium.

D It is reduced to the amount of what the cash value would buy as a single premium.

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A Waiver of Premium B Payor Benefit C Jumping Juvenile D Juvenile Premium Provision

B Payor Benefit

According to the Entire Contract provision, a policy must contain A Buyer's guide to life insurance. B Listing of the insured's former insurer(s) for incontestability provisions. C A copy of the original application for insurance. D A declarations page with a summary of insureds.

C A copy of the original application for insurance.

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 Settlement Clause B Nonforfeiture Clause C Common Disaster Clause D Spendthrift Clause

C common disaster clause

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium? A If the daughter is disabled for more than 3 months B If the daughter is disabled for any length of time C If the father is disabled for more than 6 months D If the father is disabled for at least a year

C if the father is disabled for more than 6 months

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated information during the application process. What can they do? A Pay a decreased death benefit B Sue for the right to not pay the death benefit C Pay the death benefit D Refuse to pay the death benefit because of the misstatement on the application

C pay the death benefit

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called A Revocable designation. B Irrevocable designation. C Stirpes designation. D Class designation.

D class designation

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called A Accelerated benefit rider. B Living need rider. C Payor rider. D Cost of living rider.

D cost of living rider

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called A Waiver of cost of insurance. B Accelerated benefits. C Cost of living. D Guaranteed insurability.

D guaranteed insurability

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to A Purchase a term rider to attach to the policy. B Pay back all premiums owed plus interest. C Receive payments for a fixed amount. D Purchase a single premium policy for a reduced face amount.

D purchase a single premium policy for a reduced face amount

Children's riders attached to whole life policies are usually issued as what type of insurance? A Variable life B Adjustable life C Whole life D Term

D term

Which of the following is NOT typically excluded from life policies? A Self-inflicted death B Death that occurs while a person is committing a felony C Death due to war or military service D Death due to plane crash for a fare-paying passenger

D death due to a plane crash for a fare-paying passenger

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? A The insured's premiums will be waived until she is 21. B The premiums will become tax deductible until the insured's 18th birthday. C Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. D The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums.

A the insured's premiums will be waived until she is 21

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called A Paid-up additions. B One-year term purchase. C Accumulation at interest. D Reduction of premiums.

A paid-up additions

What kind of policy allows withdrawals or partial surrenders? A Term policy B Variable whole life C Universal life D 20-pay life

C universal life

The automatic premium loan provision is activated at the end of the A Grace period. B Free-look period C Elimination period. D Policy period.

A grace period

An insured receives an annual life insurance dividend check. What term best describes this arrangement? A Cash option B Reduction of Premium C Annual Dividend Provision D Accumulation at Interest

A cash option

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? A Second-to-Die B Common Disaster C Accidental Death D Survivor Life

B common disaster

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? A Adjustable life B Term life C Limited pay D Universal life

D universal life