Chapter 2- Policy Provisions, Options and Riders

Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy? $400 $800 $2,000 $4,000

4,000

If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?

A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age.

Which of these is considered to be a Living Benefit option in a life insurance policy?

Accelerated death benefit

Which of the following is considered to be an alternative to a life settlement?

Accelerated death benefit rider

A double indemnity provision in a life insurance policy pertains to an insured's death caused by a

Accident

Of the following dividend options, which of these is taxable?

Accumulation at interest

Which of the following is NOT part of an insurance contract? Policy Application Riders Certificate of Authority

Certificate of Authority

Ownership of a life insurance policy may be temporarily transferred with

Collateral assignment

Life insurance policies will normally pay for losses arising from

Commercial aviation

All of these are standard exclusions found in a life insurance policy EXCEPT

Disability

What is the name of the provision which states that a copy of the application must be attached to the policy when issued?

Entire contract

Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n)

Guaranteed insurablility rider

What is the purpose for having an accelerated death benefit on a life insurance policy?

It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill

A guaranteed issue insurance policy has no

Medical Underwriting

What is an insurer required to do when faced with an error made under the Misstatement of Age provision?

Pay age-corrected benefits

Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?

Payor Benefit

Which situation accurately describes a reduced paid-up nonforfeiture option?

Policy has a decreased face amount

Which of the following is a reinstatement condition? Proof on insurability Changes in the insuring clause Premium increase Premium decrease

Proof on insurability

An endorsement found in an insurance plan which modifies the provisions of the policy is called

Rider

James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount? The original face amount will be paid to the beneficiary The policy will be voided with no death benefits paid The death benefit paid will be what the premium would have purchased at the correct age The amount of premiums paid will be returned with interest

The death benefit paid will be what the premium would have purchased at the correct age

Under a life insurance policy, what does the insuring clause state? The agent's obligation to provide the proper amount of coverage The insurer's obligation to return all premiums upon an approved death claim The insurer's obligation to pay a death benefit upon an approved death claim The agents obligation to pay a death benefit upon an approved death claim

The insurer's obligation to pay a death benefit upon an approved death claim

All of the following riders can increase the death benefit amount EXCEPT

Waiver of premium

All of these are valid policy dividend options for a life insurance policyowner EXCEPT

accumulate without interest

A waiver of premium rider allows an insured to waive premium payments if the insured is

completely and permanently disabled

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid

minus indebtedness and without interest

The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of

past due premiums that have not been paid by the end of the grace period

A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a

payor rider

The two major actions required for a policyholder to comply with the Reinstatement Clause are provide evidence of insurability, agree to a new incontestable period provide evidence of insurability, pay past due premiums pay past due premiums, agree to a new incontestable period pay past due premiums, agree to a reduction in coverage

provide evidence of insurability, pay past due premiums

A life insurance policyowner does NOT have the right to

revoke an absolute assignment

Loans obtained by a policyowner against the cash value of a life insurance policy are treated as taxable income would not be treated as taxable income are limited by the face amount of the policy would be subject to a Federal estate tax

would not be treated as taxable income