CHAPTER 3

What type of insurance would be used for a Return of Premium rider?

Increasing Term

an insured committed suicide one year after his life insurance policy issued

refund the premium paid

which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

automatic premium loan

What is the other term for the cash payment settlement option?

Lump sum

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Policy premium in a reinstated policy will be set according to the insured's original age.

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy?

Substitute insured rider

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then 1. The benefit is subject to the exclusionary rule. 2. IRS has no jurisdiction. 3. The benefit is received as taxable income. 4. The benefit is received tax free.

4. The benefit is received tax free

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?

50,000 it would remain the same as when it purchased

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

the rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

waiver of premium

a father purchases a life insurance policy on his teenage daughter and adds the pay benefit rider. in which of the following scenarios will the rider waive the payment of premium?1. if the daughter for any length of time2. if the father is disabled for more than 6 months3. if the father is disabled for at least a year4. if the daughter is disabled for more than 3 months

if the father is disabled for more than 6 months