Chapter Exam 4 part 2: Life Insurance- Provisions, Options and Riders

B owns a whole life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amount of

additional whole life coverage at a specified time

K pays on a $20,000 20-year endowment policy for 10 years and dies from an automobile accident. how much will the insurance company pay the beneficiary?

$20,000 death benefit

T took out a $50,000 life insurance policy with an accidental death ad dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000 the suicide occurred outside the suicidal clause period (normally 1-2 years)

S buys a $50,000 whole life policy with a $50,000 accidental death and dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

50,000

Which rider provides coverage fora. child under a parent's life insurance policy?

Child term rider

Which if these actions is taken when a policy owner uses a life insurance policy as collateral for a bank loan ?

Collateral assignment

Which of these is NOT considered to be a right given to a policyowner?

Modify a provision in the insurance contract

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

P will receive declared dividends

a provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

Policy loan provision

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices ?

Variable Universal life

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled ?

a payor clause

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called

accidental death & dismemberment rider (AD&D)

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

accidental death and dismemberment clause- due to accident on for the loss of one or more hands, feet, a rim, legs, or loss of sight

Which of the following dividend options results in taxable income to the policy owner?

accumulation of interest

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that l had understated her age o the application. Under the misstatement of age provision, the insurer will:

adjust the death benefit to a reduced amount

What action can a policy owner take if an application for a bank loan requires a collateral?

assign policy ownership to the bank

When does a guaranteed insurability rider allow the insured to buy additional coverage ?

at future dates specified in the contract with no evidence of insurability required

S has a whole life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made ?

automatic policy loan

p died 5 years later after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by p during the application process. Which of these actions will the insurer take?

beneficiary will be paid the death benefit. The incontestable clause prevents the insurer from canceling the contract even for a material misrepresentation

Variable whole life insurance can be described as:

both an insurance and securities product

a policy loan is made possible by which life insurance policy feature?

cash value provision

N is covered by a term life policy and does not make the required premium payment which was due august 1. N dies September 15. What action will the insurer take ?

claim will be denied-policy would have lapsed due to nonpayment by September 15

How are surrender charges dedicated in a life policy with a rear-end loaded provision?

deducted when the policy is discontinued.

Which provision prevents an insurer from changing the terms of the contract with the policy owner be referring to documents not found within the policy itself?

entire contract provision

D is the policy owner and insured for a $50,000 life insurance policy. The beneficiary is D' wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife.

ex-wife

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

exclusions-are specified hazards listed in a policy for which benefits will not be paid

An insured is past due on his life insurance premium, but is still within the Grace period. What will the beneficiary receive if the insured dies during this grace period?

full face amount minus any past due premiums.

All of these statements about the waiver of premium provision are correct, EXCEPT:

insured must be eligible for social security disability for claim to be accepted

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is call a(n):

insuring clause- sets forth the company's basic promise to py benefits upon the insured's death

how are policy owner dividends treated in regards to income tax ?

interest on accumulations is taxed

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:

interest only

the accidental death and dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:

is blinded in an accident

Which of these are NOT an example of a Nonforfeiture option?

life income

An insured's inability to perform two or more activities of daily living may trigger which type of rider?

long term care

Which of the following statements is CORRECT about accelerated death benefits

must have terminal illness to qualify

all of these statements concerning settlement options are true, EXCEPT:

only the beneficiary may select

a young married teacher has two children and owns a whole life policy. If the teacher wants an increasing death benefit to protect against inflation, the teacher should select which of the following dividend options?

paid-up additional insurance.

All of the following statements are true regarding a policy's Grace period, EXCEPT:

past due premiums are waived

Which life insurance rider typically appears on a juvenile life insurance policy?

payor benefit rider

M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the:

policy proceeds

What benefit does the payor clause on juvenile life policy provide?

premiums are waived if the payor becomes disabled

Which of these provisions require proof of insurability after a policy has lapsed?

reinstatement

J let her life insurance policy lapse 8 months due to nonpayment. She can reestablish coverage under which of the following provisions

reinstatement provision

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

return of premium rider

What is the suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide.

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

waiver of premium

What does the ownership clause in life insurance policy state?

who the policy owner is and what rights the policy owner is entitled to

A return of premium life insurance policy is

whole life and increasing term