Chapter Exam Policy, Provisions, Options, and Riders
How is a life insurance policy dividend legally defined?
A return of excess premium and not taxable
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
What is an insurance policy's grace period
Period of time after the premium is due but the policy remains in force
What does the guaranteed insurability option allow an insured to do>
Purchase additional coverage with no evidence of insurability required
Which of these is NOT a characteristic of the Accelerated Death Benefit option?
The benefit can be offered as a rider at a specific extra cost or may be at no cost
Which of these is considered to be a Living Benefit option in a life insurance policy?
accelerated death benefit
Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness?
accelerated death benefit
Which of the following is considered to be an alternative to a life settlement?
accelerated death benefit rider
The double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n)
accident
All of these are common exclusions to a life insurance policy EXCEPT
accidental death
All of these are valid policy dividend options for a life insurance policyowner EXCEPT
accumulate without interest
Of the following dividend options, which of these is taxable?
accumulation at interest
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?
accumulation at interest option
An error was made on Mary's life insurance application. Which of the following areas are errors commonly made on applications for which the incontestable clause does NOT apply? Marital status Age Address Income
age
What are collateral assignments normally associated with?
bank loans
Which of the following is NOT part of an insurance contract?
certificate of authority
A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n)
collateral assignment
Ownership of a life insurance policy may be temporarily transferred with a(n)
collateral assignment
Life insurance policies will normally pay for losses arising from
commercial aviation
In what part of an insurance policy are policy benefits found?
declarations
All of these are standard exclusions found in a life insurance policy EXCEPT
disability
A life insurance policyowner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability?
disability income rider
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
Which of these would limit a company's liability to provide insurance coverage?
exclusion
Which of the following is NOT a common life insurance policy rider?
extended term
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)
guaranteed insurability rider
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 insurability rider
Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake>
incontestable clause
Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake?
incontestable clause
When does a life insurance policy's waiver of premium take effect?
insured becomes totally disabled
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance polcy?
interest only
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?
interest only
Which of these is NOT considered to be a common life insurance nonforfeiture option?
life income annuity
A guaranteed issue insurance policy has no
medical underwriting
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
Which of these is NOT a valid policy dividend option?
monthly income payments
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE?
net death benefit will be reduced if the loan is not repaid
A whole life policy option where extended term insurance is selected is called a(n)
nonforfeiture option
A life insurance policy can be surrendered for its cash value under which policy provision?
nonforfeiture options
A provision in a whole life policy that allows a policyowner to terminated the policy in return for a reduced paid-up policy of the same type is called a(n)
nonforfeiture provision
A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n)
partial surrender
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of
past due premium that have not been paid by the end of the grace period
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
Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
payor benefit
A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n)
payor rider
Which situation accurately describes a reduced paid-up nonforfeiture option?
policy has a decreased face amount
When an accidental death benefit is added to a whole life policy, how does this affect the policy's cash value?
policy's cash value is not affected
Which of the following is a reinstatement condition?
proof of insurability
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST
provide evidence of insurability to the insurer
The two major actions required for a policyholder to comply with the Reinstatement Clause are
provide evidence of insurability, pay past due premiums
What does the guaranteed insurability option allow a insured to do?
purchase additional coverage with no evidence of insurability required
All of the following are considered to be a nonforfeiture options available to a policyowner EXCEPT
reduction of premium
All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT
reduction of premium
A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?
reduction of premium dividend option
Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?
results
A life insurance policyowner does NOT have the right to
revoke an absolute agreement
An endorsement found in an insurance plan which modifies the provisions of the policy is called a(n)
rider
An insurer can be protected from adverse selection with which policy provision?
suicide clause
An insurer can be protected from adverse selection with which policy provsion?
suicide clause
Which of these is NOT a characteristic of the Accelerated Death Benefit option?
the benefit can be offered as a rider at a specific extra cost or may be at no cost
Under a life insurance policy, what does the insuring clause state?
the insurer's obligation to pay a death benefit upon an approved death claim
A whole life insurance policy accumulates cash value that becomes
the policy loan value which the insured may borrow against
Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?
the policy may be paid early using policy dividends
Pat owns a 20-pay life policy with a paid up-dividend option. Which of the following statements is true?
the policy may be paid up early by using policy dividends
If an insured dies during the grace period with no premiums paid
the policy would be payable, minus the premium account
Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,
the protection ends
All of the following riders can increase the death benefit amount EXCEPT
waiver of premium
Which of these is considered to be a Living Benefit option in a life insurance policy?
waiver of premium
Loans obtained by a policyowner against the cash value of a life insurance policy
would not be treated as taxable income
loans obtained by a policyowner against the cash value of a life insurance policy
would not be treated as taxable income
