Exam 2: Chapter 3: Life Provisions

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? A: Paid-Up Additional Insurance B: Accumulate at Interst C: Reduced Premiums D: Cash

A: Paid-Up Additional Insurance

All of the following statements are true regarding a policy's Grace period EXCEPT: A: Past due premiums are waived B: Policy loans may still be made C: Full coverage continues D: Grace period terms are stated in the policy

A: Past due premiums are waived Premiums due are NOT waived during a policy's Grace period

The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and A: the initial premium B: Agreeing to physical examination C: Delivery of policy D: Disclose of any medical conditions

A: the initial premium The Consideration clause states that the policyowner's consideration consists of a completed application and the first initial premium

A policy loan is made possible by which of these life insurance policy features? A: Extended term provision B: Cash value provision C: Owner's rights provision D: Consideration clause

B: Cash value provision The Cash value provision makes a policy loan possible

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT: A: Fixed Period B: Interest Only C: Fixed Amount D: Life Income

B: Interest Only The interest only does NOT involve the systematic liquidation of the death proceeds

Which statement is TRUE in regards to a policy loan? A: Past-due interest payments not paid after 3 months will void the policy B: Past-due interest on a policy loan is added to the total debt C: Insurance companies can send delinquent interest accounts to a collection agency D: Insurance companies can send delinquent interest accounts to a collection agency

B: Past-due interest on a policy loan is added to the total debt Interest on a loan which is not paid when due is added to the total debt

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled A: Family Maintenance clause B: Payor clause C: Assignment provision D: Automatic Premium Loan provision

B: Payor clause A Payor clause ensures that premiums will be waived for a Juvenile Life policy if the policyowner becomes disabled

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? A: Accelerated death benefit rider B: Return of premium rider C: Family income rider D: Term rider

B: Return of premium rider

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached A: Accelerated Benefits B: Waiver of Premium C: Cost of Living D: Return of Premium

B: Waiver of Premium The Waiver of Premium is a rider on a life insurance policy that guarantees that the premium will be paid if the insured is disability for a specified period of time

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n) A: Elimination B: exclusion C: limitation D: exception

B: exclusion Exclusions are features of life insurance of a life insurance policy stating that the policy will not cover certain risks

What id the Suicide provision designed to do? A: Decline an application who is contemplating suicide B: safeguard the insurer from an application who is contemplating suicide C: Protect the insurer from ever paying a claim that results from suicide D: Allows the insurer the option to pay a death benefit in the event of suicide

B: safeguard the insurer from an application who is contemplating suicide The purpose of a Suicide provision id to protect the insurer against the purchase of a policy in contemplation of suicide

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount? A: Accelerated Benefits provision B: Entire Contract C: Accidental Death of Dismemberment cluase D: Consideration clause

C: Accidental Death of Dismemberment cluase An AD&D clause provides benefits for death due to accident or for the loss of one or more hands, feet, arms, legs, or loss of sight.

Which of the following Dividend options results in taxable income to the policyowner? A: Paid-Up Additions B:Cash C: Accumulation at Interest D: Reduced Premium

C: Accumulation at Interest While policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE: A: Coverage can be added at specific events such as marriage or having a child B: Evidence of insurability is not required when the option is exercised C: Evidence of insurability is required when the option is exercised D: Coverage can be added a specific ages

C: Evidence of insurability is required when the option is exercised

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? A: Joint Life B: Adjustable Life C: Variable Universal Life D: Universal Life

C: Variable Universal Life Variable Universal Life is comprised of monthly charge and self directed investment choices

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage? A: 10 year increments B: at the future dates specified in the contract with proof of insurability required C: at future dates specified in the contract with no evidence of insurability required D: at any time while policy is active

C: at future dates specified in the contract with no evidence of insurability required The rider provides specific dates on which additional life insurance policies can be bought without providing proof of insurability

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n): A: 1035 exchange B: Inter vivos gift C: Non-forfeiture option D: Living Benefit

D: Living Benefit The Accelerated Death Benefit provision in a life insurance policy is also known as a "Living Benefit"

All of these statements concerning Settlement Options are true, EXCEPT: A: Increased proceeds can be provided through accumulation of interest B: Rapid depletion of proceeds an be avoided C: Proceeds can be administered by the insurance company D: Only the beneficiary may select

D: Only the beneficiary may select

What benefit does the Payor clause on a Juvenile Life policy provide? A: Allows payor to assign ownership in the event payor becomes disabled B: Allows payor to increase face amount without providing evidence of insurability C: Premiums are waived if juvenile becomes disabled D: Premiums are waived if payor becomes disabled

D: Premiums are waived if payor becomes disabled The payor clause of a juvenile life policy provides a waiver of premiums if the payor becomes disabled

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive? A: Refund of premiums paid plus interest B: Nothing, due to actively serving in the armed forces C: Double the face amount because cause of death was accidental D: The full face amount

D: The full face amount