Exam 2 life provisions

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 still receive declared dividends

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

Reinstatement provision

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

Assign policy ownership to the bank

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

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000

An insurer may normally delay the payment of a cash value loan or surrender value for up to

6 months

A policyowner may generate taxable income from which of the following Dividend Options?

Accumulation at interest

The Consideration clause in a life insurance contract contains what pertinent information

Amount of premium payments and when they are due

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

A policy loan is made possible by which of these life insurance policy features?

Cash value provision

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

Child term rider

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

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing term

How are surrender charges deducted 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 policyowner by referring to documents not found within the policy itself?

Entire Contract provision

Which provision in a life insurance policy states that the application is considered part of the contract

Entire contract provision

Which of these statements about Guaranteed Insurability Option rider is NOT TRUE

Evidence of insuribily is required when the option is exercised

In a life insurance policy, which feature states that the policy will not cover certain risks?

Exclusion

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

Extended term

The purpose of the — period clause is to avoid an unintentional lapse of a life insurance policy

Grace

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

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 states that a specific sum of money will be paid to a designated person upon an insured's death is called an

Insuring agreement

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?

Interest only

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

Long term care

Which of the following statements is correct about accelerated death benefits

Must have a terminal illness to qualify

All of these statements concerning settlement operations are true except

Only the beneficiary may select

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefit from the policy

Owner's rights

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

Past due premiums are waived

Which of the following provisions guarantees that premiums will be waived if Juvenile Life policy owners become disabled

Payor clause

The — has the right to change a life insurance policy's beneficiary

Policy owner

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

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-Up

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Reinstatement

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

The advantage of reinstating an original life policy is

The premiums are based on a younger age

A life insurance policy owner would like to take out a policy loan against the cash value in his whole life policy. The interest rate applied to this loan may vary over time. This is referred to as a — rate loan

Variable

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

Variable Universal Life

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

Void the policy only if it is discovered during the Contestable period and proven to be material

A return of premium life insurance policy is

Whole life and Increasing term

A Term Life rider offers the insured

additional life coverage

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 on the application. Under the Misstatement of Age provision, the insurer will

adjust the death benefit to a reduced amount

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 would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT

beneficiary's age

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

collateral assignment

The incontestable clause allows an insurer to

contest a claim during the contestable period

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

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?

exclusion

B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will

pay the amount that the premium would have purchased at the correct age

Which of the following is an example of a nonforfeiture option

reduced paid-up option

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide