Life Insurance Policy Provisions, Options, and Riders

Surrender Charge

a fee charged to the insured when a life policy or annuity is surrendered for its cash value

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid up

What are nonforfeiture options?

Reduced paid up, extended term, cash value surrender

When an annuity is written, whose life expectancy is taken into account?

annuitant

Which is not true regarding the life with guaranteed minimum annuity settlement option? a. it is a contingency option b. the beneficiary receives the remainder of the principal amount upon the annuitant's death c. payments can be made in installments and as a single cash refund d. it does not guarantee that the entire principal amount will be paid out

d. it does not guarantee that the entire principal amount will be paid out

The Waiver of Cost of Insurance rider is found in what type of insurance?

universal life

Reinstatement Provision is subject to

proving continued insurability and uses the original age for premium determination

Which is true about the cash surrender nonforfeiture option? a. funds exceeding the premium paid are taxable as ordinary income b. after the cash surrender, the insured is covered for a 3 month grace period c. policy remains active for some time d. policyholder receives the original cv of the policy

a. funds exceeding the premium paid are taxable as ordinary income

Equity indexed annuities a. seek higher returns b. are more risky than variable annuities c. are security instruments d. invest conservatively

a. seek higher returns

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a. universal b. adjustable c. term d. limited pay

a. universal

In an annuity, the accumulated money is converted into a stream of income during which time period?

annuitization period

Which is true about the premium on the children's rider in a life policy? a. it decreases when an adopted child is added to the policy b. it remains the same no matter how many children are added to the policy c. it decreases when the oldest reaches 21 d. it increases when a newborn is added to the policy

b. it remains the same no matter how many children are on the policy

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend a. joint & survivor b. straight life c. life income with period certain d. installment refund

b. straight life- annuity payments cease at death

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 CV which is currently $20,000. What would be the face amount of the new term policy? a. $20,000 b. $25,000 c. $50,000 d. the face amount will be determined by the insurer

c. $50,000

Which explains the policy owners right to change beneficiaries, choose options, and receive proceeds of a policy? a. the entire contract provision b. consideration clause c. assignment rights d. owners rights

d. owners rights

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? a. payments for 20 years b. payments for life c. nothing d. payments for 15 years

d. payments for 15 years

After a back injury, an insrued is disabled for a year. His insurance policy carries a disability income benefit rider. Which of the following benefits will he receive? a. % of med costs paid by insurer b. payments for life c. yearly premium waiver and income d. monthly premium waiver and income

d. monthly premium waiver and monthly income

Which of the following products requires a securities license? a. fixed annuity b. equity indexed annuity c. deferred annuity d. variable annuity

d. variable annuity

What is the waiting period on a waiver of premium rider in life insurance policies?

6 months from time of disability

2 types of assignments are

absolute and collateral

What does the reduction of premium rider do?

allows insured to apply policy dividend toward next year's premium

All are beneficiary designations except a. primary b. specified c. tertiary d. contingent

b. specified

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

nothing, the payments will cease

Which Rider would NOT cause the Death Benefit to increase? a. guaranteed insurability rider b. cost of living rider c. accidental death rider d. payor benefit rider

d. payor benefit rider. the payor benefit rider only pays the premium if the payor dies or is disabled. with the GIO, the policyholder can increase the death benefit at specific ages or events (marriage, birth of child); cost of living rider increases death benefit to keep pace with inflation; accidental death rider- if the insured dies from an accident the death benefit is multiple the face amount

Which is true concerning irrevocable beneficiaries? a. they may be changed at any time b. they can never be changed c. they may be changed only on the anniversary date of the policy d. they can be changed only with the written consent of that beneficiary

d. they can be changed only with written consent of that beneficiary

Which is true about class designation? a. beneficiaries are not identified by name b. beneficiaries must be part of the insured's immediate family c. it is not allowed d. it determines the succession of beneficiaries

a. beneficiaries are not identified by name

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits? a. 50,000 b. 62,500 c. 75,000 d. nothing

a. 50,000

What 2 terms are associated directly with the way an annuity is funded?

single payment or periodic payments

When a life policy stipulates that the beneficiary will receive payments in specified installments or for a specifies number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? a. spendthrift provision b. settlement option c. accelerated benefit provision d. loan provision

a. spendthrift provisions. all rights of the beneficiary to change time or amount of installments, surrender for cash, borrow against, or assign, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void

Straight Life Annuity

The payout option that will guarantee an annuity payment for the remainder of an individual's life. This option typically provides the largest monthly payment.

The ownership provision entitles the policyowner to do all of the following except a. receive a policy loan b. assign the policy c. designate a beneficiary d. set premium rates

d. set premium rates

What is an equity indexed annuity considered to be a fixed annuity?

it has a guaranteed minimum interest rate