Life Insurance Policy Provisions, Options, & Riders Quiz

Which of the following riders would NOT cause the death benefit to increase? 1. Accidental death rider 2. Payor benefit rider 3. Guaranteed insurability rider 4. Cost of living rider

2: Payor benefit rider does not increase the death benefit; it only pays the premium if the payor is disabled or dies. With guaranteed insurability rider, the policyowner can increase death benefit at specified ages or events, I. E. Marriage or birth of a child; cost of living rider increases death benefit to keep pace with inflation; an accidental death rider, if the insured dies from an accident, death benefit is a multiple of the face amount.

All of the following are **beneficiary designations** EXCEPT: 1. Contingent 2. Primary 3. Specified 4. Tertiary

3; beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary & tertiary.

In Arizona, the grace period on a group life insurance policy applies to every premium payment EXCEPT

The first

What determines the amount of each installment paid in the Life Income Option arrangement?

The recipient's life expectancy & amount of principal (amount owed)

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium

All of the following are dividend options EXCEPT: 1. Fixed-period installments 2. Accumulated at interest 3. Reduction of premium 4. Paid-up additions

1; fixed-period Installments is a settlement option, not a dividend option

When a life insurance policy is canceled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount

Equal to the original policy for as long a period of time that the cash values will purchase at the insured's current age. (The cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy)

What provision in a life or health insurance policy extends coverage beyond the premium due date?

Grace period

What kind of loan protects the insured from an unintentional policy lapse due to a non-payment of premium?

Automatic premium loan

And insured receives an annual life insurance dividend check. What time best describes this arrangement?

Cash option; allows an insurer to send the policyholder an annual, nontaxable dividend check

Using a class designation for beneficiaries means

Naming beneficiaries as a group (ex. "All my children")

Are beneficiaries identified by name in a class designation?

No; a class of beneficiary is using a designation such as "my children"

Which of the following describes attachments made to policies that either add or modify coverage?

Riders

Describe a children's rider:

Children's rider are term insurance covering all of the children in the family, including newly born children, and are convertible to permanent insurance at or prior to a child reaching the maximum age without evidence of insurability.

What benefit allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor benefit; if the payor becomes disabled for at least six months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application

If a life policy allows the policy owner to make periodic additions to the face amount at standard rates, without providing insurability, the policy includes a

Guaranteed insurability rider

What is another term for the cash payment settlement option?

Lump sum

What do nonforfeiture values guarantee for the policy owner?

That the cash value will not be lost; because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policy owner. nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered

And insured stops making payments on a loan taken from his cash value policy. What will most likely happen? fry's pharmacy thomas rd

The policy will terminate when the loan amount with

Life insurance policies that have cash value must provide for a maximum policy loan interest rate of no more than

8% per annum; The following policy loan provisions apply to any policy that has a cash value element: a provision allowing a maximum interest rate not to exceed 8% per year, or a provision allowing an adjustable maximum interest rate established periodically.

What kind of policy allows withdrawals or partial surrenders?

Universal life products allow the partial withdrawal, or surrender, of the policy cash value

If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?

0%; if an insured accepts an accelerated death benefit, the death benefit received by the beneficiary will be reduced by the amount paid by the accelerated death benefit, as well as the amount of earnings lost by the insurance company in interest income. Because it is legal for an insurer to pay 100% of the death benefit before an insured dies, it is possible that the beneficiary of a policy would not receive any benefits after the insured's death.

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term; children's term riders provide term insurance with coverage expiring when the minor reaches a certain age

An insured purchased a 15 year level term life insurance policy with a face amount of $100,000. The policy contains an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$20,000; the beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90 day benefit limit stipulated in most policies

What does a policy assignment do?

It transfers rights of ownership from the owner to another person; the policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment)

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

Cost of living rider