Life Insurance Policy Riders, Provisions, Options, and Exclusions
What type of insurance would be used for a Return of Premium rider?
Increasing Term
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider
Who can request changes in premium payments, face value, loans, and policy plans?
Policyowner
Which is NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT
The insured's age at death.
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had concealed information during the application process. What can they do?
Pay the death benefit
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to
The insured's estate.
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
Guaranteed insurability.
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
If the father is disabled for more than 6 months
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in
Adjustment in the amount of death benefit.
All of the following statements concerning dividends are true EXCEPT
Dividend amounts are guaranteed in the policy.
What is the purpose of a free-look period in insurance policies?
It allows the insured to reject the policy with a full refund.
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
Military service or war
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?
Policyowner
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
The interest is not taxable since it remains inside the insurance policy.
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 cash value, which is currently $20,000. What would be the face amount of the new term policy?
$50,000
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?
$9,800
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase.
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceases the insured
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Insuring clause
Which of the following is true about the premium on the children's rider in a life insurance policy?
It remains the same no matter how many children are added to the policy.
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount.
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
Joint and survivor.
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?
Lump sum
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
Owner's Rights
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?
Pay a reduced death benefit
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
Proof of insurability is not required.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium
The interest earned on policy dividends is
Taxable.
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term
If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?
The death benefit will be smaller.
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?
The insured's contingent beneficiary
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination
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.
Under which of the following circumstances would an insurer pay accelerated benefits?
An insured is diagnosed with cancer and needs help paying for her medical treatment.
Which of the following premium payment modes will incur the lowest overall payment?
Annual
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
Automatic premium loan
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Common Disaster Clause
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire contract.
What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?
It determines who receives policy benefits if the primary beneficiary is deceased.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider.
Nonforfeiture values guarantee which of the following for the policyowner?
That the cash value will not be lost
If an insured continually uses the automatic premium loan option to pay the policy premium,
The policy will terminate when the cash value is reduced to nothing.
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
Automatic premium loan
A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy?
The full death benefit
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
The insured's premiums will be waived until she is 21
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
Becomes terminally ill.
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?
A minor son of the insured
What required provision protects against unintentional lapse of the policy?
Grace period
The automatic premium loan provision is activated at the end of the
Grace period.
Which of the following settlement options in life insurance is known as straight life?
Life income
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
Life income with period certain
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy?
Return of premium
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
Revocable beneficiary.
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.
Which of the following is TRUE about nonforfeiture values?
They are required by state law to be included in the policy.
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term
Which of the following best describes fixed-period settlement option?
Both the principal and interest will be liquidated over a selected period of time.
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
Common Disaster
An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called
Consideration.
The two types of assignments are
Absolute and collateral.
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Cash surrender
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One-year term option.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
Guaranteed insurability option
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium.
The Ownership provision entitles the policyowner to do all of the following EXCEPT
Set premium rates.
Which of the following statements about a suicide clause in a life insurance policy is true?
Suicide is excluded for a specific period of years and covered thereafter.
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100,000
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term rider
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount
Which of the following is true of a children's rider added to an insured's permanent life insurance policy?
It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained 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?
$200,000
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?
2 years
All of the following are dividend options EXCEPT
Fixed-period installments.
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
Guaranteed insurability rider.
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
Interest only option
Which of the following statements is TRUE about a policy assignment?
It transfers rights of ownership from the owner to another person.
Which two terms are associated directly with the premium?
Level or flexible
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
Term rider
Which of the following information will be stated in the consideration clause of a life insurance policy?
The amount of premium payment
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to
The insured's estate.
Which is true about a spouse term rider?
The rider is usually level term insurance.
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy.