Life insurance Policy Riders, Provisions, Options and Exclusions
Options
offer insurers and insureds ways to invest or distribute a sum of money available in a life 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
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
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
For how long is an insurance company allowed to defer policy loan requests?
6 months
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
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.
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
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
Automatic premium loan
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
Becomes terminally ill.
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
What are the three nonforfeiture options?
Cash surrender, reduced paid-up, and extended term
According to the entire contract provision, what document must be made part of the insurance policy?
Copy of the original application
Which of the following is NOT typically excluded from life policies?
Death due to plane crash for a fare-paying passenger
All of the following statements concerning dividends are true EXCEPT
Dividend amounts are guaranteed in the policy.
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.
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
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die.
What type of insurance would be used for a Return of Premium rider?
Increasing Term
All of the following are Nonforfeiture options EXCEPT
Interest only
What is the other term for the cash payment settlement option?
Lump sum
Regarding the free-look provision, the insurance company
Must allow the policyowner to return the policy for a full refund.
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 insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?
Pay the death benefit
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider
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.
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement provision
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
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.
If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?
The loan amounts are deducted from the death benefit
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
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.
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.
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.
What is the purpose of settlement options?
They determine how death proceeds will be paid.
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
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?
War or military service
When may an insurance company use suicide as a defense against paying a death claim?
When death occurs within a specified period of time after the policy was issued
Riders
are added to a policy to modify provisions that already exist.
The automatic premium loan provision is activated at the end of the
grace period
What required provision protects against unintentional lapse of the policy?
grace period
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
What required provision protects against unintentional lapse of the policy?
Grace period
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
Which of the following policy components contains the company's promise to pay?
Insuring clause
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
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 is true about the mandatory free look in a Life Insurance policy?
It commences when the policy is delivered.
Provisions
Provisions define the characteristics of an insurance contract and are fairly universal from one policy to the next.
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?
Reduction of Premium
Which of the following describes attachments made to policies that either add or modify coverage?
Riders
Methods used to pay the death benefits to a beneficiary upon the insured's death are called
Settlement options.
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.
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
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
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
The balance of the loan will be taken out of the death benefit.
The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case?
The beneficiary
What constitutes the entire contract?
The insurance policy with a copy of the application, and any riders and amendments
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.
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination
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
Items stipulated in the contract that the insurer will not provide coverage for are found in the
Exclusions clause
Items stipulated in the contract that the insurer will not provide coverage for are found in the
Exclusions clause.
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term rider
All of the following are dividend options EXCEPT
Fixed-period installments.
What provision in an insurance policy extends coverage beyond the premium due date?
Grace period
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
An insured committed suicide 6 months after his life insurance policy was issued. The insurer will
Refund the premiums paid.
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit.
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.
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.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
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 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.
Which of the following settlement options in life insurance is known as straight life?
Life income
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?
Lump sum
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider.
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
Paid-up additions.
An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?
Paid-up option
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?
Paid-up option
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
Which rider allows an insured to purchase additional coverage without evidence of insurability?
Guaranteed insurability rider
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.
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.