Life Insurance Review Ch. 3

automatic premium loan

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?

other-insured rider

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Cash option

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Joint and survivor

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Coverage ends and the policy cannot be reinstated

What happens when a policy is surrendered for its cash value?

Increasing Term

What type of insurance would be used for a Return of Premium rider?

Funds exceeding the premium paid are taxable as ordinary income.

Which is TRUE about the cash surrender nonforfeiture option?

They are required by state law to be included in the policy.

Which of the following is True about nonforfeiture values?

Term rider

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provde an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

Interest Only Option

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. What settlement option should the policyowner choose?

Payor benefit rider

Which of the following riders would NOT cause the Death Benefit to increase?

Life income

Which of the following settlement options in life insurance is known as straight life?

It is reduced to the amount of what the cash value would buy as a single premium

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

Fixed amount

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

Both the principal and interest will be liquidated over a selected period of time.

Which of the following best describes fixed-period settlement option?

Guranteed insurability rider

At the time the insured purchases 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

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated

Which of the following statements about the reinstatement provision is true?

$50,000

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?

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

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

Lump sum

If a settlement option is not chosen by the beneficiary or policy owner, which option will be use?

Reduction of premium

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?