Life policy provisions, riders and options

What limits the amount that a policy owner may borrow from my whole life insurance policy?

Cash value

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 the

Cost of living rider

When a policy owner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called

Class designation A designation such as the child of the insured, we are all children of the insured, or all current members of a group, is called a class designation. The individuals need not be specifically named, since each to meet the qualifications of being included in the class will share in the benefit.

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

Copy of the original application. An insurance contract must contain a copy of the original application.

An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceases the insured

The life insurance policy clause that Prevents an insurance company from denying payment of death claim after a specified period of time is known as the

Incontestability clause

Which of the following statements is true about a policy assignment?

It transfers rights of ownership from the owner to another person.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He's killed in an automobile accident and it is discovered that he's actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

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 policies cash value, which is currently $20,000 what would be the face amount of the new term policy?

$50,000. The face of the term policy would be the same as the face amount provided under the whole life policy.

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

6 months

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance

What is the purpose of a suicide provision within a life insurance policy?

To protect the insurer from person to purchase life insurance with the intention of committing suicide

The provision which states that both the policy and a copy of the application form the contract between the policy owner and the insurer is called the

Entire Contract

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

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 the additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability

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

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

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 policy owner 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 lapsed due to a non-payment of premium?

Automatic premium loan

After a back injury, An insured is disabled for a year. His insurance policy carries a disability income benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income. The disability income benefit rider with the policy premiums, just like the waiver of premium rider. Unlike the waiver of premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.

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

Other insured rider

Which of the following riders would not cause the death benefit to increase

Payor Benefit Rider 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 DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

Which of the following riders would not cause the death benefit to increase?

Payor Benefit Rider 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 DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

The policy owner 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 reduction of premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.