Life Policy Provisions, Riders, and Options
accumulation at interest
Insurer keeps the dividend in an account where it accumulates interest
Cash Surrender Value
Nonforfeiture option that allows the policyowner to receive the policy's cash value in exchange for loss of insurance
extended term
Nonforfeiture option that permits the policyowner to use the policy's cash values to buy paid-up term insurance.
Reduced Paid-Up Insurance
Nonforfeiture option where cash value is used as a single premium to purchase a permanent policy with a reduced face amount
reduction of premium
The insurer uses the dividend to reduce the next year's premium
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
indemnity
a principle of reimbursement on which insurance is based; in event of loss, an insurer reimburses the insureds or beneficiaries for the loss
guaranteed insurability rider
allows for purchase of additional insurance at specified times without evidence of insurability
revocable right
beneficiary can be changed at any time
irrevocable right
beneficiary can only be changed with their consent
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 receives an annual life insurance dividend check. What term best describes this arrangement?
cash option
what happens when a policy is surrendered for its cash value
coverage ends and the policy cannot be reinstated
one-year term
dividend is used to buy additional insurance
paid-up addition
dividend is used to increase the face amount
paid-up insurance
dividend is used to pay up a policy early
accelerated benefit
early payment if insured is diagnosed with a specified catastrophic illness, portion of death benefit
Which nonforfeiture option has the highest amount of insurance protection?
extended term
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
return of premium rider
increasing term is added to a whole life policy that provides that if death occurs prior to a given age, not only is the death benefit payable to the beneficiary, but all premiums paid as well
interest only settlement
insurer retains the principal and only pays out interest
which of the following policy components contains the company's promise to pay
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 statements is true concerning the accidental death rider
it will pay double or triple the face amount
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
accidental death rider
pays double or triple indemnity if accidental death occurs as defined in policy within 90 days of accident
cash loans available
policy's cash value minus any unpaid loans and interest
automatic premium loans
prevent unintentional policy lapse due to nonpayment of premium
life income
provides the recipient with an income that he or she cannot outlive
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 premiums paid. Which rider is attached to the policy?
return of premium
which of the following information will be stated in the consideration clause of a life insurance policy?
the amount of the premium payment
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
a 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, leaving 2 grown children. assuming he never changed the beneficiary, the policy proceeds will go to
the insured's estate
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
waiver of monthly deductions
waives the cost of insurance in the event of the insured's disability
waiver of premium
waives the premium if the insured becomes totally disabled; 6-month waiting period before benefits begin
