Life Provision
a potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early year of the policy. Which of these statements made by the producer would be correct
20-pay Life accumulates cash value faster than Straight Life
the option that provides an additional death benefit for a limited amount of time at the lowesr possible cost is called a
Accidental Death and Dismemberment rider (AD&D)
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied -in this situation, the insurance company will deny the claim, as the policy would have lapsed due to nonpayment
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract Provision -found at the beginning of the policy, states that the policy document, the application, and any attached riders constitute the entire contract
All of these statements about the Waiver of Premium provision are correct EXCEPT
Insured must be eligible for Social Security Disability for claim to be accepted -ARE: a waiting period mist pass before becoming eligible for benefits; waiver of premium is available on both permanent and term insurance policies; insured must be totally disable to qualify
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest Only DOES: fixed period; fixed amount; life income
B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
Interest only -some life insurance policies (participating policies) pay dividends to their policy holders. Dividends are generally not taxed as income to the policyowner. However interest is taxable as income for federal income tax purpose
All of these statements concerning Settlement Options are true, EXCEPT
Only the beneficiary may select -incorrect because settlement options may be selected by the policy owner - TRUE: increased proceeds can be provided through accumulation of interest; rapid depletion of proceeds can be avoided; proceeds can be administered by the insurance company
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor Benefit Rider - provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever is first
a return of premium life insurance policy is
Whole life and Increasing term. A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.
a term lfe rider offers the insured
additional life coverage
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will
adjust the death benefit to a reduced amount
The consideration clause in a life insurance contract contains what pertinent information
amount of premium payments and when they are due
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
an exclusion
What does the insuring agreement in a Life insurance contract establish?
an insurer's basic promise
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required
The Automatic Premium Loan Provision is designed to
avoid a policy lapse
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
beneficiary's age A FACTOR: type of life insurance; dividend amount used toward purchasel attained age
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
extended term - choosing the nonforfeiture extended term option allows the policy owner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole-life policy. Extended-term insurance is often the default nonforfeiture option in the event of nonpayment of premiums
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
full face amount minus any past due premiums
a long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following
inability of the insured to perform more than 2 activities of daily living
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)
insuring agreement
how are policy owner dividends treated in regards to oncome tac
interest on accumulation is taxed
The Accidental Death and Disemberment provision in a life insurance policy would pay additional benefits if the insured
is blinded in an accident
dividends paid from a life insurance policy are
issued by the insurer
A provisison in a Life Insurance policy that pays the policy owner an amount that does NOT surpass the guaranteed cash value is called the
loan Provision
An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?
long term care
which of the following statement is CORRECT about accelerated death benefit
must have a terminal illness to qualify
K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?
paid-up additional insurance
All of the following statements are true regarding a policy's Grace period EXCEPTPast due premiums are waivedPolicy loans may still be madeFull coverage continuesGrace period terms are stated in the policy
past due premiums are waived ARE TRUE: policy loans may still be made; full coverage continues; grace period terms are stated in the policy
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
pay face amount minus the past premium due - in this situation the insurer would pay the death benefit less the past due premium because death occurred within the grace period
a provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
policy loan provision
What benefit does the Payor clause on a Juvenile Life policy provide?
premiums are waived if the payor becomes disabled
The provision that can be used to put an insurance policy back in force after it has lapsed due to nopayment is called
reinstatement
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
return of premium rider
Typically a life insurance death benefit is paid by a lump-sum payment. A(n) __________ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.
settlement
Which of these life insurance riders allows the applicant to have excess coverage?
term rider
the consideration clause in a life insurance policy indicated that a policy owner's consideration consists of a completed application
the initial premium
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
exclusion
Whose life is covered on a life insurance policy that contains a payor benefit clause?
child - a payor benefit clause is generally added to a life policy that insures the life of a juvenile. It provides continuance of insurance coverage in the event of the death or total disability of the individual responsible for the payment of premium
The incontestable clause allows an insurer to
contest a claim during the contestable period
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
decreasing term
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
How are surrender charges deducted in a life policy with a rear-end loaded provision?
deducted when the policy is discontinued
which of these statement about a Guaranteed Insurability option rider is NOT TRUE
evidence of insurability is required when the option is excersized ARE TRUE: coverage can be added at specific events such as marriage or having a child; evidence of insurablity is not required when the option is exersized; coverage can be added at specific age
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
ex-wife - the exwife is still the beneficiary of this policy, even though policy ownership has changed to his current spouse
a life insurance policy owner would like to take out a policy loan against the cash value in his whole life policy. the interest rate applied to this loan may vary over time. This is referred to as a _____ rate loan
variable
What does the ownership clause in a life insurance policy state?
who the policy owner is and what rights the policy owner is entitled to