MO L&H - Chapter 3: Life Policy Provisions, Riders and Options

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? $0 $50,000 (50% of the policy value) $100,000 $300,000 (triple the amount of policy value)

$100,000

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? $0 $100,000 $200,000 $100,000 plus the total of paid premiums

$200,000

What is the waiting period on a Waiver of Premium rider in life insurance policies? 30 days 3 months 5 months 6 months

6 months

According to the Entire Contract provision, a policy must contain A declarations page with a summary of insureds. Buyer's guide to life insurance. Listing of the insured's former insurer(s) for incontestability provisions. A copy of the original application for insurance.

A copy of the original application for insurance.

Under which of the following circumstances would an insurer pay accelerated benefits? An insured is looking for a way to put her daughter through college. A couple wants to build a house and would like to make a larger down payment. An insured is diagnosed with cancer and needs help paying for her medical treatment. A couple is nearing retirement and needs a steady stream of income.

An insured is diagnosed with cancer and needs help paying for her medical treatment.

Which of the following premium payment modes will incur the lowest overall payment? Annual Semi-annual Quarterly Monthly

Annual

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called Irrevocable designation. Stirpes designation. Class designation. Revocable designation.

Class designation.

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? Survivor Life Second-to-Die Common Disaster Accidental Death

Common Disaster

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? Value Adjustment Rider Return of Premium Rider Inflation Rider Cost of Living Rider

Cost of Living Rider

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 Accelerated benefit rider. Living need rider. Payor rider. Cost of living rider.

Cost of living rider.

What happens when a policy is surrendered for its cash value? Coverage ends but the policy can be reinstated at any time. The policy can be reinstated by paying back all policy loans and premiums. The policy can be converted to term coverage. Coverage ends and the policy cannot be reinstated.

Coverage ends and the policy cannot be reinstated.

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. Total contract. Aleatory contract. Complete contract.

Entire contract.

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? The same as the original policy minus the cash value Equal to the original policy for as long as the cash values will purchase. In lesser amounts for the remaining policy term of age 100. Equal to the cash value surrendered from the policy

Equal to the original policy for as long as the cash values will purchase.

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? Extended term Fixed amount Fixed period Life income period certain

Fixed amount

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? Dividend options Guaranteed renewable option Nonforfeiture options Guaranteed insurability option

Guaranteed insurability option

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. Paid-up additions option. Cost of living provision. Nonforfeiture option.

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. Waiver of cost of insurance. Accelerated benefits. Cost of living.

Guaranteed insurability.

Life income joint and survivor settlement option guarantees Income for 2 or more recipients until they die. Payment of interest on death proceeds. Payout of the entire death benefit. Equal payments to all recipients.

Income for 2 or more recipients until they die.

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the Insuring clause. Misstatement of Age clause. Incontestability clause. Reinstatement clause.

Incontestability clause.

All of the following are Nonforfeiture options EXCEPT Extended term Reduced paid-up. Interest only Cash surrender

Interest only

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy? It ensures the policy proceeds will be split between the primary and contingent beneficiaries. It requires that someone who is not the primary beneficiary handles the estate. It determines who receives policy benefits if the primary beneficiary is deceased. It allows creditors to receive payment out of the proceeds.

It determines who receives policy benefits if the primary beneficiary is deceased.

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy? It is reduced to the amount of what the cash value would buy as a single premium. It is increased when extra premiums are paid. It decreases over the term of the policy. It remains the same as the original policy, regardless of any differences in value.

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

Which of the following statements is TRUE about a policy assignment? It authorizes an agent to modify the policy. It transfers rights of ownership from the owner to another person. It is the same as a beneficiary designation. It permits the beneficiary to designate the person to receive the benefits.

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

Which of the following settlement options in life insurance is known as straight life? Fixed amount Life income Single life Life with period certain

Life income

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? Fixed amount Lump sum Life income Fixed period

Lump sum

What is the other term for the cash payment settlement option? Face amount Proceeds Lump sum Principal amount

Lump sum

Regarding the free-look provision, the insurance company Must allow the policyowner to return the policy for a full refund. Cannot charge a premium after 10 days. Must issue a free policy for 30/31 days. Must issue a free policy for 10 days.

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 Paid-up additions. One-year term option. Paid-up option. Accelerated endowment.

One-year term option.

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the Juvenile rider. Payor rider. Other-insured rider. Change of insured rider.

Other-insured rider.

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? Reduction of premium Accumulation at interest Paid-up option One-year term

Paid-up option

Which of the following riders would NOT cause the Death Benefit to increase? Guaranteed Insurability Rider Cost of Living Rider Accidental Death Rider Payor Benefit Rider

Payor Benefit Rider

Who can request changes in premium payments, face value, loans, and policy plans? Policyowner Contingent beneficiary Beneficiary Producer

Policyowner

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? Medical exam and parents' medical history Proof of insurability is not required. Medical exam Her parents' federal income tax receipts

Proof of insurability is not required.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to Purchase a single premium policy for a reduced face amount. Purchase a term rider to attach to the policy. Pay back all premiums owed plus interest. Receive payments for a fixed amount.

Purchase a single premium policy for a reduced face amount.

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? Decreasing term Accidental death Return of premium Cost of living

Return of premium

The Ownership provision entitles the policyowner to do all of the following EXCEPT Assign the policy. Designate a beneficiary. Set premium rates. Receive a policy loan.

Set premium rates.

Which of the following statements about a suicide clause in a life insurance policy is true? Suicide is covered for a specific period of years and excluded thereafter. Suicide is covered as long as the policy is in force. Suicide is excluded as long as the policy is in force. Suicide is excluded for a specific period of years and covered thereafter.

Suicide is excluded for a specific period of years and covered thereafter.

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? Guaranteed insurability rider Change of insured rider Term rider Accidental death and dismemberment rider

Term rider

Which of the following information will be stated in the consideration clause of a life insurance policy? The conditions for insurability The amount of premium payment The parties to the contract The time period allowed for the payment of premium

The amount of premium payment

If a life insurance policy has an irrevocable beneficiary designation, The beneficiary can only be changed with written permission of the beneficiary. The beneficiary cannot be changed for at least 2 years. The owner can always change the beneficiary at will. The beneficiary cannot be changed.

The beneficiary can only be changed with written permission of the beneficiary.

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. The beneficiary will only receive payments of the interest earned on the death benefit. The beneficiary must pay interest to the insurer. The beneficiary will receive the lump sum, plus interest.

The beneficiary will only receive payments of the interest earned on the death benefit.

Under an extended term nonforfeiture option, the policy cash value is converted to A lower face amount than the whole life policy. A higher face amount than the whole life policy. The same face amount as in the whole life policy. The face amount equal to the cash value.

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? One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.

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? A table showing nonforfeiture values for the next 10 years must be included in the policy. Policyowners do not have the authority to decide how to exercise nonforfeiture values. They are required by state law to be included in the policy. They are optional provisions.

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

The paid-up addition option uses the dividend To reduce the next year's premium. To accumulate additional savings for retirement. To purchase a smaller amount of the same type of insurance as the original policy. To purchase a one-year term insurance in the amount of the cash value.

To purchase a smaller amount of the same type of insurance as the original policy.

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called Guaranteed insurability. Waiver of cost of insurance. Payor benefit. Waiver of premium.

Waiver of premium.

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 forfeited. The death benefit will be the same as the original face amount. The death benefit will be larger. The death benefit will be smaller.

The death benefit will be smaller.

A 40-year old 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 at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to Both children who share equally on a per-capita basis. The insurance company. The insured's estate. The insured's firstborn child.

The insured's estate.

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. The face amount of the policy will be reduced by the automatic premium loan amount. The cash value will continue to increase. The insurer will increase the premium amount.

The policy will terminate when the cash value is reduced to nothing.

Which is true about a spouse term rider? Coverage is allowed for an unlimited time. The rider is decreasing term insurance. Coverage is allowed up to age 75. The rider is usually level term insurance.

The rider is usually level term insurance.