Policy Provisons, Riders and Options

If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans? A.) The loan amounts are deducted from the death benefit. B.) The policy is withheld until payments are met. C.) The loan amount is charged to the beneficiaries. D.) The loans are waived.

A.) The loan amounts are deducted from the death benefit. *In the event an insured dies, any outstanding policy loans and accrued interest is deducted from the policy proceeds. Loans cannot exceed the cash value of the policy.

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? A.) The insured's premiums will be waived until she is 21. B.) The premiums will become tax deductible until the insured's 18th birthday. C.)Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. D.)The insured will have to pay premiums for 6 months. If at the end of this period, the father is still disabled, the insured will be refunded the premium

A.) The insured's premiums will be waived until she is 21. *If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

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? A.) Payor rider. B.) Cost of living rider. C.) Accelerated benefit rider. D.) Living need rider.

B.) Cost of living rider A "cost of living" rider adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? A.) Additional insured rider B.) Family term rider C.) Spouse rider D.) Children's rider

B.) Family term rider *A single rider that provides coverage on every family member is called a "family rider".

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? A.) $0 B.) $50,000 (50% of the policy value) C.) $100,000 D.) $300,000 (triple the amount of policy value)

C.) $100,000 *The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.

An insured had a $10,000 territe policy. The annual premium of $200 was due on February 1 however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A.) $0 B.) $200 C.) $9,800 D.) $10,000

C.) $9,800 *In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

For how long is an insurance company allowed to defer policy loan requests? A.) 30 days B.) 60 days C.) 6 months D.) 1 year

C.) 6 months Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.

a life policy allows the policy owner to make periodic additions to the face amount at standard rates without proving insurability, the policy includes a ? A.) Cost of living provision B.) Nonforfeiture Option C.) Guaranteed insurability rider D.) Paid-up additions option

C.) Guaranteed insurability rider *The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.

What type of insurance would be used for a Return of Premium rider? A.) Decreasing Term B.) Annually Renewable Term C.) Increasing Term D.) Level Term

C.) Increasing Term *The Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy it provides that at death prior to a given age, not only is the original face amount payable, but also all premiums previously paid are payable to the beneficiary.

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured has misstated information during the application process. What can they do? A.) Pay a decreased death benefit B.) Sue for the right to not pay the death benefit C.) Pay the death benefit D.) Refuse to pay the death benefit because of the misstatement on the application

C.) Pay the death benefit * The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Nonforfeiture values guarantee which of the following for the policyowner? A.) That the death benefit will be paid in a lump sum B.)That the policy premiums will never increase C.)That the cash value will not be lost D.) That the dividends will be paid annually

C.) That the cash value will not be lost *Because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policyowner. Nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered.

Which of the following best describes fixed-period settlement option? A.) Only the principal amount will be paid out within a specified period of time. B.) The death benefit must be paid out in a lump sum within a certain time period. C.) Income is guaranteed for the life of the beneficiary. D.) Both the principal and interest will be liquidated over a selected period of time.

D.) Both the principal and interest will be liquidated over a selected period of time. *Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.

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

D.) Purchase a single premium policy for a reduced face amount. *When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.

What is the advantage of reinstating a policy instead of applying for a new one? A.) Proof of insurability is not required. B.) The face amount can be increased. C.) The cash values have gained interest while the policy was lapsed. D.) The original age is used for premium determination.

D.) The original age is used for premium determination. *The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

Which of the following applies to the 10- day free-look privileage? A.) It allows the insured 10 days to pay the initial premium. B.) It can be waived only by the insurance company C.) It is granted only at the option of the agent D.) permits the insured to return the policy for a full refund of premiums paid.

D.) permits the insured to return the policy for a full refund of premiums paid. *A policyholder may return a policy for any reason during the free-look period and receive a full refund.