Primerica: Life Policy Provisions, Riders, and Options
An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?
Pay a reduced death benefit.
What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?
Policy premium in a reinstated policy will set according to the insured's original age.
With the interest only settlement option, what happens to the policy's death benefit?
Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary.
Who controls changes in premium payments, face values, and loans in a life insurance policy?
Policyowner
Who has the right to the cash value of a life insurance policy?
Policyowner
What beneficiary designation has first claim to the death proceeds of a life insurance policy?
Primary beneficiary
What nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
What provision allows the policyowner to reactivate a lapsed life insurance policy within a specific period of time with proof of insurablity?
Reinstatement
What are policy dividends?
Return of unused premiums
What type of beneficiary can b changed at any point by the policy owner?
Revocable
What term is used describe methods of payment of the death benefit to the beneficiary upon the insured's death?
Settlement options
A policy owner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?
The amount of the loan will be subtracted from the death benefit.
What happens to the policy's cash value under an extented term nonforfeiture option?
The cash value is converted to the same face amount as in the whole life policy.
What does the term double indemnity mean?
The insurer will pay a benefit of twice the face amount.
In the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installment.
The longer the period selected, the smaller each installment will be.
What is the purpose of a free-look period?
To allow the insured to return the policy with a full refund.
To meet the requirement of the entire contract policy provision, an insurance policy must contain what?
A copy of the original insurance application.
Which of the two types of policy assignments requires transfer of all ownership rights in a policy to a third party?
Absolute assignment
Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?
Cash surrender
What are the three nonforfeiture options in life insurance policies?
Cash surrender, reduced paid-up, and extended term
What are the dividend options in life insurance policies?
Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one year term, and acceleration of endowment.
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
Collateral assignment
What type of beneficiary is next in line after the primary beneficiary?
Contingent beneficiary
What life insurance policy provision state that both the policy and a copy of the application form the contract between the policy owner and the insurer?
Entire contract
What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?
Extended term
What provision in a life insurance policy extends coverage beyond the premium due date?
Grace period
What dividend option is automatically selected by the company if not chosen by the policy owner?
Paid-up additions
What required provision protects against unintentional policy lapse?
Grace period
What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?
Incontestability
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?
It will be paid to the insured's estate.
If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?
Lump-sum payment
What settlement options available in life insurance policies?
Lump-sum/cash, fixed period, fixed amount, life income, interest only.
Is the beneficiary required to have insurable interest in the insured?
No. beneficiaries do not have insurable interest in the insured.
What is the name for a life insurance policy rider that provides coverage on the insured's family members?
Other-insured rider
What dividend option can increase the death benefit of the existing life policy?
Paid-up additions
An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?
The death benefit will be adjusted to the amount that the insured could obtain for her correct age.
With the reduction of premium dividend option, how is the dividend used?
The dividend is applied to the next year's premium (it reduces the next year's premium).
What happens to the proceeds of a life insurance policy if there is no name beneficiary?
The proceeds are paid to the insured's estate.
What is the purpose of settlement options in life insurance policies?
To determine how the death benefit will be paid to the beneficiary.
What is the purpose of the Automatic Premium Loan provision?
To prevent the unintentional lapse of a policy because of nonpayment of the premium.
What life insurance policy rider allows the company to forgo collecting the premium if the insured become disabled?
Waiver of premium
What are the most common exclusions in life insurance policies?
War and military service hazardous occupation and aviation.
When can an insurance company use suicide as a defense against paying a death claim?
When a suicide is committed in a specific period of time after the policy is purchased (usually 2 years).
When will a contingent beneficiary receive death benefit from a life insurance policy?
When the primary beneficiary dies before the insured.
