Texas Life and Health - Chapter 3 Life Policy Riders, Provisions, Options and Exclusions

Which of the following statements about a suicide clause in a life insurance policy is true?

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

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

Under which of the following circumstances would an insurer pay accelerated benefits?

A insured is diagnosed with cancer and needs helps paying for her medical treatment

A rider attached to a life insurance policy that provides coverage on the insured's family member is called the

Other-insured rider

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

An insured has had a life insurance policy that he purchsed 3 years ago when he was years old. He is killed in an automobile accident, and it is discovered that he is actually years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

Which of the following determines the length of time that the benefits will be received under the fixed-amount settlement option?

Size of each installment

The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case?

The beneficiary

The two types assignments are

Absolute and collateral

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Accumulation at interest

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in

Adjustment in the amount of the death benefit

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium payment

Which of the following is true about a class designation?

Beneficiaries are no identified by name

Which of the following best describes fixed-period settlement option?

Both the principle and the interest will be liquidated over a select period of time

Which of the following components must a life insurance policy have to allow policy loans?

Cash value

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming individuals, that is called?

Class designation

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

Collateral assignment

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?

Common disaster

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application

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?

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

Cost of living rider

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated

What is the purpose of a free-look period in insurance policies?

It allows the insured to reject the policy with a full refund

Which of the following is true concerning the Accidental Death Rider?

It will pay double or triple the face amount

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, proceeds of the policy will go to

The insured's estate

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?

The insured's premiums will be waived until she is 21

If an insured under a variable life insurance policy dies, how will the insurer respond to the outstanding policyloands?

The loan amounts are deducted from the death benefit

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

All of the following are true regarding the guaranteed insurability rider EXCEPT

The rider is available to all insured with no additional premium

Which of the follow is TRUE about nonforfeiture values?

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

What is the purpose of a suicide provision within a life insurance policy?

To protect the insurer from persons who purchase life insurance with the intention of committing suicide

What is the purpose of a fixed-period settlement option?

To provide a guaranteed income for a certain amount of time

The paid-up option uses the dividend

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

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

Revocable beneficiary

The Ownership provision entitles the policyowner to do all of the following EXCEPT

Set premium rates

Methods used to pay the death benefits to a beneficiary upon the insured's death are called

Settlement options

Which of the following information will be stated in the consideration clause of a life insurance policy?

The amount of the premium payment

A father purchased a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months

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

Incontestability clause

What type of insurance would be used for a Return of Premium rider?

Increasing term

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used?

Lump sum

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of premium

An insured committed suicide one year after his life insurance policy was issued. The insurer will

Refund the premiums paid

If a life insurance policy has an irrevocable beneficiary designation,

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

Which is not true about beneficiary designation?

The beneficiary must have insurable interest in the insured.

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will receive the lump sum, plus interest

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?

$100,000

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

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?

Waiver of Premium

What is the name of the clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

War or military service

Which of the following named beneficiaries would not be able to receive the death benefit directly from the insurer in the event of the insured's death?

A minor son of the insured

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the cash value surrendered from the policy

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusion clause

Which nonforfeiture option has the highest amount of insurance protection?

Extended term

Which nonforfeiture option provides coverage for the longest period of time?

Extended term

When the policyowner specifies a dollar amount in which installment are to be paid, he/she has chosen which settlement option?

Fixed amount

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is al the insurance that 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?

Guaranteed insurability option

Which of the following is true about the mandatory free look in a Life Insurance policy?

It commences when the policy is delivered

Which of the following settlement options in life insurance is known as straight life?

Life income

What is the other term for the cash payment settlement option?

Lump sum

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

One-year term option

Which of the following rider would not cause the death benefit to increase?

Payor benefit rider

All of the following are true regarding insurance policy loans except

Policy loans can be made on policies that do not accumulate cash value

Who can request changes in premium payments, face value, loans, and policy plans?

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?

Proof of insurability is not required

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?

Reinstatement provision

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

The insured's contingent beneficiary

A 40-year old man buys 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

The insured's estate