CH 3 Quiz Pt 2

P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 minus any outstanding policy loans

The incontestable clause allows an insurer to

contest a claim during the contestable period

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

The Consideration clause in a life insurance policy indicates that a policy owners consideration consists of a completed application and

the initial premium

What action can a policyowner take if an application for a bank loan requires collateral?

Assign a policy ownership to the bank

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Beneficiary will be paid the death benefit

Whose life is covered on a life insurance policy that contains a payor benefit clause?

Child

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 a life insurance policy, which feature states that the policy will not cover certain risks?

Exclusion

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

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

All of the settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT

Interests Only

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?

Owner's rights

M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the

Policy Proceeds

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

Which of these life insurance riders allows the applicant to have excess coverage?

Term Rider

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

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

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

automatic policy loan

The automatic premium loan provision is designed to

avoid a policy lapse