Chapter 2: Policies, Provisions, Options, & Riders

Which statement regarding the misstatement of age provision is considered to be true

Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

At future dates specified in the contract with no evidence of insurability required

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

All of these statements concerning settlement options are true except

Only the beneficiary may select

A policy loan is made possible by which of these life insurance policy features?

Cash value provision

A whole life insurance policyowner does not have the right to

Change the grace period

All of the following statements are true regarding a policy's grace period except

Past due premiums are waived

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

Which of the following provisions guarantees that premiums will be waived if a juvenile life policyowner becomes disabled

Payor clause

The ______ has the right to change a life insurance policy's beneficiary

Policyowner

The is authorized to assign a life insurance policy as collateral for a loan

Policyowner

What benefit does the Payor clause on a Juvenile Life policy provide?

Premiums are waived if payor becomes disabled

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-Up

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Reinstatement

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Reinstatement provision

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

Term rider

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount

The advantage of reinstating an original life policy is

The premiums are based on a younger age

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

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of ride attached

Waiver of premium

When is the face amount of a Whole Life policy paid?

When the insured dies or at the policy's maturity date, whichever happens first

What does the ownership clause in a life insurance policy state?

Who the policyowner is and what rights the policyowner is entitled to

A return of premium life insurance policy

Whole life and Increasing term

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied under the Suicide clause of the policy

When I miss representation on a life insurance policy application is discovered what action mean insurance company take A Void the policy if found during the contestable. B Void the policy no matter when it is discovered C void the policy at any time only if it is found to be material D void the policy only if it is discovered during the contestable and proven to be material

D void the policy only if it is discovered during the contestable and proven to be material

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing term

What provision in a life insurance policy states that the application is considered part of the contract?

Entire Contract provision

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

Entire Contract provision

Which of these statements about a guaranteed insurability option rider is not true

Evidence of insurability is required when the option is exercised

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

P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks 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

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?

20-Pay Life accumulates cash value faster than Straight Life

An insurer may normally delay the payment of a cash value loan or surrender value for up to

6 months

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with? A extended term B loan provision C reduced paid up D cash surrender

A Extended term

A Term Life rider offers the insured A additional life coverage B cash value C long- term care coverage D disability protection

A additional life coverage

In a life insurance contract, an insurance company's promise to pay stated benefits is called A Insuring clause B Consideration clause C Entire Contract D Owner's rights

A insuring clause

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called A term rider B accidental death and dismemberment rider C family rider D annuity

B accidental death and dismemberment rider (AD&D)

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of A additional Term Life coverage at any time B additional Term Life coverage at specified intervals C additional Whole Life coverage at any time D additional whole life coverage at specified times

D additional whole life coverage at specified times

The consideration clause and a life insurance contract contains what pertinent information A summary of benefits B offer and acceptance C Entire contract D amount of Premium payments and when they are doing

D amount of Premium payments and when they are doing

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT A type of life ins B s's attained age C dividend amount used toward purchase D beneficiary' age

D beneficiary's age

The incontestable clause allows an insurer to A Disallow a change of ownership throughout the contestable period B Disallow a change of beneficiary during the contestable period C Contest a claim at any time of the cause of death was accidental D Contest a claim during the contestable period

D contest a claim during the contestable period

Which of the following statements is CORRECT about accelerated death benefits? A Deformed face amount is available as an accelerated benefit B Those on Social Security disability automatically qualify for this benefit C This provision is usually provided with an increase in premium D Must have a terminal illness to qualify

D must have a terminal illness to qualify

The purpose of the ________ Period clause is to avoid an unintentional lapse of a life insurance policy.

Grace period

A non forfeiture clause gives the policyowner

Guaranteed values even if the policy has lapsed

All of these statements about the Waiver of Premium provision are correct EXCEPT

Insured must be eligible for Social Security disability for claim to be accepted

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's

How are policyowner dividends treated in regards to income tax?

Interest on accumulations is taxed

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

Interest only

B receives yearly dividends and interest from a participating life insurance policy. Which of these should b include as gross indolence for federal income tax purposes

Interest only

The accidental death and dismemberment provision in a life insurance is policy would pay benefits if the insured

Is blinded in an accident

Which of the following statements about accumulated interest earned on dividends from an insurance policy is true

It is taxed as ordinary income

Which of these are not an example of non forfeiture option

Life Income

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

child

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

collateral assignment

A cost of living rider gives the insured A tax incentives B monthly income C decreasing premiums D additional death benefits

d additional death benefits

Additional coverage can be added to a Whole Life policy by adding a(n)

decreasing term rider

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

ex-wife

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

exclusion

B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will

pay the amount that the premium would have purchased at the correct age

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

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

Typically a life insurance death benefit is paid by a lump-sum payment. A(n) __________ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.

settlement

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? A Claim will be denied B Claim will be paid in full C Claim will be partially paid D Claim will be decided by an arbitrator

A claim will be denied

A provision in a life insurance policy that pays the policy owner in amount that does not surpass the guaranteed cash value is called the A Policy loan provision B Automatic premium loan provision C Accelerated benefits provision D consideration Clause

A policy loan provision

A policyowner may generate taxable income from which of the following Dividend Options?

Accumulation at interest

What does the insuring agreement in a Life insurance contract establish?

An insurer's basic promise

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

Assign policy ownership to the banks

How are surrender charges deducted in a life policy with a rear end loaded provision A Deducted it from the death benefit B Deducted when the policy is continued C Deducted from a policies cash value D Deducted when assigned to another policy owner

B deducted when the policy is continued

When an ensure issues a policy there refuses to cover certain risks this is referred to as A elimination B exclusion C limitation D exception

B exclusion- features of a life insurance policy stating that the policy will not cover certain risks

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices A Joint life B Adjustable life C Variable universal life D Universal life

C. Variable Universal Life

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? -misrepresentation -exclusion -collateral assignment -concealment

B exclusions- are specified hazards listed in a policy for which benefits will not be paid

Which of these is NOT considered to be a right given to a policy owner A Surrendering the policies cash value B Modify a provision in the insurance contract C Assignment of ownership D Change the beneficiary if revocable

B modify a provision in the ins contracf

Which statement is true in regards to a policy loan A past due interest payments not paid after three months and avoid the policy B Past due interest on a policy long is added to the total debt C Insurance companies can send delinquent interest accounts to a collection agency D insurance companies can charge an interest rate based on the policy owners credit report

B past due interest on a policy loan is added to the total debt

Which of the following is an example of a non forfeiture option A conversion option B reduced paid up option C inflation option D guaranteed insurability option

B reduced paid up option

S buys a $10,000 whole life policy in 2003 And pays an annual premium $100. S dies five years later in 2008 and the insurer pays the beneficiary $10,500 what kind of rider did as include on the policy A accelerated death benefit rider B return of premium rider C family income rider D term rider

B return of premium rider

A ____Rider may be used to include coverage for children under their parents' life insurance policy A payor B term C conversion D parent

B term

An insured's inability to perform two or more activities of daily living may trigger which type of policy rider? A waiver of premium B long term care C accelerated death benefit D accidental

B. Long term care

P Died five years after purchasing a life policy while investigating the claim the insurer discovered material misrepresentation is made by P during the application process. Which of these actions will the insurer take? A Beneficiary will be denied the claim B Beneficiary will be denied the claim and refunded all pay premiums C Beneficiary will be paid the death benefit D Beneficiary will be paid a partial death benefit

C beneficiary will be paid the death benefit. The inccontestible clause prevents the ensure from canceling the contract even for material representation.

An Insured is past due on his life insurance premium but I still within the grace period what will the beneficiary receive if the insured dies during this grace period? A Refund of our premiums paid plus interest B Refund of our premiums paid C Full face amount minus any past due premiums D full face amount

C full face amount minus any past due premiums

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following A Critical illness B Terminal illness C Inability of the insured to perform at into activities of daily living D inability of the insured to maintain insurance premiums due to the employment

C inability of the insured to perform more than 2 activities of daily living (ADL's)

Dividends paid from a life insurance policy are A guaranteed B taxable C issued by the insurer D issued by the department of insurance

C issued by the insurer

K's whole life ins policy lapses 2 months ago due to non payments. She would now like to reinstate the policy. All of these statements are correct about the policies reinstatement EXCEPT A k must reinstate within a stated period B k must pay back interest and premiums C k will forfeit the right to use the automatic loan provision upon reinstatement D k must provide evidence of insurability

C k will forfeit the right to use the automatic loan provision upon reinstatement

Which life insurance rider typically appears on a juvenile life insurance policy A Decreasing term rider B Inflation rider C Payor benefit rider D Waiver of premium rider

C payor benefit rider - a payor benefit rider provides for waiver of premium if the adult payor of the policy dies or becomes totally disabled.

The free look provision begins A Upon the date of the sales presentation B Upon receipt of the policy of the producer C Upon receipt of the policy of the policy owner D Upon the completion of the application

C upon receipt of the policy of the policy owner

A life insurance policy owner would like to take out a loan policy against the cash value in his whole life policy. The interest rate applied to this loan my very overtime. This is referred to as A Fluctuating rate loan B fixed rate loan C variable rate loan D increasing rate loan

C variable rate loan

What action will an insurer take if an interest payment on a policy loan is not made on time?

automatically add the amount of interest due to the loan balance

The automatic premium loan provision is designed to

avoid a policy lapse