Chapter 3 Life Insurance Policies- Provisions, Options and Riders (Exam 2)

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

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued

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

Entire Contract provision The Entire Contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract.

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 D's ex wife is still the beneficiary of this policy, even though policy ownership has changed to his current spouse

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

Exclusion The feature of a life insurance policy stating that the policy will not cover certain risks is called an exclusion.

All of these statements about the Waiver of Premium provision are correct EXCEPT 1. A waiting period must pass before becoming eligible for benefits 2.Waiver of Premium is available on both permanent and term insurance policies 3.Insured must be eligible for Social Security disability for claim to be accepted 4.Insured must be totally disabled to qualify

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

Which of these are NOT an example of a Nonforfeiture option? 1. Extended Term 2. Reduced Paid-up 3. Cash Surrender 4. Life Income

Life Income

A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?

Paid-Up Additional Insurance

Which statement is TRUE in regards to a policy loan?

Past-due interest on a policy loan is added to the total debt

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 that has a level premium but allows the policyowner to choose from a selection of investment options is known as Variable Life.

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

decreasing term rider

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

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

The automatic premium loan provision is designed to

avoid a policy lapse

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

$50,000

An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?

Long term care A long term care rider is triggered by the insured's inability to perform two or more activities of daily living.

All of these statements concerning Settlement Options are true EXCEPT

Only the beneficiary may select Settlement options may be selected by the policy-owner

Which life insurance rider typically appears on a Juvenile life insurance policy?

Payor Benefit rider A payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.

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

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 Unpaid interest from a policy loan is added to the loan balance if not paid by the due date.