chapter 3 life policy provisions, riders and options

what is the waiting period on a waiver of premium rider in life insurance policies?

6 months

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance

which of the following best describes (fixed-period) settlement option?

Both the principal and interest will be liquidated over a selected period of time.

The provision which states that both the policy and a copy of the application form the contract between the policy owner and the insurer is called

Entire Contract

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

Exclusions clause

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

Guaranteed insurability rider

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

It has the highest amount of insurance protection

When a Reduced-Paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is Reduced to the amount of what the cash value would buy as a single premium

which of the following statements is TRUE about a policy assignment

It transfers rights of ownership from the owner to another person.

the type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor

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

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

Other-insured rider

which of the following explains the policy owners right to change beneficiaries, choose options, and receive proceeds of a policy

Owner's Rights

an insured has a life insurance policy from a participating company and receives quarterly dividends. he has instructed the company to apply the dividends to increase the death benefits. this dividend options is

Paid-up addition

all of the following are true regarding insurance policy loans EXCEPT

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

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

when an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all the premiums paid. which rider is attached to the policy?

Return of premium

A policy owner 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 policy owner 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

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

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 only receive payments of the interest earned on the death benefit.

a life insurance policy does not have a war clause. if the insured is killed during a time of war, what will the beneficiary receive from the policy?

The full death benefit

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

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

which is true about a spouse term rider

The rider is usually level term insurance

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

which of the following statements is TRUE concerning irrevocable beneficiaries

They can be changed only with the written consent of that beneficiary.

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

This rider is available to all insureds with no additional premium.

The paid-up addition option uses the dividend

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

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of Premium

which of the following premium payment modes will incur the lowest overall payment?

annual

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A $0 B $200 C $9,800 D $10,000

c 9,800

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? a) Common Disaster b) Accidental Death c) Survivor Life d) Second-to-Die

common disaster

an insured pays an annual premium to his insurer, in return the insurer promises to pay benefits in accordance with the terms of the contract, this is called

consideration

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

contingent beneficiary

The Accidental Death Rider will pay __________ or triple the face amount of death after 90 days of an accident

double

when a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount

equal to the original policy for as long a period of time that the cash value will purchase

all of the following are dividend options EXCEPT - fixed -period installments -accumulated at interest -reduction fo premium -paid up additions

fixed-period Installments (settlement option)

if a life policy allows the policy owner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

guaranteed insurability rider

the life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is know as the

incontestability clause

what type of insurance would be used for a return of premium rider?

increasing term

which of the following policy components contains the company's promise to pay

insuring clause

which provision of a life insurance policy states the insurers duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

insuring clause

which of the following applies to the 10-day free look privilege

it permits the insured to return the policy for a full refund of premiums paid

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

pay a reduced death benefit--incontestality clause doesn't apply to statements relating to age sex and identity

an insured purchased a life policy in 2010 and dies in 2017. the insurance company discovers at that time that the insured had concealed information during th application process. what can they do?

pay the death benefit--incontestablity 2 years clause

what factors determine the amount of each installment paid in a Life Income option?

recipients life expectancy and amount of principal

which nonforfeiture option provides coverage for the Longest period

reduced paid-up

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

term

which is NOT true about beneficiary designations?

the beneficiary must have insurable interest in the insured

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

an absolute assignment is a

transfer of all ownership rights in a policy