Chapter 3 Questions

which of the following allows the insurer to relive a minor from insured premium payments if the minor's parents have died or become disabled

(Payor benefit) If the payor [usually the parent or guardian] becomes disabled for atleast 6 months or dies, the insurer will waive the premium until the minor reaches a certain age Such as 21

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

Copy of the original application (An insurance contract must contain a copy of the original application)

Which is NOT true about beneficiary designations?

The benifiary must have insurable intre

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

Which of the following, when attached to a permanent life insurance policy allows the policy owner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

Term Rider

Nonforfeiture values guarantee which of the following for a policyowner

That the cash value will not be lost. Because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policyowner. Nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered.

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 of the following is true about nonforfiture values?

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

Which rider, when attached to a permanent life insurance policy provides an amount of insurance on every family member

(Family term rider ) A single rider that provides coverage on every family member is called a "family rider".

All of the following statements concerning dividends are true except

Dividend amounts are guaranteed in the policy (dividends cannot be guaranteed)

An insured purchased a 15 year level term life policy with a face amount of $100.000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injury's. What amount would his beneficiary receive

$200,000

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) The business owner could make a collateral assignment of his or her life insurance policy to the bank

Which of the following riders would not cause the death benefit to increase

(Payor Benefit Rider) Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

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 (The value offered by the insured to the insurer, and vise versa. The insured makes accurate statements in the application and remits premium payments. in exchange, the insurer provides benefits stipulated in the contract)

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

(Reinstatement provision) A lapsed policy may be reinstated within 3 years by paying back premiums, with interest, and proving insurability.

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 ) If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit

What is true about the cash surrender nonforfiture option

(funds exceeding the premium paid are taxable as ordinary income) The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.

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

(the contingent beneficiary) A contingent beneficiary receives the death benefit if the primary beneficiary predeceases the insured. If there are no designated beneficiaries surviving the insured, the benefits are paid to the estate of the insured.

The two types of assignments are

Absolute and collateral (Absolute assigns the entire policy. Collateral assigns a part or all the benefits)