Chapter 4: Life Insurance Policy Provisions, Options and Riders

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had concealed information during the application process. What can they do?

Pay the death benefit

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

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

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?

$9,800

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

Cost of Living Rider

Which entity determines the amount of accelerated death benefits that will be paid to an insured?

The insurer

The paid-up addition option uses the dividend

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

The automatic premium loan provision is activated at the end of the

Grace period.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The policy will terminate when the loan amount with interest equals or exceeds the cash value.

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

The same face amount as in the whole life policy.

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income

The interest earned on policy dividends is

Taxable

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy.

What provision in an insurance policy extends coverage beyond the premium due date?

Grace period

A policyowner 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 policyowner should have her husband named as the

Revocable beneficiary

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