Chapter 4: Life Insurance Policy Provisions, Options, and Riders

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000 (not the triple amount - the triple indemnity rider was voided bc he caused the accident)

Naming a trust as the beneficiary of a life insurance policy can accomplish all of the following for the policyowner except

allow the trustee to transfer the assets of the trust to their personal account

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called

class designation

A rider may be attached to a life insurance policy that will adjust the face amount upon a specific index, such as the Consumer Price Index, is called

cost of living rider

An insured committed suicide one year after his life insurance policy was issued The insurer will

refund the premiums paid

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

reinstatement provision

What happens when a policy is surrendered for its cash value?

coverage ends and the policy cannot be reinstated

Which nonforfeiture option has the highest amount of insurance protection?

extended term

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

Lied about age and is killed in automobile accident 3 years later

insurance company will pay a reduced death benefit

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

lump sum

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

this rider is available to all insureds with no additional premium

What kind of policy allows withdrawals or partial surrenders?

universal life

What is the maximum annual interest rate that an insurer may charge on a policy loan?

6%

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following except

the insured's age at death

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

What is true about a spouse term rider?

the rider is usually level term insurance

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

paid-up option