Chapter 5 - Policy Provisions, Riders, and Options
Waiver of Premium
What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?
Extended Term
What nonforfeiture option is automatically selected by the company if not choses by the policyowner?
Reduced Paid-Up Insurance
What nonforfeiture option provides coverage for the longest period of time?
paid to insured estate
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?
Paid-Up Additions
What dividend option can increase the death benefit of the existing life policy?
paid-up additions
What dividend option is automatically selected by the company if not chosen by the policyowner?
insurer will pay a benefit of twice the face amount
What does the term double indemnity mean?
The cash value is converted to the same face amount as in the whole life policy
What happens to a policy's cash value under an extended term nonforfeiture option?
The amount of the loan will be subtracted from the death benefit
A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?
The death benefit will be adjusted to the amount that the insured could obtain for her correct age.
An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?
Pay a reduced death benefit
An insurer has discovered a representation on a life insurance policy application regarding insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?
lump-sum payment
If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?
Longer the period, small each installment will be
In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?
A copy of the original insurance application
To meet the requirements of the entire policy provision, and insurance policy must contain what?
cash surrender
Under what nonforfeiture option does the company pay the policy surrender value and have no further obligations to the policy owner?
Return of unused premiums
What are policy dividends?
within a specified period of time after the policy has been purchased (usually 2 years)
When can an insurance company use suicide as a defense against paying a death claim?
When a primary beneficiary dies before the insured
When will a contingent beneficiary receive death benefits from a life insurance policy?
absolute assignment
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?
entire contract
What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?
no
Is the beneficiary required to have insurable interest in the insured?
paid to the insured's estate
What happens to the proceeds of a life insurance policy if there is no named beneficiary?
policy premium in a reinstated policy will be set according to the insured's original age
What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?
Other Insured Rider
What is the name for a life insurance policy rider that provides coverage on the insured's family members?
To prevent the unintentional lapse of a policy because of nonpayment of the premium
What is the purpose of Automatic Premium Loan Provision?
To allow the insured to return the policy with a full refund
What is the purpose of a free-look period?
to determine how the death benefit will be paid to the beneficiary
What is the purpose of settlement options in life insurance policies?
Incontestability
What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?
Reinstatement
What provisions allows policyowners to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?
grace period
What provisions in a life insurance policy extends coverage beyond the premium due date?
Grace Period
What required provision against unintentional policy lapse?
lump-sum cash fixed period fixed amount life income interest only
What settlement options are available in life insurance policies?
Settlement Options
What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?
Collateral Assignment
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
revocable
What type of beneficiary can be changed at any point by the policyowner?
Contingent Beneficiary
What type of beneficiary is next in line after the primary beneficiary?
Policyowner
Who controls changes in premium payments, face values, and loans in a life insurance policy?
Policyowner
Who has the right to the cash value of a life insurance policy?
Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary
With the interest only settlement option, what happens to the policy's death benefit?
The dividend is applied to the next year's premium (it reduces the next year's premium)
With the reduction of premium dividend option, how is the dividend used?
cash surrender reduced paid-up extended term
What are the 3 nonforfeiture options in life insurance policies?
Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term, and acceleration of endowment
What are the dividend options in life insurance policies?
war/military hazardous occupations aviation
What are the most common exclusions in life insurance policies?
primary beneficiary
What beneficiary designation has first claim to the death proceeds of a life insurance policy?
Contingent Beneficiary
Who does the common disaster clause protect?