Chapter 6 Quiz

An insured purchased a 15-year level term life insurance 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 injuries. How much will the beneficiary receive from the policy?

$200,000 (The beneficiary will most likely receive twice the face value of the policy, since the insured's fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.)

An insured purchased a 15-year level term life insurance 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 injuries. How much will the beneficiary receive from the policy? A. $200,000 B. $0 C. $100,000 D. $100,000 plus the total of paid premiums

A. $200,000 (The beneficiary will most likely receive twice the face value of the policy, since the insured's fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.)

What is the waiting period on a Waiver of Premium rider in life insurance policies? A. 6 months B. 30 days C. 3 months D. 5 months

A. 6 months (Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.)

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called A. Guaranteed insurability. B. Accelerated benefits. C. Cost of living. D. Waiver of cost of insurance.

A. Guaranteed insurability (Guaranteed insurability is a rider that is included at the time of application (or can be added at a later date) which allows the insured to increase the amount of insurance without proving evidence of insurability.)

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? A. Monthly premium waiver and monthly income B. Percentage of medical costs paid by the insurer C. Payments for life D. Yearly premium waiver and income

A. Monthly premium waiver and monthly income (The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.)

A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury is called

Accelerated Benefit provision. (The accelerated payment can be made in a lump sum or in monthly installments over a special period of time. This provision is given without an increase in premium. Some companies, however, deduct an interest charge from the proceeds paid out to make up for their loss earnings.)

All of the following are features and requirements of the Living Needs Rider EXCEPT A. It provides funds for medical and nursing home expenses to a terminally ill insured. B. Diagnosis must indicate that death is expected within 3 years. C. It is usually available at no additional charge. D. The remainder of the policy proceeds is payable to the beneficiary at the insured's death.

B. Diagnosis must indicate that death is expected within 3 years. (The Living Needs Rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years.)

Which of the following statements is TRUE concerning the Accidental Death Rider? A. It is only available in group insurance. B. It will pay double or triple the face amount. C. This rider is only available to insureds over the age of 65. D. It is also known as a triple indemnity rider.

B. It will pay double or triple the face amount (The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.)

All of the following are the responsibilities of every long-term care insurer in California EXCEPT A. Establish marketing procedures to assure that any comparison of policies will be fair and accurate. B. Provide enough business to solicit long-term care insurance. C. Submit to the Commissioner a list of all agents authorized to solicit individual consumers for the sale of long-term care insurance. D. Establish marketing procedures to assure excessive insurance is not sold or issued.

B. Provide enough business to solicit long-term care insurance. (Long-term care insurers must maintain strict requirements. These include establishing marketing procedures to assure that comparison is fair and accurate and to assure that excessive insurance is not sold. In addition, insurers must semiannually submit to the Commissioner a list of all agents authorized to solicit for the sale of long-term care insurance.)

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called A. Payor benefit. B. Waiver of premium. C. Waiver of cost of insurance. D. Guaranteed insurability.

B. Waiver of Premium (Waiver of premium rider waives the premium if the insured owner has been totally disabled for a predetermined period. The payor benefit provides for an owner other than the insured and the waiver of cost of insurance is found in Universal Life.)

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called A. Living need rider. B. Accelerated benefit rider. C. Cost of living rider. D. Payor rider.

C. Cost of Living Rider (A "cost of living" rider adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living.)

Which of the following annuity riders ensures that the owner will receive from an annuity at least the amount paid for the annuity? A. Guaranteed Minimum Income B. Guaranteed Minimum Accumulation C. Guaranteed Lifetime Withdrawal D. Guaranteed Lifetime Earning

C. Guaranteed Lifetime Withdrawal (The Guaranteed Lifetime Withdrawal Benefit protects annuity owners from losing their investments if the annuity value drops.)

All of the following are true regarding the guaranteed insurability rider EXCEPT A. The insured may purchase additional coverage at the attained age. B. The insured may purchase additional insurance up to the amount specified in the base policy. C. This rider is available to all insureds with no additional premium. D. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events.

C. This rider is available to all insureds with no additional premium. (The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.)

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

Cost of Living Rider (A "cost of living" rider adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living.)

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 (The Cost of Living rider annually adjusts the policy's face value in accordance with the national rate of inflation or deflation. This rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time.)

All of the following are features and requirements of the Living Needs Rider EXCEPT

Diagnosis must indicate that death is expected within 3 years. (The Living Needs Rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years.)

Which of the following annuity riders ensures that the owner will receive from an annuity at least the amount paid for the annuity?

Guaranteed Lifetime Withdrawal (The Guaranteed Lifetime Withdrawal Benefit protects annuity owners from losing their investments if the annuity value drops.)

Which of the following annuity riders ensures investors will receive a set amount of income annually?

Guaranteed Minimum Income Benefit (The Guaranteed Minimum Income Benefit provides a set annual income, no matter how the underlying investments perform.)

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called

Guaranteed insurability (Guaranteed insurability is a rider that is included at the time of application (or can be added at a later date) which allows the insured to increase the amount of insurance without proving evidence of insurability.)

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option (The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.)

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 (The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.)

Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary?

It will decrease the benefits paid to the beneficiary (Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of insurance is therefore reduced, which will decrease the benefits paid to the beneficiary.)

What is the waiting period on a Waiver of Premium rider in life insurance policies?

Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.

All of the following are the responsibilities of every long-term care insurer in California EXCEPT

Provide enough business to solicit long-term care insurance. (Long-term care insurers must maintain strict requirements. These include establishing marketing procedures to assure that comparison is fair and accurate and to assure that excessive insurance is not sold. In addition, insurers must semiannually submit to the Commissioner a list of all agents authorized to solicit for the sale of long-term care insurance.)

All of the following topics may be included in the continuing education requirement for long-term care insurance EXCEPT

Sales techniques and overcoming client objectives in the purchase of long-term care insurance. (Training courses on sales techniques or overcoming client objectives are not approved continuing education topics.)

Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least

Semiannually (According to CIC 10234.93, the insurer must submit an updated list semiannually of all agents authorized to solicit long term care insurance.)

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

This rider is available to all insureds with no additional premium. (The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.)

What is the purpose of annuity riders?

To allow investors to obtain additional benefit (Annuity riders are features that allow annuity investors to obtain additional benefit not offered with the original annuity product.)

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life (The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.)

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. (Waiver of premium rider waives the premium if the insured owner has been totally disabled for a predetermined period. The payor benefit provides for an owner other than the insured and the waiver of cost of insurance is found in Universal Life.)

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

long term care (Long-term care rider provides for the payment of part of the death benefit (called accelerated benefits) in order to take care of the insured's health care expenses, which are incurred in a nursing or convalescent home.)

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 (The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.)

As part of the continuing education requirement, what is the minimum number of hours of continuing education specific to long-term care insurance to be completed prior to each license renewal?

8 (For licensees issued a license after January 1, 1992, 8 hours of continuing education specific to long-term care insurance are required for each license period.)

The Waiver of Cost of Insurance rider is found in what type of insurance? A. Whole Life B. Universal Life C. Juvenile Life D. Joint and Survivor

B. Universal Life (The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.)

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount (The accidental death rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs writhing 90 days of such an accident.)

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 Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.)