Chapter Exam 2 - Life Provisions

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Beneficiary will be paid the Death Benefit

Additional coverage can be added to a Whole Life policy by adding a(n);

Decreasing term rider

What provision in a life insurance policy states that the application is considered part of the contract?

Entire Contract provision

The purpose of the <Blank> Period clause is to avoid an unintentional lapse of a life insurance policy.

Grace

All of these statements about the Waiver of Premium provision are correct, EXCEPT:

Insured must be eligible for Social Security disability for claim to be accepted

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):

Living Benefit

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-Up

J let her life insurance policy lapse 8 moths ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Reinstatement provision

S buy a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

Return of premium rider

Which of the following statement about accumulated interest earned on dividends from an insurance policy is TRUE?

Taxed as ordinary income

A Cost of Living rider gives the insured

additional death benefits

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will:

adjust the death benefit to a reduced amount

A Whole Life insurance policyowner does NOT have the right to

change the grace period

The incontestable clause allows an insurer to:

contest a claim during the Contestable Period

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n):

exclusion

A Nonforfeiture clause gives the policyowner

guaranteed values even if the policy has lapsed

Dividends paid from a life insurance policy are

issued by the insurer

The <Blank> has the right to change a life insurance policy's beneficiary.

policyowner

The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and

the initial premium

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

$20,000 death benefit

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000 (The suicide occurred outside the Suicide Clause period (normally 1-2 years), thus the face amount will be paid)

An insurer may normally delay the payment of a cash value loan or surrender value for up to

6 months

A policy loan is made possible by which of these life insurance policy features?

Cash value provision

Whose life is covered on a life insurance policy that contains a payor benefit clause?

Child

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT:

K will forfeit the right to use the automatic loan provision upon reinstatement

The advantage of reinstating an original life policy is

the premiums are based on a younger age

The free-look provision begins

upon receipt of the policy by the policyowner

An insured's inability to perform two or more activities of daily living may trigger which type of life policy rider?

Long term care

Which of the following Nonforfeiture options offers the highest death benefit?

Extended Term

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:

Interest Only

Which of these are NOT an example of a Nonforfeiture option?

Life Income

All of these statements concerning Settlement Options are true, EXCEPT:

Only the beneficiary may select

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?

Owner's Rights

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

What action will an insurer take if an interest payment on a policy loan is not made on time?

Automatically add the amount of interest due to the loan balance

Which of these is NOT considered to be a right given to a policyowner?

Modify a provision in the insurance contract

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:

Policy Loan provision

What benefit does the Payor clause on a Juvenile Life policy provide?

Premiums are waived if payor becomes disabled