Chapter Four- Life Provisions

Which of the following is considered to be an alternative to a life settlement ? A.)Accelerated death benefit rider B.)Waiver of premium rider C.)Extended term option D.)Decreasing term insurance

A.)Accelerated death benefit rider

Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue ? A.)Accumulation at Interest Option B.)Cash Dividend Option C.)Paid - Up Additions Option D.)One - Year Term Dividend Option

A.)Accumulation at Interest Option

Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy ? A.)Interest only B.)Reduced paid - up insurance C.) Extended term insurance D.)Cash surrender

A.)Interest only

Joanne has a $ 100,000 whole life policy with an accumulated $ 25,000 of cash value . She would like to borrow $ 15,000 against the cash value . Which of the following statements is TRUE ? A.)Net death benefit will be reduced if the loan is not repaid B.)No interest will be charged on loan balance C.)Term life policies are the only type of insurance that allows policy loans D.)A loan can be taken out for up to the face amount of the policy

A.)Net death benefit will be reduced if the loan is not repaid

All of these are common exclusions to a life insurance policy EXCEPT A.)accidental death B.)military service C.)aviation D.)hazardous occupations

A.)accidental death

Life insurance policies will normally pay for losses arising from A.)commercial aviation B.)war C.)suicide D.)hazardous jobs

A.)commercial aviation

A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT A.)fare - paying passenger B.)pilot of personal airplane C.)suicide D.) War

A.)fare - paying passenger

A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n) A.)partial surrender B.)waiver of premium C.)automatic premium D.)loan grace period

A.)partial surrender

An insured individual and the policy's beneficiary die from the same accident . The common disaster provision states the insurer will continue as if A.)the insured outlived the beneficiary B.)the beneficiary outlived the insured C.)no beneficiary was ever named D.)the insured and beneficiary died at the same time

A.)the insured outlived the beneficiary

If an insured dies during the grace period with no premiums paid A.)the policy would be payable , minus the premium amount B.)the policy would be payable only after the beneficiary makes past due premium payment C.)all past premiums will be refunded with interest D.)the claim would be denied

A.)the policy would be payable , minus the premium amount

An error was made on Mary's life insurance application Which of the following areas do errors commonly occur on applications and for which the incontestable clause does NOT apply ? A.)Marital status B.)Age C.)Address D.)Income

B.)Age

What is an insurer required to do when faced with an error made under the Misstatement of Age provision ? A.)Cancel the policy B.)Pay age - corrected benefits C.)Pay full benefits as stated in the policy D.)Bill the policyowner for back premiums

B.)Pay age - corrected benefits

All of the following riders can increase the death benefit amount EXCEPT A.)Cost of Living B.)Waiver of Premium C.)Accidental Death Rider D.)Guaranteed Insurability

B.)Waiver of Premium

The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of A.)any interest payable from an outstanding policy loan balance B.)past due premiums that have not been paid by the end of the grace period C.)the outstanding policy loan balance D.)any surrender charges owed by the policyowner

B.)past due premiums that have not been paid by the end of the grace period

A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a ( n ) A.)waiver of premium rider B.)payor rider C.)automatic premium loan rider D.)juvenile waiver rider

B.)payor rider

The two major actions required for a policyholder to comply with the Reinstatement Clause are A.)provide evidence of insurability , agree to a new incontestable period B.)provide evidence of insurability , pay past due premiums C.)pay past due premiums , agree to a new incontestable period D.)pay past due premiums , agree to a reduction in coverage

B.)provide evidence of insurability , pay past due premiums

In order to activate the reinstatement clause of a lapsed life insurance policy , the insured MUST A.)remit all past - due premiums within the grace period B.)provide evidence of insurability to the insurer C.)resubmit a new life insurance application D.)provide a valid reason for the lapse

B.)provide evidence of insurability to the insurer

Loans obtained by a policyowner against the cash value of a life insurance policy are _______? A.)treated as taxable income B.)would not be treated as taxable income C.)are limited by the face amount of the policy D.)would be subject to a Federal estate tax

B.)would not be treated as taxable income

What is the purpose for having an accelerated death benefit on a life insurance policy ? A.)It allows for a spouse to be added as a rider to a life insurance policy B.)It allows for policy loans to be advanced to the insured in the event of unemployment C.)It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill D.)It allows for a third party to purchase a life insurance policy at a discounted rate and immediately advance a portion of the death benefit

C.) It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill

An endorsement found in an insurance plan which modifies the provisions of the policy is called a ( n ) A.)attachment B.)add - on C.)rider D.)supplement

C.) rider

Which of these is considered to be a Living Benefit option in a life insurance policy ? A.)Reinstatement B.)Waiver of premium C.)Accelerated death benefit D.)Payor benefit

C.)Accelerated death benefit

What is the name of the provision which states that a copy of the application must be attached to the policy when issued ? A.)Policy Summary B.)Buyer's Guide C.)Entire Contract D.)Entire Policy

C.)Entire Contract

All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT A.)Extended Term Insurance B.)Cash Surrender C.)Reduction of Premium D.)Reduced Paid - Up Insurance

C.)Reduction of Premium

James is the insured on a life insurance policy where his age was misstated on the application . Which of the following is CORRECT regarding the death benefit amount ? A.)The original face amount will be paid to the beneficiary B.)The policy will be voided with no death benefits paid C.)The death benefit paid will be what the premium would have purchased at the correct age D.)The amount of premiums paid will be returned with interest

C.)The death benefit paid will be what the premium would have purchased at the correct age

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception , the insurer will only be liable for a return of premiums paid A.) minus indebtedness and with interest B.)during the last 12 months C.)minus indebtedness and without interest D.)during the last 6 months

C.)minus indebtedness and without interest

A whole life policy option where extended term insurance is selected is called a ( n ) A.)dividend option B.)settlement option C.)nonforfeiture option D.)interest - only option

C.)nonforfeiture option

Which of these is NOT considered to be a common life insurance nonforfeiture option ? A.)Cash surrender B.)Extended term insurance C.)Reduced paid - up insurance D.)Life income annuity

D.)Life income annuity

Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies ? A.) Waiver of premium B.)Juvenile waiver C.)Guaranteed insurability D.)Payor benefit

D.)Payor benefit

What is an insurance policy's grace period ? A.)Period of time after the initial premium is paid and before the policy is issued B.)Period of time it takes for a policy's underwriting to complete C.)Period of time after a policy is issued and before it is delivered to policyowner D.)Period of time after the premium is due but the policy remains in force

D.)Period of time after the premium is due but the policy remains in force

Which of these is NOT a characteristic of the Accelerated Death Benefit option ? A.)The face amount and policy premium are not affected by the payment B.)Before payment of the benefit is made , specific conditions must exist , such as suffering from a terminal C.) There may be a dollar limit on the maximum benefit D.)The benefit can be offered as a rider at a specific extra cost or may be at no cost

D.)The benefit can be offered as a rider at a specific extra cost or may be at no cost

Which of these is NOT a characteristic of the Accelerated Death Benefit option ? A.)The face amount and policy premium are not affected by the payment B.)Before payment of the benefit is made , specific conditions must exist , such as suffering from a terminal illness C.)There may be a dollar limit on the maximum benefit D.)The benefit can be offered as a rider at a specific extra cost or may be at no cost

D.)The benefit can be offered as a rider at a specific extra cost or may be at no cost

A guaranteed issue insurance policy has no A.)initial premium requirement B.)incontestable period C.)waiting period D.)medical underwriting

D.)medical underwriting

Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option . When the term insurance expires , A.)he has the option of resuming the original policy and paying the same premium B.)the coverage can be extended with a lump sum payment C.) all remaining cash values are paid to the policyowner D.)the protection ends

D.)the protection ends