Life Insurance Ch 4 Life Insurance Policy Provisions options and riders
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in A Recession of the policy. B Adjustment in the amount of death benefit. C No change whatsoever. D Automatic lapse.
Adjustment in the amount of death benefit. - If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.
Which of the following premium payment modes will incur the lowest overall payment? A Annual B Semi-annual C Quarterly D Monthly
Annual - Annual premiums are the only modes of payment that do not result in service fee, so the overall payment will be lower.
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? A Life income period certain B Extended term C Fixed amount D Fixed period
Fixed amount
What type of account will most likely be established for a minor? A Annuity B Credit life C Estate planning D Trust
Trust - Trusts are commonly established for minors, or to create a scholarship fund.
Under which of the following circumstances would an insurer pay accelerated benefits? A An insured is looking for a way to put her daughter through college. B A couple wants to build a house and would like to make a larger down payment. C An insured is diagnosed with cancer and needs help paying for her medical treatment. D A couple is nearing retirement and needs a steady stream of income.
An insured is diagnosed with cancer and needs help paying for her medical treatment. - Accelerated benefits are paid when insureds endure financial hardship due to severe illness. They may request immediate payment of some portion of the policy's death benefit, usually 50-100%, depending on the insurer. Benefits are not taxable.
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 A Irrevocable designation. B Stirpes designation. C Class designation. D Revocable designation.
Class designation. - A designation such as the child of the insured, or all children of the insured, or all current members of a group, is called a "class designation." The individuals need not be specifically named, since each who meet the qualifications of being included in the class will share in the benefit.
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? A Common Disaster B Accidental Death C Survivor Life D Second-to-Die
Common Disaster - Under the Uniform Simultaneous Death Law, Common Disaster provision, the law will assume that the primary beneficiary dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 days). This provides that the proceeds will be paid to either the contingent beneficiary or the insured's estate, if no contingent beneficiary is designated.
J applied for a life insurance policy on January 10. The policy was issued on January 31. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid? A February 28th, or 10 days after the time the policy is delivered. B The time varies from one policy to another. C It was already too late when J received the policy because the 10-day free-look period had expired. D Anytime, because the agent did not deliver the policy promptly.
February 28th, or 10 days after the time the policy is delivered. - The 10-day free-look period begins when the policy is delivered.
The automatic premium loan provision is activated at the end of the A Free-look period B Elimination period. C Policy period. D Grace period.
Grace period. - Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.
Which of the following applies to the 10-day free-look privilege? A It is granted only at the option of the agent. B It permits the insured to return the policy for a full refund of premiums paid. C It allows the insured 10 days to pay the initial premium. D It can be waived only by the insurance company.
It permits the insured to return the policy for a full refund of premiums paid - A policyowner may return a policy for any reason during the free-look period and receive a full refund.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? A Her parents' federal income tax receipts B Medical exam and parents' medical history C Proof of insurability is not required. D Medical exam
Proof of insurability is not required. - If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.
All of the following are beneficiary designations EXCEPT A Primary. B Specified. C Tertiary. D Contingent.
Specified. - Beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary and tertiary.
If an insured continually uses the automatic premium loan option to pay the policy premium, A The cash value will continue to increase. B The insurer will increase the premium amount. C The policy will terminate when the cash value is reduced to nothing. D The face amount of the policy will be reduced by the automatic premium loan amount.
The policy will terminate when the cash value is reduced to nothing. - This option, usually elected at the time of application, provides that in case of a possible policy lapse, the premium will be automatically paid form the contract's guaranteed cash value. However, once the cash value is exhausted, the policy will terminate.
Under an extended term nonforfeiture option, the policy cash value is converted to A A lower face amount than the whole life policy. B A higher face amount than the whole life policy. C The same face amount as in the whole life policy. D The face amount equal to the cash value.
The same face amount as in the whole life policy. - Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.
The paid-up addition option uses the dividend A To reduce the next year's premium. B To accumulate additional savings for retirement. C To purchase a smaller amount of the same type of insurance as the original policy. D To purchase a one-year term insurance in the amount of the cash value.
To purchase a smaller amount of the same type of insurance as the original policy. - The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.
