Life Insurance Policy Provisions, Options & Riders

Which of the following is NOT a standard exclusion, included in most life policies?

A policy issued following a misstated age

The two types of assignments are

Absolute and collateral

Under which of the following circumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment.

Which concept is associated with "exclusion ration"?

Annuity payments

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the original policy for as long as the cash values will purchase.

Which nonforfeiture option has the highest amount of insurance protection?

Extended Term

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

The automatic premium loan provision is activated at the end of the

Grace period.

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?

Lump sum

A rider attached to a life insurance policy that provides coverage on the insured's family members is called th

Other-insured rider.

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's Rights

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions.

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination.

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy.

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

Universal Life

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

Universal life

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

An insured just died. The insured's beneficiary promptly sent the insurer proof of death. According to Arizona law, this insurer may now establish a period of time during which the settlement will be made. What is the greatest amount of time the insurer can mandate for this particular period?

2 months

Which is true about a spouse term rider?

The rider is usually level term insurance.

The accelerated benefits provision will provide for an early payment of the death benefit when the insured.

Becomes terminally ill.

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender

What type of insurance would be used to a Return of Premium rider?

Increasing Term

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium.

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium.

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

It will pay double or triple the face amount.

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance.

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?

A minor son of the insured

An insured has a continuous premium whole life policy. She would life to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid-up option

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?

Reinstatement provision

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

Revocable beneficiary.

All of the following are beneficiary designations EXCEPT

Specified.

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will only receive payments of the interest earned on the death benefit.

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

The insured's premiums will be waived until she is 21.

Which of the following statements is TRUE concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary.

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated.

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up