Life Insurance Policy Riders , Provisions , Options , and Exclusions

What is the waiting period on a waiver of premium rider in life insurance policies?

6 months

To meet the requirement of the entire contract policy provision , an insurance policy must contain what?

A copy of the original insurance application

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Absolute assignment

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selection period of time

What are the dividend options in life insurance policies?

Cash , reduced premium , accumulation at interest , paid-up option , one-year term , and acceleration of endowment

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Cash surrender

What are the three nonforfeiture options in life insurance policies?

Cash surrender , reduced paid-up , and extended term

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

Collateral assignment

What type of beneficiary is next in line after the primary beneficiary?

Contingent beneficiary

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Entire contract

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Extended term

What provision in a life insurance policy extends coverage beyond the premium due date?

Grace period

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 renewable option

Which of the following is true of a children's rider added to an insured's permanent life insurance policy?

It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation , what will happen to the policy's death benefit?

It will be paid to the insured's estate

What is the other term for the cash payment settlement option?

Lump sum

If a settlement option is not chosen by the policy owner or the beneficiary , what option will be used by the insurer?

Lump-sum payment

What settlement options are available in life insurance policies?

Lump-sum/cash , fixed period , fixed amount , life income , and interest only

Is the beneficiary required to have insurable interest in the insured?

No , beneficiaries do not have insurable interest in the insured

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

Other-insured rider

What is the name for a life insurance policy rider that provides coverage on the insured's family members?

Other-insured rider

What dividend option can increase the death benefit of the existing life policy?

Paid-up additions

What dividend option is automatically selected by the company if not chosen by the policyowner?

Paid-up additions

An insured has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older then he stated on the application. What will the insurer do regarding the death benefit?

Pay a reduced death benefit

All of the following are true regarding insurance policy loans EXCEPT?

Policy loans can be made on policies that do not accumulate cash value

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Policy premium in a reinstated policy will be set according to the insured's original age

With the interest only settlement option , what happens to the policy's death benefit?

Policy proceeds are retained by the insurance company ; only the interest is paid to the beneficiary

Who has the right to the cash value of a life insurance policy?

Policyowner

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Primary beneficiary

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

Reduced paid=up

What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

Reinstatement

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

What are policy dividends?

Return of unused premiums

What type of beneficiary can be changed at any point by the policyowner?

Revocable

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

What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?

Settlement options

Which of the following information will be stated in the consideration clause of a life insurance policy?

The amount of premium payment

A policyholder borrowed a portion of cash value from his whole life policy , if the load is not repaid , how will that affect the death benefit to the beneficiary?

The amount of the loan will be subtracted from the death benefit

If a policy has an automatic premium load provision , what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit

What happens to a policy's cash value under an extended term nonforfeiture option?

The cash value is converted to the same face amount as in the whole life policy

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

The death benefit will be adjusted to the amount that the insured could obtain for her correct age

With the reduction of premium dividend option , how is the dividend used?

The dividend is applied to the next year's premium (it reduces the next year's premium)

What does the term double indemnity mean?

The insurer will pay a benefit of twice the face amount

In the fixed-period settlement option , how will the number of installments for the death benefit proceeds determine the amount of the installments?

The longer the period selected , the smaller each installment will be

What happens to the proceeds of a life insurance policy if there is no named beneficiary?

The proceeds are paid to the insured's estate

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

The same face amount as in whole life policy

Which of the following is TRUE about nonforfeiture values?

They are required by state law to be included in the policy

What is the purpose of a free-look period?

To allow the insured to return the policy with a full refund

What is the purpose of settlement options in life insurance policies?

To determine how the death benefit will be paid to the beneficiary

What is the purpose of the automatic premium loan prevision?

To prevent the unintentional lapse of a policy because of nonpayment of the premium

An absolute assignment is a...

Transfer of all ownership rights in a policy : the new policyowner does not need to have an insurable interest in the insured.

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Waiver of premium

What are the most common exclusions in life insurance policies?

War and military service , hazardous occupation , and aviation

When can an insurance company use suicide as a defense against paying a death claim?

When a suicide is committed with in a specified period of time after the policy is purchased (usually 2 years)

When may an insurance company use suicide as a defense against paying a death claim?

When death occurs within a specified time after the policy was issued

When will a contingent beneficiary receive death benefits from a life insurance policy?

When the primary beneficiary dies before the insured