Policy provisions, riders, and options

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

The amount of premium payment

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

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

Cash option

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A In lesser amounts for the remaining policy term of age 100. B Equal to the cash value surrendered from the policy C The same as the original policy minus the cash value D Equal to the original policy for as long as the cash values will purchase.

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

All of the following are Nonforfeiture options EXCEPT A Extended term B Reduced paid-up C Interest only D Cash surrender

Interest only

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

Long term care

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

Reduced paid- up

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause.

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Insuring clause

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased.

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.

If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?

Loan amounts are deducted from the death benefit

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?

Proof of insurability is not required.

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.

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?

$9,800

The interest earned on policy dividends is

Taxable

If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?

The loan amounts are deducted from the death benefit.

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

Insured's age at death

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

Which of the following premium payment modes will incur the lowest overall payment?

Annual

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family

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 is TRUE about the cash surrender nonforfeiture option? A The policy remains active for some time after the policyholder opts for cash surrender. B The policyholder receives the original cash value of the policy. C Funds exceeding the premium paid are taxable as ordinary income. D After the cash surrender, the insured is covered for a grace period of one month.

Funds exceeding the premium paid are taxable as ordinary income.

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor.

Which of the following settlement options in life insurance is known as straight life?

Life income

If a policy has an automatic premium loan 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.

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?

2 years

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

Becomes terminally ill.

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the

Entire contract

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A The same as the original policy minus the cash value B Equal to the original policy for as long as the cash values will purchase. C In lesser amounts for the remaining policy term of age 100. D Equal to the cash value surrendered from the policy

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

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A Interest only B Fixed period C Life with period certain D Fixed amount

Fixed period

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

Increasing term

Which of the following statements about the reinstatement provision is true? A It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. B It permits reinstatement within 10 years after a policy has lapsed. C It provides for reinstatement of a policy regardless of the insured's health. D It guarantees the reinstatement of a policy that has been surrendered for cash.

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

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

Lump sum

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 The wife of the deceased insured B The former wife of the deceased insured C A minor son of the insured D A business partner of the insured

Minor son

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Reduction of premium

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

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing.

The paid-up addition option uses the dividend

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