Section 3

What is a incontestability clause?

A life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the incontestability clause.

What are the 3 nonforfeiture options in life insurance policies?

Cash surrender value, reduced paid-up insurance and extended term option. These nonforfeiture options guarantee that the cash value will not be lost in a whole life policy.

Which riders increase the amount of the death benefit?

Cost of Living Rider increases the amount of the death benefit.

What type of settlement would a beneficiary choose to receive a specified amount of money every month until the principal and interest on the insurance policy has been paid out?

Fixed Period

What is true or correct regarding the guaranteed insurability rider?

Guaranteed insurability allows the insured to purchase additional coverage without proof of insurability, may purchase additional coverage at the attained age and usually expires when the insured turns age 40.

What does the grace period provision do?

It allows an insurance policy to remain in force for a specific number of days beyond the premium due date.

What is true or correct regarding the mandatory free-look period in a life insurance policy?

It commences when the policy is delivered

What is the definition of assignment?

It transfers some or all of the ownership rights of a life insurance policy from one individual to another.

What is N A I C and what does it stand for?

N A I C stands for National Association of Insurance Commissioners It is an organization composed of insurance Commissioners from all states and jurisdictions formed to resolve insurance regulatory issues.

Which dividend option increases the death benefit?

Paid-up additions increase the death benefit of the original policy by whatever amount the dividend will buy through small single premium payments.

What is the definition regarding lump sum in insurance?

Payment of the entire benefit in one sum is lump sum.

If an insured usually pays a specific amount annually for their life insurance premium and then accumulates dividends that are then applied to their next premium, lowering that year's premium payment, which dividend option did the insured choose?

Reduction of Premium

What settlement options are available in life insurance policies?

The following are settlement options in life insurance policies: Cash or lump sum payment, which is usually not taxable. Life Income, Interest Only, Fixed period and Fixed Amount

What rider does a policy include if an insured is injured, unable to work for months, wasn't able to pay his life insurance premiums, yet their policy remains in force?

Wavier of premium rider

What is the definition of consideration regarding insurance?

Something of value that each party gives to the other; binding force in any contract.

What happens when a life insurance policy has an irrevocable beneficiary designation?

The beneficiary can only be changed with written permission of the beneficiary.

What does principal mean regarding insurance?

The face value of the policy; the original amount invested before the earnings.

What is the free-look period, and when does it begin?

The free-look period is a provision that allows the policyowner 10 days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. It begins when the policyowner receives the policy, not when the insurer issues the policy.

What will an insurer do if the insured unintentionally submits their application with the incorrect age and death benefit is claimed?

The insurer will pay a reduced benefit based on the insured's actual age.

What constitutes the entire contract?

The policy and a copy of the application, along with any riders or amendments, form the entire contract.

Which provision of a life insurance policy states that the application is part of the contract?

The provision that states that a copy of the application, the policy along with riders and amendments is called an Entire Contract.

What is the purpose of the Automatic Premium Loan Provision?

The purpose of an automatic premium loan is to prevent the unintentional lapse of a policy due to nonpayment of the premium.

What is the purpose of a grace period regarding insurance?

The purpose of the grace period is to protect the policyholder against an unintentional lapse of the policy. If the insured dies during this period, the death benefit is payable; however any unpaid premium will be deducted from the death benefit.

What are standard exclusion risks that will not be covered in life insurance policies?

The standard exclusion risks are WASH and the W stands for War or Military Service The A stands for Aviation The S stands for Suicide and the H stands for Hazardous Occupations or Hobbies

What is the definition of assignment regarding insurance?

The transfer of rights of policy ownership.

What is true or correct of both fixed-period and fixed amount settlement options?

They both guarantee that the principal and interest will be fully paid out.

Which nonforfeiture option is automatically selected if the policy owner has not made a selection?

If the policyowner has neglected to select one of these nonforfeiture options, the insurer will automatically implement the extended term option in the event of termination of the original policy.

Under what circumstances will the contingent beneficiary receive the death benefit?

If the primary beneficiary dies before the insured.

What is a minor regarding insurance?

A person under legal age.

What is the definition of indemnity?

A principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss.

What is ADL and what does it stand for?

ADL stands for Activities of Daily Living It is a person's essential activities that include bathing, dressing, eating, transferring, toileting, and continence.

What is the difference between absolute and collateral assignment?

Absolute is permanent transfer of ownership, while Collateral involves a temporary transfer of partial rights to another person and in most cases, it secures a loan. Once the debt or loan is repaid, the assigned rights are returned to the policyowner.

Which rider allows the early payment of a portion of the death benefit to the insured?

Accelerated Living Benefits allows the early payment of a portion of the death benefits.

What happens to an unpaid policy loan at insured's death?

If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit. While the insurer may defer requests for other loans for a period of up to 6 months loan requests for payment of due premiums must be honored immediately.