Chapter 3 : Life insurance policy riders, provisions, options, and exclusions

which of the following is NOT typically excluded from life policies

Death due to plane crash for a fare-paying passenger

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

one-year term option

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident

Common disaster clause

What is the other term for the cash payment settlement option

Lump sum

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

Which of the following riders would NOT cause the Death benefit to increase

Payor benefit rider

Children's riders attached to whole life policies are usually issued as what type of insurance

term

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 insurability option

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 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

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

The contingent beneficiary

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy

The death benefit will be smaller

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

Which of the following is true about the mandatory free look period in a life insurance policy

it commences when the policy is delivered

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early

Paid-up option

Which of the following is TRUE about nonforfeiture values

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

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

The amount of premium payment

If a life insurance policy has an irrevocable beneficiary designation

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

an absolute assignment is a

Transfer of all ownership rights in a policy

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

fixed amount

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision

Automatic premium loan

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

becomes termanilly ill

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceased the insured

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

The same face amount as in the whole life policy

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement

$200,000 (the beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

Regarding the free-look provision, the insurance company

Must allow the policyowner to return the policy for a full refund

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

Other-insured rider

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

Owner's rights

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured has misstated information during the application process. What can they do?

Pay the death benefit

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

Policyowner

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate

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

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

The original age is used for premium determination

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

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

cash surrender

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

Life income joint and survivor settlement guarantees

Income for 2 or more recipients until they die

All of the following are Nonforfeiture options EXCEPT

Interest only

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

Life income

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

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military

War or military service

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

For how long is an insurance company allowed to defer policy loan requests

6 months

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

6 months

An insured misstates her age at the time the life insurance application is taken. The misstatement may result in

Adjustment in the amount of the death benefit

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

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

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

Annual

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

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

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

family term rider

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?

fixed period

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

At the time of the insured purchased her life insurance policy, she added a rider that will allow her to purchased additional insurance in the future without having to prove insurability. This rider is called

guaranteed insurability

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe

Reduction of premium

All of the following are true regarding the guaranteed insurability rider EXCEPT

The rider is available to all insureds with no additional premium

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 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

Which nonforfeiture option provides coverage for the longest period of time

reduced paid-up

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

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in the accordance with the terms of the contract. This is called

Consideration

The two types of assignments are

absolute and collateral

Which of the following is true about the premium on the children's rider in a life insurance policy

it remains the same no matter how many children are added to the policy