Chapter 4

Albert, as the owner of a life insurance policy insuring his son David, wants a Settlement Option that, if David were to die, would provide guaranteed payments to Albert and his wife Lois, until both of them die. Albert should choose:

Life Income Joint and Survivor

Burt named Liz as his beneficiary; however, he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits?

Liz the beneficiary determines which option she would like to have

Frank has a life insurance policy in which he chooses to have the dividends increase the death benefit. Which Dividend Option did he select? A Paid-Up Option

Paid-Up Additions Frank's objective is to use his dividends to increase the death benefit. Paid-Up Additions purchases single premium additional permanent benefits at the insured's attained age. The additional insurance is added to the face amount and it generates cash values and dividends as if the paid-up additional benefit was part of the original policy.

An insured has paid premiums annually on her life insurance policy. She would now like to change to a monthly premium payment. What must occur to effect this change?

The insured simply needs to contact the insurance company and request a change in premium mode Changing the mode of payment is provided for in the contract. A simple telephone call to the insurance company will effect the change beginning with the next premium due date in most cases, however, some companies may want to receive the request in writing.

How long, typically, is the grace period on a $500,000 level term life insurance policy?

Typically, the grace period runs one month (30 or 31 days) from the premium due date.

All of the following are Dividend Options, except: A One-year term B Reduced paid-up C Cash D Paid-up additions

Reduced paid-up

All of the following are examples of an absolute assignment, except: A A business permits the change of ownership of a company owned policy over to a retiring executive B A court orders the existing policyowner to change it to their ex-spouse C A grandparent signs over ownership of a juvenile policy to their grandchild who is now reached age of majority D Using a Life Insurance policy as collateral for a loan

Using a Life Insurance policy as collateral for a loan

The nonforfeiture option that, if exercised, terminates all coverage is:

Cash Surrender

If an insured dies during the policy's grace period, the insurer will:

Pay the death benefit, less the amount of premium due

The ____________ provision prevents a Whole Life Policy from lapsing, as long as there is adequate cash value, if the insured/policyowner forgets to pay the premium by the end of the grace period.

Automatic Premium Loan

Concerning the Paid-Up Additions Dividend Option, all of the following are true, except: A Eventually, no more premiums will be due on the policy B Paid-up additions increase the amount of future dividends credited C Paid-up additions have their own increasing cash values D These single premium additions do not change the face value of the original policy

Eventually, no more premiums will be due on the policy The Paid-Up Additions purchased under this Option have their own values and do not change the face amount of the original policy. Each additional segment of insurance contains both a death benefit and increasing cash surrender value, and by purchasing paid-up additions, larger dividends may be paid in the future. Paid up additions do not eliminate need to pay premiums on the original policy.