Chapter IV Life Insurance Policy, Provisions, Options and Riders (15 Exam Questions)

How many days is the right to examine (free look)

10 days from when the insurer receives he policy

Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?

Assignment

The automatic premium loan provision is activated at the end of the

Grace Period

Absolute Assignment

all ownership rights in the policy are transferred to a new owner or entity

Nonforfeiture Options

cash value, reduced paid-up insurance, extended term insurance

The most common exclusions found in insurance polices are:

Aviation, hazardous occupation, war and military service

Spendthrift Clause

A clause that prevents the debtors of a beneficiary from collecting the benefits before he/she receives them.

Which of the following statement is true of both the fixed period and fixed amount settlement options?

Both guarantee the principal and interest will be paid fully out

Incontestability Clause

Ensures insurance company cannot contest statements made in insurance application after 2 years

Which of the following is a characteristic of a revocable beneficiary designation?

Policyowner can change the beneficiary designation anytime with consent of beneficiary

The insured pays 1200 annually for her life insurance premium. This year, she has accumulated $175 worth of dividends, which she applies to her next premium, thus reducing it to $1025. What dividend option has the insured chosen?

Reduction of Premium

Vera has a whole life policy with 150K face amount. Three years ago she took out a 50K policy loan which has accused 3500 in interest. If Vera dies the policy death will be?

150K-50K-3500=96500

Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes

Waiver of premium rider

Settlement Options (CLIFF)

Cash Life Income Interest Only Fixed Period Fixed Amount

The 6 dividend options are (CRAPPO)?

Cash Reduction of Premium Accumulation of Interest Paid up Addition Paid up Insurance One year Term

Which of the following is NOT a standard excluding in life insurance policies?

Disability

A spouse receives $5K a month until the principal and interest on her husband life insurance policy have been paid out. Which settlement option did this beneficiary choose?

Fixed amount

Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?

Grace period provision

Grace Period

If the insurer dies during this period, the death benefit is payable, however any unpaid premium will be deducted from the death benefit

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

Incontestability clause

What life policy allows for partial withdrawal or partial surrender?

Universal life-Interest earned on the withdrawn cash value my be subject to taxation

Collateral Assignment (debts)

Assignment of part of the proceeds of an insurance policy to a bank as collateral to settle the loan balance that may exist at the insured's death.

All of the following are nonforfeiture options in life insurance policies EXCEPT

Automatic Premium Loans

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

It commences when the policy is delivered.

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

It is available automatically, for no extra premium

Means 'by the head' evenly distributes among the living named beneficaries

PER CAPITA

Means 'by the bloodline' distributes the benefits of the beneficiary who died before the insured to that beneficiary heirs

PER STRIPES

When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What action will the insurer take?

Pay the reduced death benefit based on the insured's actual age

Reinstatement period

Allows for a lapse policy to be put back in force The max time limit for the reinstatement is 3 years Insurer will have to provide evidence of insurability Policyowner will be required to pay back premium plus interest and any unpaid loans and interest

Under what circumstances will the contingent beneficiary receive death benefits?

If the primary beneficiary dies before the insured

In order to reinstate a life insurance policy the insured must do all the following EXCEPT

Pay next year premiums in advance

Common Disaster Clause

Clause protects the contingent beneficiaries' rights by stipulating a certain number of days the primary beneficiary must outlive the insured after a common accident causing near-simultaneous death in order for the primary beneficiary to receive the policy proceeds.