Chapter: Life insurance policy provisions, options, and riders

Which nonforfeiture option has the highest amount of insurance protection?

Extended term

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

An insured just died. The insured's beneficiary promptly sent the insurer proof of death. According to Arizona law, this insurer may now establish a period of time during which the settlement will be made. What is the greatest amount of time the insurer can mandate for this particular period

2 months

How long is the grace period on a group life insurance policy

31 days

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

6 months

What named beneficiary would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death

A minor son of the insured

What is NOT a standard exclusion, included in most life insurance policies

A policy issued following a misstated age

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

Becomes terminally ill

What is TRUE about a class designation

Beneficiaries are not identified by name

What best describes a fixed-period settlement option

Both the principal and interest will be liquidated over a selected period of time

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision

Common disaster

What is the clause that described 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 NOT typically excluded from life policies

Death due to plan crash for a fare-paying passenger

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

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

Guaranteed insurability

The 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

Who has the ability to request the change of a life policy's beneficiary

Insured

What applies to the 10-day free-look privilege

It permits the insured to return the policy for a full refund of premiums paid

What is TRUE regarding a single life settlement option

It provides income the beneficiary cannot outlive

What is true about a policy assignment

It transfers rights of ownership from the owner to another person

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

Other-insured rider

When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value

Outstanding loans and interest

What rider would NOT cause the death benefit to increase

Payor benefit rider

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

Policyowner

What nonforfeiture option provides coverage for the longest period of time

Reduced paid-up

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

What is NOT a beneficiary designation

Specified

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

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

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen

The policy will terminate when the loan amount with interest equals or exceeds the cash value

What is true about a spouse term rider

The rider is usually level term insurance

What statement is TRUE concerning irrevocable beneficiaries

They can be changed only with the written consent of that beneficiary

The waiver of cost of insurance rider is found in what type of insurance

Universal life

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change

Cost of living rider

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the consumer price index, is called

Cost of living rider

What explains the policyowner's rights to change beneficiaries, choose options, and receive proceeds of a policy

Owner's rights

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 in called

Paid-up additions

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use

Paid-up option

Interest earned on policy dividends is

Taxable

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

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 terminal illness, how will that affect the payable death benefit from the policy

The death benefit will be smaller

What type of account will most likely be established for a minor

Trust

The two types of assignments are

Absolute and collateral

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

Which of the following protects the insured from an unintentional policy lapse due to a non payment of premium

Automatic premium loan

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount

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

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

Exclusions clause