EXAM 2: policy provisions, options and riders

ron has a life insurance policy with a face value of $100,000 and a cost of living rider. if the consumer price index has gone up 4%, how much may ron increase the face value of the policy: -$400 -$800 -$2,000 -$4,000

$4,000 $100,000 x .04= 4,000

in what part of an insurance policy are policy benefits found: -declarations -entire contract -waivers -conditions

DECLARATIONS

an endorsement found in an insurance plan which modifies the provisions of the policy is called a(n): -attachement -add on -rider -supplement

RIDER

which of these is considered to be a living benefit option in a life insurance policy: -reinstatement -waiver of premium -accelerated death benefit -payor benefit

accelerated death benefit

which of the following is considered to be an alternative to a life settlement: -accelerated death benefit rider -waiver of premium rider -extended term option -decreasing term insurance

accelerated death benefit rider

the double indemnity provision in a life insurance policy pertains to an insured's death caused by: -sickness -suicide -accidnet -war

accident

all of these are common exclusions to a life insurance policy except: -accidental death -military service -aviation -hazardous occupations

accidental death

all of these are valid policy dividend options for a life insurance policy owner except: -cash outlay to the policy owner -accumulate without interest -reduction in policy premium -buy additional insurance coverage

accumulate without interest

of the following dividend options, which of these is taxable: -reduction of premium -one year term -paid up additions -accumulation at interest

accumulation at interest

which dividend option would an insurer invest the policy owner's money and add any interest earnings as the dividends accrue: -accumulation at interest option -cash dividend option -paid up additions option -one year term dividend option

accumulation at interest option

an error was made on mary's life insurance application. which of the following areas do errors commonly occur on applications and for which of the incontestable clause does NOT apply: -marital status -age -address -income

age

what is the purpose for having an accelerated death benefit on a life insurance policy: -allows for a spouse to be added as a rider to a life insurance policy -allows for policy loans to be advanced to the insured in the event of unemployment -allows for cash advances to be paid against the death benefit if the insured becomes terminally ill -allows for a third party to purchase a life insurance policy at a discounted rate and immediately advance a portion of the death benefit

allows for cash advances to be paid against the death benefit if the insured becomes terminally ill

which of the following is not part of an insurance contract: -policy -application -riders -certificate of authority

certificate of authority

a provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n): -automatic premium loan -nonforfeiture option -collateral assignemtn -irrevocable assignment

collateral assignment

ownership of a life insurance policy may be temporarily transferred with a(n): -collateral assignment -absolute assignment -transferable assignment -beneficiary assignment

collateral assignment

life insurance policies will normally pay for losses arising from: -commercial aviation -war -suicide -hazardous job

commercial aviation

a waiver of premium rider allows an insured to waive premium payments if the insured is: -temporarily disabled -unemployed -completely and permanently disabled -experiencing financial hardship

completely and permanently disabled

james is the insured on a life insurance policy where his age was misstated on the application. which of the following is CORRECT regarding the death benefit amount: -original face amount will be paid to beneficiary -policy will be voided with no death benefits paid -death benefit paid will be what the premium would have been if purchased at the correct age -amount of premiums paid will be returned with interest

death benefit paid will be what the premium would have been if purchased at the correct age

matt is applying for life insurance and requests a double indemnity rider. a double indemnity benefit will be payable to matt's beneficiary if matt: -is killed while committing a felony -dies of a stroke -dies instantly from a car accident -injured in a skiing accident and dies 18 months later

dies instantly from a car accident

all of these are standard exclusions found in a life insurance policy except: -hazardous occupations -aviation -disability -war

disability

a life insurance policy owner was injured in an automobile accident which results in a total and permanent disability. which rider would pay a monthly amount because of this disability: -long term care rider -disability income rider -annuity rider -waiver of premium

disability income rider

what is the name of the provision which states that a copy of the application must be attached to the policy when issued: -policy summary -buyer's guide -entire contract -entire policy

entire contract

which of these would limit a company's liability to provide insurance coverage: -waiver -exclusion -rider -provision

exclusion

a life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations except: -fare-paying passenger -pilot of personal airplane -suicide -war

fair-paying passenger

an insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period: -incontestable period -probation period -reinstatement period -grace period

grace period

a life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a: -guaranteed term rider -guaranteed insurability rider -accelerated benefit rider -cost of living rider

guaranteed insurability rider

barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. this rider is called a: -guaranteed insurability rider -payor rider -endowment rider -family income rider

guaranteed insurability rider

which of the following protects a policy owner from a misrepresentation cause by an innocent mistake: -reinstatement clause -entire contract clause -incontestable clause -nonforfeiture clause

incontestable clause

under a life insurance policy, what does the insuring clause state: -agent's obligation to provide proper amount of coverage -insurer's obligation to return all premiums upon an approved death claim -insurer's obligation to pay a death benefit upon an approved death claim -agent's obligation to pay a death benefit upon an approved death claim

insurer's obligation to pay a death benefit upon an approved death claim

which of these is not considered to be a nonforfeiture option in a whole life insurance policy: -interest only -reduced paid up insurance -extended term insurance -cash surrender

interest only

which of these is not considered to be a common life insurance nonforfeiture option: -cash surrender -extended term insurance -reduced paid up insurance -life income annuity

life income annuity

a guaranteed issue insurance policy has no: -initial premium payment -incontestable period -waiting period -medical underwriting

medical underwriting

the suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid: -minus indebtedness and with interest -during the last 12 months -minus indebtedness and without interest -during the last 6 months

minus the indebtedness and without interest

joanne has a $100,000 whole life policy with an accumulated cash value of $25,000. she would like to borrow $15,000 against the cash value. which of the following statements is true: -net death benefit will be reduced if the loan is not repaid -no interest will be charged on loan balance -term life policies are the only type of insurance that allows policy loans -a loan can be taken out for up to the face amount of the policy

net death benefit will be reduced if the loan is not repaid

a whole life policy option where extended term insurance is selected is called a: -dividend option -settlement option -nonforfeiture option -interest only option

nonforfeiture option

a provision in a whole life policy that allows a policy owner to terminate the policy in return for a reduced paid up policy of the same type is called a: -insuring clause -payor provision -reinstatement provision -nonforfeiture provision

nonforfeiture provision

a provision that allows a policyowner to withdraw a policy's cash value interest free is a(n): -partial surrender -waiver of premium -automatic premium loan -grace period

partial surrender

the automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of: -any interest payable from an outstanding policy loan balance -past due premiums that have not been paid by the end of the grace period -outstanding policy loan balance -any surrender charges owed by the policyowner

past due premiums that have not been paid by the end of the grace period

what is an insurer required to do when faced with an error made under the Misstatement of Age provision: -cancel the policy -pay age-corrected benefits -pay full benefits as stated in the policy -bill the policyowner for back premiums

pay age-corrected benefits

which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies: -waiver of premium -juvenile waiver -guaranteed insurability -payor benefit

payor benefit; will waive the premium on a juvenile life insurance policy

a rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called: -waiver of premium rider -payor rider -automatic premium loan rider -juvenile waiver rider

payor rider

what is an insurance policy's grace period: -period of time after the initial premium is paid and before the policy is issued -period of time it takes for a policy's underwriting to complete -period of time after a policy is issued and before it is delivered to the policy owner -period of time after the premium is due but the policy remains in force

period of time after the premium is due but the policy remains in force

which situation accurately describes a reduced paid up nonforfeiture option: -policy has a decreased face amount -face amount of the new policy equals that of the original policy -cash value is surrendered to policy owner -premiums must continue to be paid

policy has a decreased face amount

a whole life insurance policy accumulates cash value that becomes: -policy loan value which the insured may borrow against -death benefit -source of funding for administration fees -source of funding a term rider to the policy

policy loan value which the insured may borrow against

pat owns a 20-pay life policy with a paid-up dividend option. which of the following statements is true: -policy may be paid up early by using accumulated cash values -policy may be paid up early by using policy dividends -policy's premiums will increase after 20 years -policy's cash values steadily decrease after 20 years

policy may be paid up early using policy dividends

if an insured dies during the grace period with no premiums paid: -policy would be payable, minus premium amount -policy would be payable only after the beneficiary makes past due premium payment -all past premiums will be refunded with interest -claim would be denied

policy would still be payable, minus premium amount

which of the following is a reinstatement condition: -proof of insurability -changes in the insuring clause -premium increase -premium decrease

proof of insurability

if an insured's age on a life policy has been misstated, what is the insurer's liability if the insured dies: -no death benefit is owed because of the misstatement of age -full original death benefit listed on the policy -prorated death benefit based on the amount of insurance the insured's premium would have been if purchased at the correct age -original death benefit listed on the policy minus any outstanding loans and interest

prorated death benefit based on the amount of insurance the insured's premium would have been if purchased at the correct age

dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. when the term insurance expires...: -he has the option of resuming the original policy and paying the same premium -coverage can be extended with a lump sum payment -all remaining cash values are paid to the policy owner -protection ends

protection ends

in order to activate the reinstatement clause of a lapsed life insurance policy, the insured must: -remit all past due premiums within the grace period -provide evidence of insurability to the insurer -resubmit a new life insurance application -provide a valid reason for the lapse

provide evidence of insurability to the insurer

the two major actions required for a policyholder to comply with the Reinstatement Clause are: -provide evidence of insurability, agree to a new contestable period -provide evidence of insurability, pay past due premiums -pay past due premiums, agree to a new incontestable period -pay past due premiums, agree to a reduction in coverage

provide evidence of insurability, pay past due premiums

all of the following are considered to be nonforfeiture options available to a policy owner except: -extended term insurance -cash surrender -reduction of premium -reduced paid up insurance

reduction of premium

a policy owner may exercise which of these dividend options that uses the dividend to pay all of part of the next premium due: -reduction of premium dividend option -extended term option -paid up option -cash dividend option

reduction of premium dividend option

kurt is an active duty serviceman who was recently killed in an accident while home on leave. which military service exclusion clause would pay upon his death: -active -status -results -leave

results

a life insurance policyowner does not have the right to: -change a beneficiary -select a beneficiary -take out a policy loan -revoke an absolute assignemtn

revoke an absolute assignment

which of these is not a characteristic of the accelerated death benefit option: -face amount and policy amount are not affected by the payment -before payment of the benefit is made, specific conditions must exist, such as suffering from a terminal illness -there may be a dollar limit on the maximum benefit -benefit can be offered as a rider at a specific extra cost or may be at no cost

the benefit can be offered as a rider at a specific extra cost or may be at no cost

an insured individual and the policy's beneficiary die from the same accident. the common disaster provision states the insurer will continue as if: -insured outlived the beneficiary -beneficiary outlived the insured -no beneficiary was ever named -insured and beneficiary died at the same time

the insured outlived the beneficiary

the free-look provision gives the policy owner: -the right to return the policy for a partial refund within a specific number of days -the right to contest the terms of the policy -the right to change a policy provision -the right to return the policy for a full refund with In a specific number of days

the right to return the policy for a full refund within a specific number of days

all of the following riders can increase the death benefit amount except: -cost of living -waiver of premium -accidental death rider -guaranteed insurability rider

waiver of premium

loans obtained by a policyowner against the cash value of a life insurance policy: -treated as taxable income -would not be treated as taxable income -limited by the face amount of the policy -would be subject to a federal estate tax

would not be treated as taxable income