IL CHAPTER 3 - LIFE POLICY PROVISIONS, RIDERS, & OPTIONS

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

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

6 months

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

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Insuring clause

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

Which settlement option in life insurance is known as straight life?

Life Income

Which rider added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

Long-term care

What is the purpose of a suicide provision within a life insurance policy?

To protect the insurer from persons who purchase life insurance with the intention of committing suicide

The two types of assignments are...

absolute and collateral

An insured 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

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?

Pay the death benefit because the incontestability clause prevents an insurer from denying a claim after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

The Ownership provision entitles the policyowner to do..

Receive a policy loan Assign the policy Designate a beneficiary

Which nonforfeiture option provides coverage for the longest period of time?

Reduced Paid-Up

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?

Reinstatement provision

Which rider, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

Term rider

An insured committed suicide one year after his life insurance policy was issued. The insurer will...

refund the premiums paid

The interest earned on policy dividends is

taxable

Which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender

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

The same face amount as in the whole life policy

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

The same face amount as in the whole life policy.

Who can request changes in premium payments, face value, loans, and policy plans?

policyowner

The paid-up addition option uses the dividend to...

to purchase a smaller amount of the same type of insurance as the original policy