Life Insurance Chapter 5 Life Insurance Policy Provisions, options and riders

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A Predetermined length of time stated in the contract B Length of income period C Amount of Interest D Size of each installment

Size of each installment

Which nonforfeiture option has the highest amount of insurance protection? A Extended Term B Conversion C Decreasing Term D Reduced Paid-up

Extended Term - The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? A Spouse rider B Children's rider C Additional insured rider D Family term rider

Family term rider - A single rider that provides coverage on every family member is called a "family rider".

An absolute assignment is a A Transfer of some ownership rights in a policy. B Change of beneficiary. C Change of insurer. D Transfer of all ownership rights in a policy.

Transfer of all ownership rights in a policy. - Absolute Assignment involves transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights. The new policyowner does not need to have an insurable interest in the insured.

What kind of policy allows withdrawals or partial surrenders? A Variable whole life B Universal life C 20-pay life D Term policy

Universal life - Universal Life products allow the partial withdrawal, or surrender, of the policy cash value.

Who can make changes to the policy once it is in effect? A The agent B An executive officer of the insurer C The insured D The policyowner

An executive officer of the insurer - Any changes made to a policy must be endorsed and attached to the policy over the signature of an authorized officer of that insurer. No other individual has the authority to make changes or waive policy provisions.

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? A The insurance company B The insured's estate C The primary beneficiary's estate D The insured's contingent beneficiary

The insured's contingent beneficiary - Under the Uniform Simultaneous Death Law, the law will assume that the beneficiary dies first in a common disaster. This provides that the proceeds will be paid to the contingent beneficiary or to the insured's estate if none is designated.

What is the benefit of choosing extended term as a nonforfeiture option? A It matures at age 100. B It allows for coverage to continue beyond maturity date. C It can be converted to a fixed annuity. D It has the highest amount of insurance protection.

It has the highest amount of insurance protection. - Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.

J applied for a life insurance policy on January 10. The policy was issued on January 31. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid? A Anytime, because the agent did not deliver the policy promptly. B February 28th, or 10 days after the time the policy is delivered. C The time varies from one policy to another. D It was already too late when J received the policy because the 10-day free-look period had expired.

February 28th, or 10 days after the time the policy is delivered - Correct! The 10-day free-look period begins when the policy is delivered.

What provision in an insurance policy extends coverage beyond the premium due date? A Waiver of premium B Grace period C Free look D Automatic premium loan

Grace period - Grace period is a mandatory provision found in all life and health insurance policies that provides coverage for a period of time after the premium becomes past due.

If a life insurance policy has an irrevocable beneficiary designation, A The owner can always change the beneficiary at will. B The beneficiary cannot be changed. C The beneficiary can only be changed with written permission of the beneficiary. D The beneficiary cannot be changed for at least 2 years.

The beneficiary can only be changed with written permission of the beneficiary -If a policy has an irrevocable beneficiary designation the beneficiary can only be changed with written permission of the beneficiary.

What limits the amount that a policyowner may borrow from a whole life insurance policy? A Cash value B Premiums paid C Amount stated in the policy D Face amount

Cash value - The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest.

How long will the beneficiary receive payments under the single life settlement option? A Until the insured's age 100 B Until the beneficiary's death C Until the insured's death D For a specified period of time

Until the beneficiary's death - The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.

Which of the following is TRUE about a class designation? A Beneficiaries must be part of the insured's immediate family. B It is not allowed. C It determines the succession of beneficiaries. D Beneficiaries are not identified by name.

Beneficiaries are not identified by name. - A class of beneficiary is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or illegitimate children. Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive.

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to A The insurance company. B The insured's estate. C The insured's firstborn child. D Both children who share equally on a per-capita basis.

The insured's estate.- Because there is no viable beneficiary at the time of death, proceeds are paid to the insured's estate.

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? A Assignment B Automatic premium loan C Waiver of premium D Incontestability period

Automatic premium loan - This provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.