Life Insurance ExamFX - Chapter 5: Life Insurance Policy Provisions, Options and Riders

What type of insurance is the Waiver of Cost of Insurance rider?

Universal Life

The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?

The Policyowner can specify the way the proceeds are split in the policy

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

What arrangement allows the insured to receive an annual insurance dividend check?

Cash option

What limits the amount that a policyowner may borrow from a whole life insurance policy?

Cash value

An insurer stops making payments on a loan taken from his cash value policy. What will happen?

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

When is the automatic premium provision activated?

At the end of the GRACE period

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium.

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

Reduced paid-up

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

What is the waiting period on a Waiver of Premium rider in the life insurance policies?

6 months

An individual purchased a life insurance policy on his life naming his wife as primary beneficiary and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceases the insured

An applicant for insurance misstates her age at the time her life insurance application is taken. This misstatement could result in?

Adjustment in the death benefit

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 the rights of ownership. How should the Policyowner have her husband named?

Revocable beneficiary

Which entity determines the amount of accelerated death benefits that will be paid to an insured?

The insured

Which nonforfeiture option has the highest amount of insurance protection?

Extended Term

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should include in the policy?

Guaranteed insurability option

What is the other term for the cash payment settlement option?

Lump sum

An insured has a continuous premium whole life policy. Should 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

What allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

Is the interest earned on policy dividends taxable?

Yes, they are taxable

What is a rider attached to a life insurance policy that provides coverage on the insured's family member?

Other-insured rider