Life Insurance Policy Provisions, Options and Riders

Which is true about a spouse term rider? A. The rider is usually level term insurance B. Coverage is alowed for an unlimited time C. The rider is decreasing term insurance D. Coverage is allowed up to age 75

A. The rider is usually level term insurance The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A. The annual dividend is retained by the company B. The interest is credited at a rate specified by the policy C. The policyholder has the right to withdraw the accumulations at any time D. The interest is not taxable since it remains insde the insurance policy

D. The interest is not taxable since it remains insde the insurance policy The interest credited under this option is TAXABLE, whether or not the policyowner receives it.

The law states that an insurer is allowed to pay the entire Death Benefit to the insured if they qualify to use the Accelerated Death Benefit Rider; however, most insurers limit the amount of the Death Benfit paid to A. 50% B. 60% C. 75% D. 30%

A. 50% While the law technically allows an insurance company to advance the entire death benefit, most carriers impose their own cap, such as 50% of the death benefit.

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? A. A business partner of the insured B. The wife of the deceased insured C. The former wife of the deceased insured D. A minor son of the insured

D. A minor son of the insured Because a minor does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee.

which of the following is true about the mandatory free look in a life insurance policy? A. It is optional on all life insurance policies B. It commences when the policy is delivered C. It commences when the application is assigned D. It applies only to term life insurance policies

C. It commences when the policy is delivered The free look provision is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A. Equal to the original policy for as long as the cash values will purchase B. In lesser amounts for the remaining polciy term of age 100 C. Equal to the cash value surrendered from the policy D. The same as the original policy minus the cash value

A. Equal to the original policy for as long as the cash values will purchase With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.

The paid-up addition option uses the dividend A. To reduce the next year's premium B. To accumulate additional savings for retirement C. To purchase a smaller amount of the same type of insurance as the orignal policy D. To purchase a one-year term insurance in the amount of the cash value

C. To purchase a smaller amount of the same type of insurance as the orignal policy The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

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?

The Reinstatement provison A lapsed policy may be reinstated within 3 years by paying back premiums, with interest, and proving insurability.

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

The policyowner Only the policyowner has the ownership rights under the policy, and not the insured or the beneficiary.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? A. The insurer will increase the interest rate on the loan and charge a penalty B. The insurer will not permit the policyowner to take out any more loans C. The policy will be reduced to an extended term option D. The policy will terminate when the loan amount with interest equals or exceeds the cash value

D. The policy will terminate when the loan amount with interest equals or exceeds the cash value In most policies, failure to pay back a loan will result in termination of the policy if the total amount of the loan and accrued interest equals the cash value.

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

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

The automatic premium loan provision is activated at the end of the A. Free-look period B. Elimination period C. Policy period D. Grace period

D. Grace period Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.

Regarding the free-look provision, the insurance company A. Cannot charge a premium after 10 days B. Must issue a free policy for 30/31 days C. Must issue a free policy for 10 days D. Must allow the policyowner to return the policy for a full refund

D. Must allow the policyowner to return the policy for a full refund This provision allows the policyowner a specified number of days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The beginning of this free-look period starts when the policyowner receives the policy, not when the insurer issues the policy.

All of the following are beneficiary designations EXCEPT A. Primary B. Specified C. Tertiary D. Contingent

B. Specified Beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary and tertiary.

The Waiver of Cost of Insurance rider is found in what type of insurance? A. Joint and Survivor B. Juvenile Life C. Universal Life D. Whole Life

C. Universal Life The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.