Life policy provisions, riders and options

Which of the following riders would not cause the death benefit to increase?

Payor benefit rider

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

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

what are typically excluded from life policies?

self-inflicted death death that occurs when a person is committing a felony death due to war or military service

grace period

time period after the premium is due during which the policy will not lapse

if an insured receives accelerated death benefits, what is the least amount of original death benefit that the beneficiary would receive after the insured's death?

0%

Death riders that would cause the death benefit to increase:

accidental death rider guaranteed insurability rider cost of living rider return of premium rider

An insured receives accelerated death benefits. Why is it possible that the beneficiary would not receive any benefits after the insured's death?

because it is legal to pay 100% of the death benefit before the insured dies

an insured receives an annual life insurance dividend check, what term best describes this arrangement?

cash option

if an insurer wishes to contest any statements on an application, they must...

do so within the first two years

what is the guaranteed insurability rider?

it allows the policymaker to purchase specific amounts of additional insurance at specific dates or events, without providing continued insurability. Rates for the additions are based upon attained age.

Items stipulated in the contract that the insurer will not provide coverage for are found in what?

exclusions clause

which nonforfeiture option has the highest amount of insurance protection

extended term

The validity of coverage over a life insurance policy may not be contested, except for non payment of premium, after the policy has been in force for at least how many years?

2 years

T/F? Dividend amounts are guaranteed in the policy

false

Lower insurance company costs generate _______ dividends

higher

incontestability

insurer cannot contest misstatements on the application under a time period

the interest earned on policy dividends is...

taxable

which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's rights

The policy loan option is only found in policies that contain...

cash value

Which of the following named beneficiaries would not be able to receive the death benefit directly from the insurer in the event of the insured's death? a. the wife of the deceased insured b. the former wife of the deceased insured c. a minor son of the insured d. a business partner of the insured

C a minor does not have the legal capacity to release the insured from further obligation, benefits normally have to be passed through a guardian or a trustee

The Accidental Death rider

it pays double or triple the face amount if death is the result of an accident as defined in the policy, and occurs within 90 days of such an accident.

Dividends stem from favorable what?

underwriting experience

When the policy owner specifies a dollar amount in which installments are to be paid, he or she has chose which settlement option?

fixed amount

Favorable investment results generate...

higher dividends

What will happen to the amount of outstanding loan and interest when the insured dies?

it will be deducted from the policy proceeds

Which of the following, when attached to a permanent life insurance policy, allows the policy owner 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

if a settlement option is not chosen by either the policyowner or the beneficiary, what option will be used?

lump sum

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

the same face amount as in the whole life policy

the insured had his wife named as the beneficiary of his life insurance policy. to insure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account what factors?

face amount of the policy the beneficiary's life expectancy projected interest rates

T/F? regarding the accumulation at interest option, the interest is not taxable, since it remains inside the insurance policy.

false the interest credited under this option is taxable, whether or not the policyowner receives it

When the policy owner specifies a dollar amount in which installments are to be paid, he/she has chosen what settlement option?

fixed amount

If a beneficiary wants a guarantee that benefits paid from principle and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

fixed period

life income joint and survivor settlement option guarantees...

income for two or more recipients until they die

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. The accident was the insured's fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what would the policy beneficiary receive?

$100,000 the death must be accidental and not contributed to by any other factors and occur 90 days after the accident to receive triple the amount of policy value.

which of the following best describes fixed-period settlement option?

both the principle and interest will be liquidated over a selected period of time

A business owner is trying to get a bank loan, but the bank requires additional proof of assets to secure the loan. She uses her $250,000 life insurance policy to secure the loan. What provision makes this possible?

collateral assignment

The extended non forfeiture option has the same ____________ as the original policy, but for a __________ period of time.

face amount shorter

an insured and his wife are both involved in a head on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life policy had what provision?

common disaster this means that if the primary beneficiary and the insured died at approximately the same time, it is assumed that the primary beneficiary died first. This insures that the proceeds will either be paid to the contingent beneficiary or the insured's estate if no contingent beneficiary is designated.

an individual is purchasing a 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 be included in the policy?

guaranteed insurability option

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of the premium?

if the father is disabled for at least 6 months

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

it has the highest amount of insurance protection

definition for the 10-day look provision

it is a MANDATORY provision that allows the insured to examine the policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid

when a reduced-paid up non forfeiture 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

What is the 10 day free look privilege?

it permits the insured to return the policy for a full refund of premiums paid

if the loan plus interest equals or exceeds the cash value of the policy, what happens to the policy?

it will terminate

what are all of the nonforfeiture options?

reduced paid up insurance extended term cash surrender value

who can request changes of premium payments, face value, loans, and policy plans?

the policyowner

T/F? regarding the accumulation at interest option, the annual dividend is retained by the company

true

T/F? regarding the accumulation at interest option, the interest is credited at a rate specified by the policy

true

T/F? regarding the accumulation at interest option, the policy holder has the right to withdraw the accumulations at any time.

true

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

the insured's contingent beneficiary

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to...

the insured's estate

What is the Payor Benefit

If the payor (usually parent or guardian) becomes disabled for at least 6 months or dies, the insurer will wave the premium, until the minor reaches a certain age (such as 21).

what two terms are associated directly with the premium?

level or flexible

what is the term for how frequently a policyowner is required to pay the policy premium?

mode

Which of the following factors determines the amount of each installment paid in a Life income option arrangement?

recipients life expectancy and amount of principle

which of the following factors determines the amount of each installment paid in a Life income option arrangement

recipients life expectancy and amount of principle

childrens riders attached to whole life policies are usually issued as what type of insurance?

term

non forfeiture values guarantee what for the policyowner?

that the cash value will not be lost

which of the following will be stated in the consideration clause of a life insurance policy?

the amount of premium payment

upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

the beneficiary will only receive payments of the interest earned on the death benefit

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 what?

the incontestability clause

if an insured continually used the automatic premium loan option to pay the policy premium....

the policy will terminate when the cash value is reduced to nothing

an absolute assignment is a

transfer of all ownership rights in a policy

Policy owners can borrow _________________________ of their whole life policies cash value

up to the full amount

what are the two types of assignments and what do they assign?

absolute assignment- assigns the entire policy to another person or entity collateral assignment- assigns a part or all of the benefits to another person