LIFE POLICY PROVISIONS, RIDERS, AND OPTIONS
C
For how long is an insurance company allowed to defer policy loan requests? A) 30 days B) 60 days C) 6 months D) 1 year
C
Which is true about a spouse term rider? A) The rider is decreasing term insurance B) Coverage is allowed up to age 75 C) The rider is usually level term insurance D) Coverage is allowed for an unlimited time
A
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible? A) Collateral assignment B) Insurable interest C) Modification clause D) Ownership provision
D
According to the entire contract provision, what document must be made part of the insurance policy? A) Buyer'sGuide B) Agent's report C) Outline of coverage D) Copy of the original application
A
All of the following are true regarding insurance policy loans EXCEPT A) Policy loans can be made on policies that do not accumulate cash value B) The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies C) The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy D) Policyowners can borrow up to the full amount of their whole life policy's cash value
D
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A) Life with period certain B) Fixed amount' C) Interest only D) Fixed period
B
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a A) Nonforfeiture option B) Guaranteed insurability rider C) Paid-up additions option D) Cost of living provision
A
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights? A) Policyowner B) The insured and the policyowner C) Beneficiary D) Insured
C
What is the advantage of reinstating a policy instead of applying for a new one? A) The face amount can be increased B) The cash values have gained interest while the policy was lapsed C) The original age is used for premium determination D) Proof of insurability is not required
C
What is the benefit of choosing extended term as a nonforfeiture option? A) It allows for coverage to continue beyond maturity date B) It can be converted to a fixed annuity C) It has the highest amount of insurance protection D) It matures at age 100
A
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A) Payor benefit B) Jumping Juvenile C) Juvenile Premium Provision D) Waiver of Premium
C
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? A) The Consideration Clause B) Assignment Rights C) Owner's Rights D) The Entire Contract Provision
C
Which of the following riders would NOT cause the Death Benefit to increase? A) Cost of Living Rider B) Accidental Death Rider C) Payor Benefit Rider D) Guaranteed Insurability Rider
C
All of the following are dividend options EXCEPT A) Reduction of premium B) Paid-up additions C) Fixed-period installments D) Accumulated at interest
A
An insured committed suicide one year after his life insurance policy was issued. The insurer will A) Refund the premiums paid B) Pay the policy's cash value C) Pay the full death benefit to the beneficiary D) Pay nothing
C
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? A) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies B) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies C) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive D) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time
C
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? A) $20,000 B) $25,000 C) $50,000 D) The face amount will be determined by the insurer
D
Which of the following settlement options in life insurance is known as straight life? A) Single life B) Life with period certain C) Fixed amount D) Life income
C
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 premium? A) If the daughter is disabled for more than 3 months B) If the daughter is disabled for any length of time C) If the father is disabled for more than 6 months D) If the father is disabled for at least a year
C
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his 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 will the policy beneficiary receive? A) $0 B) $50,000 (50% of the policy value) C) $100,000 D) $300,000 (triple the amount of the policy value)
B
What is the other term for the cash payment settlement option? A) Proceeds B) Lump sum C) Principal amount D) Face amount
B
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A) Cash option B) Reduction of premium C) Paid-up addition D) Accumulation at interest
B
What is the for how frequently a policyowner is required to pay the policy premium? A) Consideration B) Mode C) Schedule D) Grace period
B
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A) The policyholder has the right to withdraw the accumulations at any time B) The interest is not taxable since it remains inside the insurance policy C) The annual dividend is retained by the company D) The interest is credited at a rate specified by the policy
D
The accelerated benefits provision will provide for an early payment of the death benefit when the insured A) Needs to borrow money B) Has earned enough credits C) Becomes disabled D) Becomes terminally ill
C
An insured has a continuous premium whole life policy. She 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? A) Reduction of premium B) Accumulation at interest C) Paid-up option D) One-year term
C
Children's riders attached to whole life policies are usually issued at what type of insurance? A) Adjustable life B) Whole life C) Term D) Variable life
B
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? A) Extended term B) Fixed amount C) Fixed period D) Life income period certain
B
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
A
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called A) Paid-up additions B) One-year term purchase C) Accumulation at interest D) Reduction of premiums
D
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called A) Guaranteed insurability B) Waiver of cost of insurance C) Payor benefit D) Waiver of premium
B
Under the extended term policy nonforfeiture option, the policy cash value is converted to A) A higher face amount than the whole life policy B) The same face amount as in the whole life policy C) The face amount equal to the cash value D) A lower face amount than the whole life policy
B
Under which of the following circumstances would an insurer pay accelerated benefits? A) A couple wants to build a house and would like to make a larger down payment B) An insured is diagnosed with cancer and needs help paying for her medical treatment C) A couple is nearing retirement and needs a steady stream of income D) An insured is looking for a way to put her daughter through college
D
What is the purpose of a free-look period in insurance policies? A) It allows the insured 10 days to pay the initial premium B) It allows the insurer to temporarily suspend coverage after an insured's disability C) It allows the insurer to cancel coverage if a misrepresentation is discovered D) It allows the insured to reject the policy with a full refund
D
What is the waiting period on a Waiver of Premium rider in life insurance policies? A) 30 days B) 3 months C) 5 months D) 6 months
D
What provision in an insurance policy extends coverage beyond the premium due date? A) Free look B) Automatic premium loan C) Waiver of premium D) Grace period
D
Which of the following is TRUE concerning the Accidental Death Rider? A) It is also known as a triple indemnity rider B) This rider is only available to insureds over the age of 65 C) It is only available in group insurance D) It will pay double or triple the face amount
B
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 signed D) It applies only to term life insurance policies
C
All of the following are nonforfeiture options EXCEPT A) Extended term B) Reduced paid-ip C) Interest only D) Cash surrender
C
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A) $0 B) $200 C) $9,800 D) $10,000
C
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called A) Accelerated benefits B) Cost of living C) Guaranteed insurability D) Waiver of cost of insurance
C
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? A) The policy beneficiary takes over the loan payments B) The policy is rendered null and void C) The balance of the loan will be taken out of the death benefit D) The policy beneficiary receives the full death benefit
C
Nonforfeiture values guarantee which of the following for the policyowner? A) That the death benefit will be paid in a lump sum B) That the policy premiums will never increase C) That the cash value will not be lost D) That the dividends will be paid annually
D
The two types of assignments are A) Absolute and partial B) Complete and partial C) Complete and proportionate D) Absolute and collateral
C
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called A) Fixed amount B) Joint Life C) Joint and survivor D) Fixed period
B
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? A) 1 year B) 2 years C) 5 years D) 7 years
A
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the A) Other-insured rider B) Change of insured rider C) Juvenile rider D) Payor rider
A
All of the following are true regarding the guaranteed insurability rider EXCEPT A) This rider is available to all insureds with no additional premium B) The insured may purchase additional coverage at the attained age C) The insured may purchase additional insurance up to the amount specified in the base policy D) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events
A
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 the 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? A) Guaranteed insurability option B) Dividend options C) Guaranteed renewable option D) Nonforfeiture options
D
What type of insurance would be used for a Return of Premium rider? A) Level Term B) Decreasing term C) Annually Renewable Term D) Increasing Term
C
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? A) Joint and survivor B) Fixed amount option C) Interest only option D) Life income with period certain
B
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does that mean? A) The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments B) The beneficiary will only receive payments of the interest earned on the death benefit C) The beneficiary must pay interest to the insurer D) The beneficiary will receive the lump sum, plus interest
D
Which is TRUE about the cash surrender nonforfeiture option? A) After the cash surrender, the insured is covered for a grace period of one month B) The policy remains active for some time after the policyholder opts for cash surrender C) The policyholder receives the original cash value of the policy D) Funds exceeding the premium paid are taxable as ordinary income
C
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? A) Single life B) Fixed-amount C) Life income with period certain D) Joint and survivor
D
Which of the following best describes fixed-period settlement option? A) Only the principal amount will be paid out within a specified period of time B) The death benefit must be paid out in a lump sum within a certain time period C) Income is guaranteed for the life of the beneficiary D) Both the principal and interest will be liquidated over a selected period of time
C
Which of the following is NOT typically excluded from life policies? A) Death that occurs while a person is committing a felony B) Death due to war or military service C) Death due to plane crash for a fare-paying passenger D) Self-inflicted death
D
Which of the following statements is TRUE concerning irrevocable beneficiaries? A) They may be changed at any time B) They can never be changed C) They may be changed only on the anniversary date of the policy D) They can be changed only with the written consent of the beneficiary
C
Which of the following, 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? A) Guaranteed insurability rider B) Change of insured rider C) Term rider D) Accidental death and dismemberment rider
B
Which two terms are associated directly with the premium? A) Renewable or convertible B) Level or flexible C) Fixed or variable D) Term or permanent
A
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 policy 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
D
Which of the following is true about the premium on the children's rider in a life insurance policy? A) It decreases when the oldest child reaches the age of 21 B) It increases when a newborn baby is added to the policy C) It decreases when an adopted child is added to the policy D) It remains the same no matter how many children are added to the policy
D
Which of the following policy components contains the company's promise to pay? A) Premium mode B) Owner's rights C) Entire contract provision D) Insuring clause
D
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
C
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? A) $0 B) $100,000 C) $200,000 D) $100,000 plus the total of paid premiums
C
The paid-up addition option uses the dividends 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 original policy D) To purchase a one-year term insurance in the amount of the cash value
C
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all the premiums paid. Which rider is attached to the policy? A) Decreasing term B) Accidental death C) Return of premium D) Cost of living
B
Which of the following statements about the reinstatement provision is true? A) It guarantees the reinstatement of a policy that has been surrendered for cash B) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated C) It permits reinstatement within 10 years after a policy has lapsed D) It provides the reinstatement of a policy regardless of the insured's health
C
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? A) Paid-up additions B) Dividend Accumulation option C) Paid-up option D) Accumulation at Interest
D
An insured receives an annual life insurance dividend check. What term best describes this arrangement? A) Reduction of Premium B) Annual Dividend Provision C) Accumulation at Interest D) Cash option
C
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof on insurability is provided. Which policy provision allows this? A) Incontestable clause B) Grace period C) Reinstatement provision D) Waiver of premium provision
C
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? A) It decreases over the term of the policy B) It remains the same as the original policy, regardless of any differences in value C) It is reduced to the amount of what the cash value would buy as a single premium D) It is increased when extra premiums are paid