Life quiz 3
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?
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.
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called
Cost of living rider - Cost of Living Rider adjusts the face amount of the policy to maintain the relationship of the face amount and increases in the cost of living.
All of the following are dividend options EXCEPT
Fixed period installments - Fixed-period installments is a settlement option, and not one of the dividend options.
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 be included in the policy?
Guaranteed insurability option - The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.
Which of the following is true of a children's rider added to an insured's permanent life insurance policy?
It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. - Children's rider is term insurance covering all of the children in the family, including newly born children, convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability.
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount - Correct! The Accidental Death Rider pays 2 or 3 times 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.
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
Joint and survivor - A joint and survivor option pays while either beneficiary is still living.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider - The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
Proof of insurability is not required. - If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term insurance - Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age.
Which is true about a spouse term rider?
The rider is usually level term insurance - Correct! 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 spousp term rider (just like any other insured rider) is usually level term insurance.
Question 14 of 15 All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium. - The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy. - The dividends are used to purchase a single premium policy in addition to the face amount of the permanent
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in
adjustment in the amount of death benefit - If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.
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?
paid up option - With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.