Life Quiz : Policy provisions, Riders and Options

Policyowner

Who controls changes in premium payments, face values, and loans in a life insurance policy?

The contingent beneficiary

Who does the common disaster clause protect?

Policyowner

Who has the right to the cash value of a life insurance policy?

The death benefit will be adjusted to the amount that the insured could obtain for her correct age.

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

Yes, since the suicide was committed long after the restricting period

An insured purchased a life policy, and then committed suicide 5 years later. Will the company pay the death benefit to the beneficiary?

Pay a reduced death benefit

An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Paid-up Additions

What dividend option can increase the death benefit of the existing life policy?

Representations

Statements on the application made by an applicant for a life insurance policy are known as what?

It would be paid to the insured's estate.

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?

A copy of the original insurance application

To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

Return of unused premiums

What are policy dividends?

War and Military service, hazardous occupation, and aviation.

What are the most common exclusions in life insurance policies?

1. Cash surrender, 2. Reduced Paid-up, 3. Extended Term

What are the three nonforfeiture options in life insurance policies?

The proceeds are paid to the insured's estate.

What happens to the proceeds of a life insurance policy if there is no named beneficiary?

A promise to pay policy benefits

What is consideration on the part of the insurer?

Reinstatement

What provision allows the policyowner to reactivate a lapsed life insurance policy within a specific period of time with proof of insurability?

The dividend is applied to the next year's premium. It reduces the next year's premium.

With the reduction of premium dividend option, how is the dividend used?

Reduced Paid Up

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

Cash Surrender

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Statements made by the applicant that are true to the best of the applicant's knowledge

What are representations on life insurance applications?

1. Cash, 2. Reduced Premium, 3. Accumulation at Interest, 4. Paid-up Option, 5. One-year Term, 6. Acceleration of Endowment

What are the dividend options in life insurance policies?

Policy Premium in a reinstated policy will be set according to the insured's original age.

What is the advantage of restating a life insurance policy as opposed to applying for a new one?

To prevent the unintentional lapse of a policy because of nonpayment of the premium.

What is the purpose of the Automatic Premium Loan provision?

Incontestability

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

When suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

When can an insurance company use suicide as a defense against paying a claim?

When the primary dies before the insured

When will a contingent beneficiary receive death benefit from a life insurance policy?

When it may alter the underwriting decision

When would a misrepresentation be considered material?

Paid-up additions

Which dividend option is automatically selected by the company if not chosen by the policyowner?

Extended Term Option

Which nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Absolute Assignment

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Lump-sum payment

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

The longer the period selected, the smaller each installment will be

In the Fixed-Period Settlement Option, how will the number of installments of the death benefit proceeds determine the amount of installments?

No... Beneficiaries do not have to have insurable interest in the insured.

Is the beneficiary required to have insurable interest in the insured?

Primary beneficiary

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

The insurer will pay twice the face amount

What does the term "double indemnity" mean?

The cash is converted to the same face amount as in the Whole Life policy

What happens to a policy's cash value under an extended term nonforfeiture option?

If the beneficiary dies shortly after the payments begin, the balance of the principal will be forfeited.

What is the disadvantage of selecting the Life Income Settlement option?

Other-insured Rider

What is the name for a life insurance policy rider that provides coverage on the insured's family members?

To allow the insured to return the policy with a full refund

What is the purpose of a free-look period?

To determine how the death benefit will be paid to the beneficiary

What is the purpose of settlement options in life insurance policies ?

Entire Contract

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

Waiver of Premium

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Grace Period Option

What provision in a life insurance policy extends coverage beyond the premium due date?

Grace Period Mode

What required provision protects against unintentional policy lapse?

1. Lump-sum cash, 2. Fixed period, 3. Fixed amount, 4. Life income, 5. Interest only

What settlement options are available in life insurance policies?

Settlement Options

What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?

Collateral Assignment

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

Revocable

What type of beneficiary can be changed at any point by the policyowner?

Contingent beneficiary

What type of beneficiary is next in line after the primary beneficiary?

Policy proceeds are retained by the insurance company ; only the interest is paid to the beneficiary

With the interest only settlement option, what happens to the policy's death benefit?