Am Pro Chapter 13

A grandmother purchases policies for her grandchildren. She should consider purchasing which of the following? Select one: a.AD&D Rider b.Aviation Rider c.Aviation Exclusion Rider d.Payor Benefit Rider

"Payor Benefit Rider" is a memorization term. The Payor Benefit Rider will continue to pay the premiums (usually until age 21) if the "payor" dies or is disabled. Although it wasn't mentioned in the answer list, she may also want to purchase a "Guaranteed Insurability Rider" so that each grandchild will be able to increase the face value of the policy at specified future times. The correct answer is: Payor Benefit Rider

A Guaranteed Insurability Rider: Select one: a.Allows the policy owner to increase the face value at any time without proof of insurability. b.Allows the policy owner to cover additional family members under the same policy. c.Allows the policy owner to increase the face value at set intervals without proof of insurability. d.Allows the policy owner to increase the face value at a reduced premium rate with proof of insurability.

A Guaranteed Insurability Rider is a key exam concept. Under this rider, the Insured can purchase more insurance at set future times. The key point is that the purchases may be made without proof of insurability. This is a great rider to have if the Insured wants more insurance at the time of marriage, or when children are born, or at set ages, etc. The Guaranteed Insurability Rider is very commonly included in the policy parents or grandparents purchase for the newborns. The correct answer is: Allows the policy owner to increase the face value at set intervals without proof of insurability.

A stunt pilot is given two options when shopping for Life Insurance. One option is to buy a rated policy, which would cover the aviation risk at a higher premium. The second choice would be to: Select one: a.Add an AD&D Rider. b.Add an exclusion rider. c.Add a Multiple Indemnity Rider. d.Delete the Insuring Clause.

Add an exclusion rider.

Which of the following would a stunt pilot add to a policy in order to be covered when flying as a stunt pilot? Select one: a.An Aviation Exclusion Rider b.An Entire Contract Provision c.A Multiple Indemnity Rider d.An Aviation Rider

An Aviation Rider

What type of rider would you purchase if you wanted the cash value to be returned to your beneficiary along with the death benefit upon your death? Select one: a.Return of Premium Rider b.Level Term Rider c.Increasing Term Rider d.Return of Cash Value Rider

An Insured who wants to have the beneficiary receive the cash value would request a Return of Cash Value Rider. Because the cash value increases each year, the Insured would be an Increasing Term Rider to cover the increasing cash value. The correct answer is: Return of Cash Value Rider

Which of the following statements about an exclusion rider is true? Select one: a.An exclusion rider eliminates some coverage and reduces the cost of the policy. b.Exclusion riders allow an applicant to promise never to do certain activities in exchange for a lower rate. c.Exclusion riders make a policy less affordable for people with certain risk factors. d.An exclusion rider adds to a policy's coverage.

An exclusion rider eliminates some coverage and reduces the cost of the policy.

A Payor Benefit Rider will pay the policy's premiums: Select one: a.As long as the Producer is disabled. b.As long as the Insured is disabled. c.For the life of the Insured, regardless of whether the payor dies or becomes disabled. d.As long as the payor is disabled but only until the Insured reaches the specified age.

As long as the payor is disabled but only until the Insured reaches the specified age.

Which of the following riders would waive premiums on a minor's policy if the parent or grandparent who pays the premium dies or becomes disabled? Select one: a.Payor Benefit Rider b.Waiver of Premium Rider c.AD&D Rider d.Cost of Living Rider

Be sure to memorize this! It is almost always a test question. The correct answer is: Payor Benefit Rider

The Free Look clause: Select one: a.May be waived by the Insured. b.May be waived by the Insurer. c.May be waived only if both the Insurer and Insured agree in writing. d.Cannot be waived.

Cannot be waived.

Which provision allows a policy owner to increase the face value at specified intervals without proof of insurability? Select one: a.Conversion Provision. b.Guaranteed Insurability Provision. c.Payor Benefit Rider. d.Renewal Provision.

Discussion: The perfect place to include a "Guaranteed Insurability Rider" is in a policy parents might buy for a newborn. The parents often want a low-cost policy (which means there will only be a modest face value) but the parents want the newborn to be able to increase the amount of insurance at a particular age (without having to pass a physical), or at other key times, such as when getting married or having a child. The Guaranteed Insurability Rider permits the Insured (the newborn) to buy more life insurance at a later time - even if the child is later "uninsurable" due to an illness. Absolutely for sure you will have a Guaranteed Insurability Rider question on your exam. Remember that the policy purchased for the newborn will also likely include a Payor Benefit Rider to pay the premiums to a set age if the parents die or become disabled. Our test writers know that a weak student won't know what either of these provisions are and they can't be understood without some memorization. Go get 'em! The correct answer is: Guaranteed Insurability Provision.

What is the purpose of the Automatic Policy Loan Provision? Select one: a.Makes a loan available to the policy owner to pay for a home purchase or a child's education. b.Provides an automatic policy loan if the owner enters the hospital. c.Helps prevent policy lapsation if the policy owner fails to pay the premium. d.Makes loans available to the policy owner for home improvements.

Helps prevent policy lapsation if the policy owner fails to pay the premium.

A Whole Life Policy with an Accidental Death Benefit (ADB) Rider (which is also known as a Double Indemnity Rider) provides $250,000 coverage. The insured died of an accidental drug overdose. The policy will pay: Select one: a.$0 b.$250,000 c.$500,000 d.$1,000,000

If it is an accident, the Accidental Death benefit will double the payment. The correct answer is: $500,000

What is used to create a Return of Cash Value Rider? Select one: a.Double Indemnity Rider b.Decreasing Term Insurance c.Straight Life d.Increasing Term Insurance

Increasing Term Insurance

What is used to create a Return of Premium Rider? Select one: a.Increasing Term Insurance b.Decreasing Term Insurance c.Universal Life d.Ordinary Life

Increasing Term Insurance

Which of the following statements regarding the Automatic Premium Loan Provision is true? Select one: a.It is designed to prevent the policy from lapsing by using the cash value as collateral for a premium loan. b.No interest may be charged under this provision. c.Any loan must be repaid within 90 days. d.The provision is only allowed in Term Life policies.

It is designed to prevent the policy from lapsing by using the cash value as collateral for a premium loan.

The Waiver of Premium rider waives the premium upon total disability of the: Select one: a.producer b.owner c.insured d.beneficiary

Keep in mind that the Insured isn't necessarily the owner. The correct answer is: insured

If an Insured is totally disabled but has a Waiver of Premium rider in the Whole Life Policy. The premium: Select one: a.Must be paid up by the Insured after the period of disability. b.Is paid by the policy's cash value account. c.Is paid by the Insurer. d.Isn't paid during the period of disability.

LH Addendum, Page 13-1, Line 28. The premium isn't actually "waived," it is paid by the Insurer. The correct answer is: Is paid by the Insurer.

Sheila decided to take a loan against her Whole Life policy. In the last year, she paid $284 interest. The amount of the interest that is tax deductible from her income taxes is: Select one: a.$0 (0%) b.$28.40 (10%) c.$142 (50%) d.$284 (100%)

LH Addendum, Page 13-1, Line 8. Interest paid on a life insurance policy loan is NOT tax deductible. This is because a policy loan is similar to you loaning yourself money and then wanting a tax deduction for the interest you paid yourself. The correct answer is: $0 (0%)

Which of the following is true of a Waiver of Premium Rider during the period of a total disability? Select one: a.The premium won't be waived if the Insured's age exceeds a specified age. b.The amount of the death benefit is reduced during the period of disability. c.The policy will not pay dividends. d.The policy's cash value will not grow.

LH Addendum, Page 13-1, Lines 20-22. The Waiver of Premium Rider is a very common test issue. If you aren't comfortable with it, be sure to read the LH Addendum material. The Insurer won't let me take advantage of a Waiver of Premium Rider because the Insurer knows that it is us old geezers who are most likely to be disabled. The Insurer also won't make this rider available for people with rated policies - the people who are in the high risk categories. The correct answer is: The premium won't be waived if the Insured's age exceeds a specified age.

Q has an Additional Insured "Children" Rider added to his Whole Life Policy. He had no children at the time he purchased the rider. Q called the Producer to announce that he is the proud father of triplets. How will this affect Q's premium? Select one: a.The premium won't change. b.The premium will be adjusted upward immediately upon the birth of the triplets. c.The premium will be adjusted upward 31 days after Q notifies the Producer of the births. d.The premium will automatically be tripled.

LH Addendum, Page 13-2, Line 5. The premium won't change. When the underwriter set the original premium for the Children Rider, the underwriter factored in the likelihood of additional children being born. The Children's Rider premium doesn't change no matter how many children Q may have. The correct answer is: The premium won't change.

Patty works in a job that is very dangerous. Her Life Insurance policy will likely: Select one: a.increase the premium. b.decrease the premium. c.not change her premium if she changes to a less hazardous occupation. d.require new proof of insurability.

Life Insurance premiums are level and fixed. When we get to Health Insurance, we will see that the Health Insurer can change premiums if the Insured's occupation changes. However, Life Insurance companies don't change the premium with the application because, once the policy is issued, the premium is "level and fixed." The Life Insurer is interested in the hazardous occupation or hobby at the time of application, but not thereafter. The correct answer is: not change her premium if she changes to a less hazardous occupation.

Under the Waiver of Premium Rider, how many months must a policy owner be totally disabled before the insurance company will waive the premiums? Select one: a.3 Months b.6 Months c.9 Months d.12 Months

Memorization time again. The Waiver of Premium Rider waives the premium if the Owner becomes totally disabled and the 6-month Waiting Period has expired. The Insurer will then refund the premiums paid during the 6-month waiting period and waive future premiums as long as the total disability continues. The correct answer is: 6 Months

Under a Guaranteed Insurability Rider, the fee paid for the extra insurance is: Select one: a.based on the Insured's health at the time the additional coverage is sold. b.flexible because the Insured may purchase additional insurance at any time. c.based on the Insured's age at the time the original policy was sold. d.based on the Insured's attained age at the time the additional coverage is sold.

New Point: When the Insured decides to purchase coverage, the premium is based on the Insured's attained age at that time. The correct answer is: based on the Insured's attained age at the time the additional coverage is sold.

.Karen owns a Life Insurance policy with a Waiver of Premium Rider with a six month waiting period. Karen has been partially disabled for six months. What will the company do? Select one: a.Refund the last six month's premiums, waive future premiums, and continue coverage. b.Nothing. c.Begin sending a monthly income benefit to the Insured. d.Refund the last six month's premiums, waive future premiums, and discontinue coverage.

Nothing.

Which rider waives the premiums on a child's policy if the child's parent or guardian becomes disabled and can't make the payments? Select one: a.Payor Benefit Rider b.Waiver of Premium rider

Payor Benefit Rider

Which rider waives the premiums on a child's policy if the responsible adult is dead or disabled? Select one: a.Waiver of Premium rider b.Payor Benefit Rider

Payor Benefit Rider

A Guaranteed Insurability Rider will allow an Insured to purchase additional insurance upon each of these events EXCEPT: Select one: a.Marriage b.Adoption of a child c.Reaching age 75 d.Birth of a child

Reaching age 75

Mom wants to buy a policy covering her child. Which is appropriate? Select one: a.Child Term Rider b.Decreasing Term Policy

See Page 13-5, Line 20. You know that the "Decreasing Term Policy" answer is wrong because that is almost always used for mortgage protection insurance. The correct answer is: Child Term Rider

Mom bought a Child Term Rider. What provision should she use to pay the premiums should Mom die before the child? Select one: a.Guaranteed Insurability b.Return of Cash Value c.Return of Premium d.Payor Benefit

See Page 13-5, Line 26. The Payor Benefit Rider (tough to remember) will pay the juvenile's premium if the parent dies or if the parent is disabled. In the case of disability, the Payor Benefit Rider will only pay as long as the parent is disabled. Also, the Payor Benefit Rider only pays to a specified age, such as 27. When the child reaches the specified age, the child becomes responsible for paying the premium. The correct answer is: Payor Benefit

What is the Waiver of Premium Rider designed to do? Select one: a.Waive Life Insurance premiums for the length of the disability when the owner is totally disabled. b.Waive Life Insurance premiums for the length of the policy if the owner is totally or partially disabled. c.Waive Life Insurance premiums for the length of the policy if the owner is totally disabled. d.Waive Life Insurance premiums for the length of the disability if the owner is totally or partially disabled.

The "owner" is always responsible for the premium. In this question you are only given possible answers regarding the "owner" so we must assume the owner and Insured are the same people. The correct answer is: Waive Life Insurance premiums for the length of the disability when the owner is totally disabled.

Which of the following would a stunt pilot add in order to pay standard rates? Select one: a.A Rated Policy b.An Aviation Exclusion Rider c.An Aviation Rider d.An AD&D Rider

The Aviation Exclusion Rider won't cover a stunt pilot accident but will permit the Insured to purchase insurance at the standard rate - adding an Aviation Rider would cover the stunt pilot accident but at a higher than standard rate. The correct answer is: An Aviation Exclusion Rider

The Accelerated Death Benefit will pay up to 50% of the face value in which situation? Select one: a.The Insured dies within 2 years after the policy is issued. b.The Insured becomes totally disabled and is confined to a nursing home.

The Insured becomes totally disabled and is confined to a nursing home.

The Payor Benefit Rider is designed to protect: Select one: a.The Insurer if the Payor dies or is disabled. b.The Child if the Payor is disabled or dies. c.The Payor if the Child is disabled. d.The Child if the Child is disabled.

The Payor Benefit Rider often added to a Child (Juvenile) Policy pays the premium if the adult Payor is disabled or dies. The Rider protects the Child, not the Payor. The correct answer is: The Child if the Payor is disabled or dies.

A Payor Benefit Rider specifies which of the following? Select one: a.When the premiums will be tax deductible b.When the death benefit will be paid c.When the Insurer can increase the amount of the premiums d.When the Insurer will pay the premiums

The Payor Benefit Rider requires the Insurer to pay the premiums if the premium payor dies or becomes disabled. So, surprisingly, this is the answer. The correct answer is: When the Insurer will pay the premiums

Mardi purchased a Juvenile policy for her daughter. Mardi added a Payor Benefit Rider to the policy. Mardi became disabled. The Payor Benefit Rider will: Select one: a.Only pay the premium if the child is disabled. b.Not pay the premium unless Mardi dies. c.Pay the premium as long as Mardi is disabled but only to the child's specified limiting age. d.Pay the premium as long as Mardi is disabled to Mardi's age of 100.

The Payor Benefit Rider will pay the premium on the Juvenile policy as long as Mardi is disabled but only to the child's specified limiting age, such as 21. The correct answer is: Pay the premium as long as Mardi is disabled but only to the child's specified limiting age.

Under which of the following circumstances would the premiums be waived under the Payor Benefit Rider? Select one: a.The insured child becomes disabled. b.The parent responsible for the child's policy premium becomes disabled or dies. c.The parent responsible for the policy premium loses his or her job. d.The agent that sold the policy becomes disabled.

The parent responsible for the child's policy premium becomes disabled or dies.

What happens when a policy is continued under the Automatic Premium Loan Rider? Select one: a.The policy remains in force, however the death benefit will be reduced by the loan debt. b.The policy will not be eligible for dividends. c.The grace period is extended. d.The policy is converted to an AD&D policy.

The policy remains in force, however the death benefit will be reduced by the loan debt.

What is the impact on the Insured under the Payor Benefit Rider? Select one: a.The premiums are waived until the Insured reaches the age specified in the policy. b.The premiums are reduced by 50% during the period of disability. c.The premiums are permanently waived as long as the payor is disabled. d.The premiums are permanently waived if the payor has died.

The premiums are waived until the Insured reaches the age specified in the policy.

Which of the following riders would result in the premiums being waived if a policy owner becomes disabled? Select one: a.Waiver of Premium Rider b.Guaranteed Insurability Rider c.Disability Rider d.AD&D Rider

There is no such thing as a "Disability Rider." The Waiver of Premium Rider waives the premiums after 6 months if the Insured becomes totally disabled. The correct answer is: Waiver of Premium Rider

Which of the following provisions is optional and cannot be included without the policy owner's consent? Select one: a.Incontestable Clause b.Automatic Premium Loan Provision c.Grace Period Clause d.Free Look Clause

This is a tough question. All of the listed provisions are required by state law except for the Automatic Premium Loan Rider. State law doesn't require this, so it would likely only be included with the policy owner's consent. The correct answer is: Automatic Premium Loan Provision

What does the Payor Benefit Rider do? Select one: a.Waives premiums if the payor becomes unemployed. b.Waives premiums if the payor dies or becomes disabled before the Insured reaches adulthood. c.Designates the person who will pay the premium if the policy owner dies. d.Specify the designated payor for an insurance policy.

Waives premiums if the payor dies or becomes disabled before the Insured reaches adulthood.