Chapter 10 Riders

For a beneficiary to receive accidental death benefits, death of the insured generally must occur within how many days following the accident? A) 60 days. B) 90 days. C) 30 days. D) 45 days.

90 For a beneficiary to receive accidental death benefits, death of the insured generally must occur within 90 days following an accident.

Which of the following statements regarding the cost of living rider is NOT correct? A) It is not necessary for the insured to demonstrate evidence of insurability to receive the increased coverage provided through a cost of living adjustment. B) A drawback of the rider is that a drop in the consumer price index (CPI) can result in a decrease in the coverage previously added. C) The typical cost of living rider is provided through a form of term insurance coverage. D) If the face amount is increased through the cost of living adjustment, there is typically an increase in the premium.

B

All of the following statements pertaining to waiver of premium in health insurance policies are correct EXCEPT: A) it exempts an insured from paying premiums during periods of permanent and total disability. B) it applies only to a specified age, such as 60 or 65. C) it applies to both medical expense and disability income policies. D) it may be applied retroactively, after the insured has been disabled for a specified period.

C Does not apply to medical expense insurance policies

A rider on a whole life policy that adds temporary coverage for a spouse and children is: A) a multiple protection policy. B) a family income rider. C) a family maintenance rider. D) a family term rider.

D

All of the following statements regarding a disability income rider are correct EXCEPT: A) a disability income rider is a form of health insurance. B) a disability income rider does not provide benefits for partial or temporary disability. C) most disability income riders do not cover disabilities that develop after age 60 or 65. D) the only way to provide disability benefits in a life insurance policy is through a disability income rider.

D A waiver of premium rider (a type of disability coverage) is generally included with guaranteed renewable and noncancelable individual disability income policies. It is a valuable provision because it exempts the policyowner from paying premiums during periods of total disability.

All of the following statements about accelerated living benefits are correct EXCEPT: A) they allow access to the policy's face value. B) they are provided at no additional cost to the policyowner. C) they are standard in life insurance policies. D) the proceeds must be spent on the insured's medical expenses.

D Accelerated benefits provisions are standard in life insurance policies and are included at no additional cost to the policyowner. They allow access to the policy's face value if the insured suffers from a terminal illness or injury. (The death benefit, less any accelerated payment, is still payable.) The insured can spend the proceeds in any manner.

Frank owns a graded premium whole life insurance policy that includes a spousal rider. Which of the following is the most likely type of insurance underlying the spousal rider? A) Annually renewable term. B) Level premium term. C) Straight level-premium whole life. D) Graded premium whole life.

B Most Other Insureds riders, including so-called spousal riders, are based on a level-premium term life policy that provides level term coverage to a specified age of the spouse (for example, age 65) at a level premium.

For a waiver of premium rider to become operative, the insured must be A) terminally ill. B) partially disabled. C) chronically ill. D) totally disabled.

D An insured must be totally disabled for a waiver of premium rider to become operative. The policyowner does not have to pay premiums as long as the disability continues. Instead, the insurer continues to pay all premiums that become due while the insured's disability continues.

At the age of 34, Ben purchased a whole life policy with a guaranteed insurability option. How many opportunities will he have to purchase additional life insurance in the future? A) Two. B) Five. C) Four. D) Three.

A Typically, the guaranteed insurability option allows the insured to purchase additional insurance at 3-year intervals between ages 25 and 40. In this case, Ben would be able to exercise this option at age 37 and at age 40.

All of the following statements about accelerated benefits provisions are correct EXCEPT: A) the money received as an accelerated benefit must be used to pay medical expenses. B) they are standard in life insurance policies. C) they provide for the early payment of part of a policy's face amount if the insured suffers from a terminal illness or injury. D) the death benefit, less the accelerated payment, is still payable.

A Accelerated benefits provisions are standard in life insurance policies. They provide for the early payment of part of a policy's face amount if the insured suffers from a terminal illness or injury. The death benefit, less the accelerated payment, is still payable. The insured may spend the money received as he wishes; it does not have to be spent on final expenses or medical expenses.

Jay has a $50,000 life insurance policy with an accidental death benefit that pays triple the face amount. If Jay commits suicide three years after purchasing the policy, how much will his beneficiary receive? A) $50,000.00 B) $100,000.00 C) $0.00 D) $150,000.00

A Suicide is excluded from coverage under the accidental death benefit and, as a result, does not qualify for the additional payment. Moreover, most policies include a 1- or 2-year suicide clause that excludes coverage if the insured commits suicide during that period following the effective date. Because the suicide occurred more than two years after the policy effective date, the face amount will be paid.

The insured in a $25,000 life insurance policy died of a heart attack. Since the policy had a "double indemnity" provision, the policy beneficiary received A) $25,000.00 B) $50,000.00 C) $12,500.00 D) nothing.

A Under a "double indemnity" provision, the policy beneficiary would receive double the face amount in the event of a fatal accidental injury. Since the insured's death was not due to an accident, the policy paid its $25,000 face amount.

The payor benefit option or rider is used with: A) family policies. B) juvenile policies. C) adjustable life. D) joint life.

B The juvenile policy's payor benefit rider provides that the policy premiums will be waived if the person paying the premium dies or becomes totally disabled.

Which of the following types of life insurance riders is NOT based on term life insurance? A) Cost of living. B) Return of premium. C) Spousal. D) Waiver of premium.

D The waiver of premium rider is based more on the actuarial principles of disability insurance than life insurance. All other riders listed are based on some form of term life insurance.