Chapter 3: Life Riders, Provisions, Options, and Exclusions

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other- insured rider

Which of the following explains the policy-owner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owners Rights

The insured has his wife as the beneficiary of his life insurance policy. To ensure that his wife had income for life after his death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following except:

The insured's age at death.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

One- year term options

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 beneficiaries receive as a settlement?

$200,000

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?

$50,000

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?

$9,800

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

Automatic premium loan

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?

Life income with period certain

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

Under which nonforfeiture option does the company pay the surrender value and has no further obligations to the policyowner?

Cash surrender

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?

Collateral assignment

All of the following statements concerning dividends are true except:

Dividend amounts are guaranteed in the policy.

When the insured selects the extended tern nonforfeiture option, the cash cash value will be used to purchase insurance with what face amount?

Equal to the original policy for as long as the cash value will purchase.

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

All of the following are dividends options except

Fixed period installments (settlement installments)

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

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

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?

If the father is disabled for more than 6 months

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specific period of time is known as the

Incontestability clause (Within two years)

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest insurance coverage

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

Which of the following settlement options in life insurance is known as straight life?

Life income

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

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?

Payor benefit

If the policy owner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

Policy owner

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

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What options does this describe?

Reduction of premium

The policy owner pays her life insurance annually. Until now, she has collected a nontaxable dividend check for next 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?

Reduction of premium

Children attached to whole life policies are usually issued as what type of insurance?

Term

Which of the following, when attached to a permanent life insurance policy, allows the policy owner 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?

Term rider

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?

The death benefit will be smaller.

A 40- year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at the age 61, leaving 2 grown up children. Assuming he never changed the beneficiary, the policy proceeds go to

The insured's estate

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing

Under an extended tern nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy.

Which is true about nonforfeiture values?

They are required by state law to be included in the policy.

Which of the following is true concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary.

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?

Two years