Chapter 3 Questions

in the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of installments

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

Which non-for feature option provides coverage for the longest period of time

reduced paid up insurance

what provision allows the policy owner to reactivate A lapsed life insurance policy within a specific period of time with proof of insurability

reinstatement

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

settlement options

which rider Is often used in business life insurance policies when the policy owner needs to change the insured under the policy

substitute insured rider

What constitutes the entire contract?

the policy and application, riders and amendments

what are the most common exclusions

war and military service, hazardous occupation or hobbies, aviation

when will a contingent beneficiary receive death benefits from a life insurance policy

when the primary beneficiary dies before the insured

And insured purchased a 15 year level term life insurance policy with a face of amount of $100,000. The policy contained an accidental death writer, offering a double indemnity benefit. The insured was severely injured in an auto accident and after 10 weeks of hospitalization he died from injuries. what amount would his beneficiary receive as a settlement?

$200,000

What is the waiting period on a waiver of premium rider in life insurance

6 months

What are the 3 nonforfeiture options in life insurance policies?

Cash surrender value, reduced paid-up insurance or extended term option

According to the entire contract Provision, what document must be made part of the insurance policy

Copy of the original application

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?

Entire Contract

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

Extended term

Which rider when attached to a permanent life insurance policy provides an amount of insurance on every family member

Family term rider

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium

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

what are policy dividends

Return of unused premiums

What type of beneficiary can be changed at any point by the policy owner

Revocable

if a policy has an automatic Premium loan Provision, what happens if the insured dies before the loan is paid back

The balance of the loan will be taken out of the death benefit

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

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

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

The dividend is applied to the next year's premium (it reduces the next year's premium)

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

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

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

Waiver of Premium

to meet the requirements of the entire contract policy provision, an insurance policy must contain what?

a copy of the original insurance application

in the consideration clause of a life insurance policy what is usually the information contained?

amount of premium payment

And insured pays an annual premium to his insurer. in return the insurer promises to pay benefits in accordance with the terms of the contract. This is called

consideration

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

contingent beneficiary

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

fixed period

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

grace period

What required Provision protects against unintentional policy lapse

grace period

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

it will be smaller

what is the advantage of reinstating a life insurance policy as opposed to starting a new one?

policy premium will be set according the insured's original age

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner fails to change the beneficiary before the insured's death the proceeds will go to

the insureds estate

What settlement options are available in life insurance policies?

Lump-sum/cash, fixed period, fixed amount, life income, interest only

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

Paid-up additions

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

Paid-up additions

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

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

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

The proceeds are paid to the insured's estate

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

The same face amount as in the whole life policy

what is the purpose of the automatic premium loan provision?

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

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

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

When can an irrevocable beneficiary be changed?

With the written consent of the beneficiary

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

absolute assignment

Which rider does NOT cause the Death Benefit to increase?

accelerated (living) benefit

what are the dividend options in life insurance

cash, reduced premium, accumulation at interest, paid up additions, paid up option, one year term, acceleration of endowment

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

collateral assignment

What provision in an insurance policy extend coverage beyond the premium due date

grace period

which rider doesn't require evidence of insurability?

guaranteed insured rider

What type of insurance would be used for a return of premium rider

increasing term

what's included in the exclusions clause?

items stipulated in the contract that the insurer will not provide coverage for

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

other insured rider

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

Primary beneficiary

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

Reduced Paid-Up

A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?

The amount of the loan will be subtracted from the death benefit.