Chapter 3.2 Exam - Policy provisions options and riders
T took out a 50,00 life insurance policy with an accidental death and dismemberment rider. 5 years later T commits suicide. How much will the insurer pay?
$50,000
P purchases a 50,000 whole life insurance policy in 2005. One of the questions on the application asks if p engages in scuba diving, to which p answers no. The policy is then issued with no scuba exclusions. In 2010, p takes up scuba diving and dies in a scuba related accident in 2011. What will the insurer pay p's beneficiary?
$50,000 minus any outstanding policy loans
A potential client, age 40, would like to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20 pay life accumulates cash value faster than straight life
The option that provides an additional death benefit for a limited about of time at the lowest possible cost is called an:
Accidental death and dismemberment (AD&D)
The consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
What does the insuring agreement in a life insurance contract establish?
An insurers basic promise
What action can a policy owner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates specified in the contract with no evidence of insurability required
What action will an insurer take if an interest payment on a policy loan is not made on time?
Automatically add the amount of interest due to the loan balance
M had an annual life insurance premium payment due January 1st. She died january 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor benefit rider
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:
Policy loan provision
Which of these nonforfeiture options continue a build up of cash value?
Reduced paid up
The provisions that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
Reinstatement
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
D was actively serving in the Marines when he was killed in automobile accident while on level. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary receive?
The full face amount
The consideration clause in a life insurance policy indicates that a policy owners consideration consists of a completed application and
The initial premium
When is the face amount of a Whole Life policy paid ?
Upon the death of the insured or the policy's maturity date, whichever happens first.
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child
Which rider provides coverage for a child under a parents life insurance policy?
Child term rider
Which of these actions is taken when a policyowner uses a Life insurance policy as collateral for a bank loan?
Collateral assignment
The incontestable clause allows an insurer to
Contest a claim during the contestable period
beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife (still the beneficiary)
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n):
Exclusion
A long term care rider in a life insurance policy pays a daily benefit in the event of which of the following:
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
All of these statement about the Waiver of Premium provision are correct EXCEPT
Insured must be eligible for social security disability for claim to be accepted
In a life insurance contract, an insurance company's promise to pay stated benefits is called the:
Insuring clause
How are policy owners dividends treated in regards to income tax ?
Interest on accumulations is taxed
The accidental death and dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
Is blinded in an accident
Which of the following statements is correct about accelerated death benefits?
Must have a terminal illness to qualify
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will receive declared dividends
Which statement regarding the misstatement of age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered.
What provision in a life insurance policy states that the application is considered part of the contract?
Entire contract provision
Which provision prevents an insurer from changing the terms of the contract with the policy owner by referring to documents not found within the policy itself?
Entire contract provision
Which of these statements about a Guaranteed Insurability Option Rider is NOT TRUE:
Evidence of insurability is required when the option is exercised
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusions
A young, married teacher has 2 children and owns a whole life policy. If the teacher wants an increasing death benefit to protect against inflation, the teacher should select which of the following dividend options?
Paid up additional insurance
Which statement is TRUE in regards to a policy loan?
Past due interest on a policy loan is added to the total debt
All of the following statements are true regarding a policy's grace period , EXCEPT
Past due premiums are waived
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the:
Policy proceeds
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable life
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
Additional whole life coverage at specified times
L takes out a life insurance policy and dies 10 years later. During the claims process, the insurer discovers that L had understated her age on the application. Under the misstatement of age provision, the insurer will:
Adjust the death benefit to a reduced amount
All of these settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT
Interest only
Which of these NOT an example of a nonforfeiture option
Life income
The accelerated death benefit provision in a life insurance policy is also known as the
Living benefit
An insureds inability to perform 2 or more activities of daily living may trigger which type of policy rider?
Long term care
Which of these is NOT considered to be a right given to a policyowner
Modify a provision in the insurance contract
All of these statements concerning Settlement Options are true EXCEPT:
Only the beneficiary may select
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owners rights
S buys a $10,000 whole life policy in 2003 and pays an annual premium of 100. S dies 5 years later in 2008 and the insurer pays the beneficiary 10,500. What kind of rider did S include on the policy?
Return of premium rider
What is the sucicide provision designed to do ?
Safeguard the insurer from an applicant who is contemplating suicide
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insureds death is called a (n):
Insuring agreement
The automatic premium loan provision is designed to
Avoid policy lapse
K pays on a $20,000 20- year endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
20,000 death benefit
S buys a 50,000 whole life policy with a 50,000 accidental death and dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
50,000
A return of premium life insurance policy is:
A whole life an increasing term
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental death and dismemberment clause
Which of the following dividend options result in taxable income to the policy owner?
Accumulation at interest
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death benefit
Variable Whole Life insurance can be described as
Both an insurance and securities product
A policy loan is made possible by which of these insurance policy features?
Cash value provision
N is covered by a term life policy and does not make the required premium payment which was due August1. N dies september 15. What action will the insurer take?
Claim will be denied
How do life insurance companies handle cases where the insured commits suicide within the contract's stated contestabel period?
Claims are denied under the suicide clause of the policy
Which of the following statements about accumulated interest on dividends from an insurance policy is true?
It is taxed as ordinary income
What benefit does the Payor clause on a Juvenile life policy provide?
Premiums are waived it payor becomes disabled
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the contestable period and proven to be material
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of premium
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
Which of these types of policies may NOT have the automatic premium loan provision attached to it?
Decreasing Term
Additional coverage can be added to a Whole Life policy by adding a(n):
Decreasing term rider
How are surrender charges deducted in a life policy with a rear end loaded provision?
Deducted when the policy is discontinued
N is a student pilot with a large life insurance policy. Which of these features would limit the insurers obligation in the event N was killed while flying as a student pilot?
Exclusion
An insured is past due on his life insurance premium, but is still within a Grace Period. What will the beneficiary receive if the insured dies during this Grace Period
Full face amount minus any past due premiums
Which type of life policy contains a monthly mortality charge as well as self directed investment choices?
Variable universal life
S has a whole life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and policy has adequate cash value from which the premium payment can be made?
Automatic policy loan
S would like to use dividends from her life insurance policy to purchase paid up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT:
Beneficiaries age
Which of the following provisions guarantees that premiums will be waived if a juvenile life policyowner becomes disabled ?
Payor clause
