Chapter 4: Life insurance policy provisions,riders,and options
Which of the following settlement options in life insurance is known as straight life
Life income
All of the following statements concerning dividends are true except
Dividend amounts are guaranteed in the policy
When the insured selects the extended term non forfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase
Which of the following statements is true about a policy assignment
It transfers rights of ownership from the owner to another person.
All of the following are true regarding insurance policy loans except
Policy loans can be made on policies that do not accumulate cash value
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
Non forfeiture values guarantee which of the following for the policy owner
That the cash value will not be lost
What is the waiting period on a waiver of premium rider in life insurance policies
6 months
All of the following are dividend options EXCEPT
Fixed period installments
Life income joint and survivor settlement option guarantees
income for 2 or more recipients until they die
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 and then decided to use her 250,000 life insurance policy to secure the loan. Which provision makes this possible?
Collateral assignment
According to the entire contract provision, what document must be made part of the insurance policy?
Copy of the original application
An insured purchased a life policy in 2010 and died in 2017. The insurance company discovered at the same time that the insured had misstated information during the application process what can they do?
Pay the death benefit
Which is true about the cash surrender non forfeiture option
Funds exceeding the premium paid are taxable as ordinary income
An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?
The policy will terminate when the loan amount with interest equals or exceeds the cash value.
A policy owner wants to make sure that upon his death the life policy will pay a portion of the proceeds annually to his spouse but that the principal will be paid to their children when they reach a certain age which settlement option should the policy owner choose
Interest only option
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insurance dies as a result of war or while serving in the military?
War or military service
When the policy owner specifies a dollar amount and which installments are to be paid he/she has chosen which settlement option
a fixed amount
If a settlement option is not chosen by the policy owner or the beneficiary which option will be used?
Lump sum
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
The policy owner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policy owner choose?
Interest only option
The writer attached to an life insurance policy that provides coverage on the insured's family members is called the
Other - insured rider
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in
adjustment in the amount of death benefit
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of Premium
Which of the following is true regarding a single life settlement option
it provides income the beneficiary cannot outlive
When calculating the amount a policy owner may borrow from a variable life policy, what must be subtracted from the policy's cash value
Outstanding loans and intrest
For how long is an insurance company allowed to defer policy loan request
6 months
