Chapter Exam 2 - Life Provisions

Which of these life insurance riders allows the applicant to have excess coverage?

Term rider

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Variable Universal Life

Who does the ownership clause in a life insurance policy state?

Who the policyowner is entitled to

An insurer may normally delay the payment of a cash value loan or surrender value for up to

6 months

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?

Interest only

An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?

Long term care

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 still receive declared dividends; just as if the insured were still making the payments themselves.

The _______ has the right to change a life insurance policy's beneficiary.

Policyowner

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

Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?

Taxed as ordinary income

The free look provision begins

Upon receipt of the policy by the policyowner

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

Void the policy only if its

A term life rider offers the insured

additional life coverage

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

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

Dividends paid from a life insurance policy are

issued by the insurer

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 statements 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

A policy loan is made possible by which of these life insurance policy features?

Cash Value provision

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accidental Death & Dismemberment clause

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 insurer's basic promise

Which rider provides coverage for a child under a parent's life insurance policy?

Child term rider

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

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 the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

Which life is covered on a life insurance policy that contains a payor benefit clause?

Child

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

Claim will be denied

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Collateral Assignment

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing Term

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

Evidence of insurability is required when the option is exercised

All of the settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT

Interest Only

How are policyowner dividends treated in regards to income tax?

Interest on accumulations is taxed

K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?

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

Which of these nonforfeiture options continue a build-up of cash value?

Reduced Paid Up

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-Up

A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as an ________________ rate loan

Variable

The Accelerated Death Benefit provision in a life insurance policy is also known as a

living benefit

The consideration clause in a life insurance policy indicated that a policy owner's consideration consists of a completed application and

the initial premium

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled?

Payor Clause

Which life insurance rider typically appears on a Juvenile life insurance policy?

Payor Benefit rider

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; the incontestable clause prevents the insurer from canceling the contract even for a material misrepresentation

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied under the Suicide clause of the policy

A cost of living rider gives the insured

additional death benefits

A Term Life rider offers the insured

additional life coverage

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 the following is an example of a nonforfeiture option?

Reduced Paid-Up Option

What provision in a life insurance policy states that the application is considered part of the contract?

entire contract provision

Variable Whole Life Insurance can be described as

both an insurance and securities product

A Whole Life insurance policyowner does NOT have the right to

change the grace period

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.