Chp 3 Life policy options, Provisions and Exclusions

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? A $0 B $50,000 (50% of the policy value) C $100,000 D $300,000 (triple the amount of policy value)

$100,000

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? A$20,000 B$25,000 C$50,000 D The face amount will be determined by the insurer.

$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? a) $0 b) $200 c) $9,800 d) $10,000

$9,800

To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

A copy of the original insurance application

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

Absolute assignment

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in A Automatic lapse. B Recession of the policy. C Adjustment in the amount of death benefit. D No change whatsoever.

Adjustment in the amount of death benefit.

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Cash Surrender

What are the three nonforfeiture options in life insurance policies?

Cash surrender reduced paid-up extended term

What are the dividend options in life insurance policies?

Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term and acceleration

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

Collateral assignment

An 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 A Acceptance. B Consideration. C Conditions. D Utmost good faith.

Consideration

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

Contingent beneficiary

According to the entire contract provision, what document must be made part of the insurance policy? A. Buyers Guide B. Agents Report C. Outline of Coverage D. Copy of the original application

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

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

Grace Period

What required provision protects against unintentional policy lapse?

Grace Period

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called A Accelerated benefits. B Cost of living. C Guaranteed insurability. D Waiver of cost of insurance.

Guaranteed insurability

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? A If the daughter is disabled for any length of time B If the father is disabled for more than 6 months C If the father is disabled for at least a year D If the daughter is disabled for more than 3 months

If the father is disabled for more than 6 months

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Incontestability

Which of the following is true about the premium on the children's rider in a life insurance policy? A It remains the same no matter how many children are added to the policy. B It decreases when the oldest child reaches the age of 21. C It increases when a newborn baby is added to the policy. D It decreases when an adopted child is added to the policy.

It remains the same no matter how many children are added to the policy.

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?

It will be paid to the insured's estate

Which of the following settlement options in life insurance is known as straight life? A Single life B Life with period certain C Fixed amount D Life income

Life income

If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?

Lump-Sum payment

What settlement options are available in life insurance policies?

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

Is the beneficiary required to have insurable interest in the insured?

NO. Beneficiaries do not have insurable interest in the insured

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

Other-insured rider

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

An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Pay a reduced death benefit

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? A Refuse to pay the death benefit because of the misstatement on the application B Pay a decreased death benefit C Sue for the right to not pay the death benefit D Pay the death benefit

Pay the 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? A Waiver of Premium B Payor Benefit C Jumping Juvenile D Juvenile Premium Provision

Payor Benefit

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Policy premium in a reinstated policy will be set according to the insured's original age

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

Who controls changes in premium payments, face values, and loans in a life insurance policy?

Policyowner

Who has the right to the cash value of a life insurance policy?

Policyowner

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

Primary beneficiary

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? A. Proof of insurability is not required B. Medical exam C. Her parents' federal income tax receipts D. Medical exam and parents' medical history

Proof of insurability is not required

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

Reduced paid-up

Which nonforfeiture option provides coverage for the longest period of time? A Extended term B Paid-up option C Accumulated at interest D Reduced paid-up

Reduced paid-up

What provision allows the policyowner to reactive a lapsed life insurance policy within a specified period of time with proof of insurability?

Reinstatement

What are policy dividends?

Return of unused premiums

What type of beneficiary can be changed at any point by the policyowner?

Revocable

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

Settlement options

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

What happens to a policy's cash value under an extended term nonforfeiture option?

The cash value is converted to the same face amount as in the whole life policy

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 years premium (it reduces the next years premium

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT A. The beneficiary's life expectancy. B. Projected interest rates. C. Face amount of the policy. D. The insureds age at death

The insureds age at death

What does the term double indemnity mean?

The insurer will pay a benefit of twice the face amount

What does the term double indemnity means?

The insurer will pay a benefit of twice the face amount

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

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

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

The proceeds are paid to the insured's estate

What is the purpose of a free-look period?

To allow the insured to return the policy with a full refund

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

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

What if the purpose of the Automatic premium loan provision

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

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

Waiver of premium

What are the most common exclusions in life insurance policies?

War and military service, hazardous occupation, and aviation

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

When a suicide is committed with a specified period of time after the policy is purchased (usually 2 yr.)

When will a contingent beneficiary receive death benefit from a life insurance policy?

When the primary beneficiary dies before the insured