EXCEL Life Policies, Provisions, Premiums, Underwriting

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 to P's beneficiary?

$50,000 minus any outstanding policy loans

Additional coverage can be added to a Whole Life policy by adding a(n)

Decreasing term rider

Issued by the insurer

Dividends paid from a life insurance policy are...

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

Extended term. This is often the DEFAULT nonforfeiture option in the event on non-payment of premiums.

Payor Clause

Guarantees premiums waived if a juvenile life policyowner becomes disabled

True statements concerning Settlement Option

Increased proceeds can be provided through accumulation of interest, rapid depletion of proceeds can be avoided, proceeds can be administered by the insurance company

Insuring Clause

Insurer's basic promise to pay

Decreasing Term

May not have the automatic premium loan provision attached to it

Automatic Policy Loan

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?

Beneficiaries Age. (what matters: type of life insurance, S's age, dividend amount used toward purchase)

S would like to use dividends from her life insurance policy to purchase paid-up additions. What factor does NOT determine how much coverage can be purchased

Straight

Straight

Decreasing

The combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy

Decreasing Term

The conversion period varies according to the contract with ________ Life insurance

Term

The conversion period varies according to the contract with ________ Life insurance

Upon receipt of the policy by the policyowner

The free-look provision begins

Life income

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Automatic Policy Loan

Will keep a whole life policy in force if a required premium payment is not made and there is sufficient cash value

0%

______ % of life insurance premiums is usually deductible for federal income tax purposes

Collateral Assignment

a life insurance policy may be used as collateral for a bank loan

Accumulate Interest Option

a policyowner may generate taxable income

What can be found in the entire contract clause or provision at the beginning of the policy

a statement that the application is considered part of the contract

Cost of Living Rider offers

additional death benefits

Extended Term Option offers the

highest death benefit (coverage is equal to death benefit)

Term Riders

may be used to include coverage for children under their parents' life insurance policy

Guaranteed Insurability Rider (future increase option)

permits the policyowner to buy additional permanent life insurance coverage at predetermined intervals without submitting proof of insurability

Grace

the purpose of the ______ period is to avoid an unintentional lapse of a life insurance policy

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. What statement made by the producer is correct?

20-Pay Life accumulates cash value faster than Straight Life

Waiver of Premium

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached

Reduced Premiums Option

A nonforfeiture option that continues to build-up cash value. This is a rear-end loaded provision and deducted when the policy is discontinued.

Consideration Clause

A policyowner must pay a premium in exchange for the insurer's promise to pay benefits.

Taxed as ordinary income

A statement about accumulated interest earned on dividends from an insurance company

With this rider, the policyholder can receive the benefits before death (living benefits)

Accelerated Benefits Rider

Decreasing Term Rider

Additional coverage can be added to a Whole Life policy by adding a(n):

Extended Term

Allows the policyowner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole-life policy

Long Term Care

An insured's inability to perform two or more activities of daily living.

6 months

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

Extra premium

An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with a(n)

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

Additional Whole Life coverage at specified times

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

Provides coverage for a child under a parent's life insurance policy

Child Term Rider

Extended Term

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. What is incorrect about reinstating this policy

The policyholder will forfeit the right to use the automatic loan provision upon reinstatement

What is the advantage of reinstating an original life policy?

The premiums are based on a younger age

Policy Loan Provision

These loans, with interest, cannot exceed the guaranteed cash value

This type of life policy combines investment choices with a form of term coverage

Variable Universal Life

Values held in these separate accounts are invested in riskier, but potentially higher yielding assets than those in general accounts

Variable Whole Life Insurance

Inform insurer of relevant information not included on the application

What action should a producer take when submitting an insurance application to an insurer?

Automatically add the amount of interest due to the loan balance

What action will an insurer take if an interest payment on a policy loan is not made on time?

Insurer's basic promise

What does the insuring agreement in a Life insurance contract establish?

Life income (it is extended term, reduced paid-up, or cash surrender)

What is NOT an example of a Nonforfeiture option?

Reduced Paid-Up option

What is an example of a nonforfeiture option?

Variable Life

Which life insurance policy allows the policyowner to have level premiums and to also choose from a selection of investment options?

Decreasing Term Rider

adds an additional decreasing death benefit for a predetermined amount of time at a predetermined cost to the existing face value a permanent policy

Guaranteed Insurability Option

allows the insured to purchase specific amounts of additional insurance at specific times without proving evidence of insurability

Term Riders

an economical way to add a large amount of additional insurance to a permanent life insurance policy