Life Insurance Policies- Provisions, Options, and Riders Ch. 3
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 $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
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application ask 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
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment rider (AD&D)
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
Additional coverage can be added to a Whole Life policy by adding a(n)
Decreasing term rider
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
D is the policyowner and insured for a $50,000 life insurance policy. The 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
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
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 Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest Only
The Accelerated Death Benefit provision in a life insurance policy is known as a(n)
Living Benefit
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?
Owner's Rights
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants and increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
Which of these provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled?
Payor Clause
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled?
Payor clause
Which of these Nonforfeiture Options continue to build-up cash value?
Reduced Paid-Up
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 type of life policy contains a monthly charge as well as self-directed investment choices?
Variable Universal Life
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
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 policy owner is entitled to
What action can a policy owner take if an application for a bank loan requires collateral?
assign policy ownership to the bank
P died 5 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
Whose life is covered on a life insurance policy that contains a payor benefit clause?
child
Which statement regarding the Misstatement of Age is considered to be true?
coverage will be adjusted to reflect the insured true age if a misstatement of age is discovered
The face value of a endowment policy paid to the beneficiaries in 1 lump sum if the insured dies before maturity of policy
death benefit
What provision in the life insurance policy states that the application is considered part of the contract?
entire contract provision
All of the settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
interest only
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 life insurance rider typically appears on a Juvenile life insurance policy?
payor benefit rider
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 provisions require proof of insurability after a policy has lapsed?
reinstatement
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S died 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
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole Life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
the full face amount
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
void the policy only if it's during the Contestable period and proven to be material