Life Insurance Policy Provisions
The mode of premium payment refers to
the frequency of the payment
The time period between the date when premium is due and when coverage lapses is called
the grace period
Peggy takes out a $50,000 10-year term policy on herself and names her 2 children, aged 11 and 12, as primary beneficiaries to share equally in the proceeds. How much would each child receive if Peggy should die when the children are aged 19 and 20
$25,000
Which provision of a life insurance policy declares that the application is part of the contract?
Entire contract clause
Which provision of a life insurance policy states that "no statement shall void this policy or be used in defense of a claim under it unless contained in the application"?
Entire contract clause
After an individual life insurance policy has been in effect for 2 years, which of the following is grounds for cancellation?
Nonpayment of premium
Which of the following is NOT required in order to reinstate a lapsed permanent life policy?
Submit an application for reinstatement within 4 years of the lapse
Which is NOT a life insurance policy provision?
cancellation
Roberta is the insured in a $30,000 life insurance policy for which she pays an annual premium of $700. There is an outstanding policy loan of $2,500. Her last premium due has not been paid, and she dies during the grace period. How much will her beneficiary receive?
$26,800
Micah pays $220 annually for a $50,000 life insurance policy. The premium is due June 1, however it is not paid until June 24. If Micah died on June 15, what would the amount of the death benefit?
$49,780
An individual life insurance policy must become incontestable no later than how long after its effective date?
2 years
An insurer may NOT contest an individual life insurance policy after it has been in force for how long?
2 years
What are the 2 types of assignment of rights to another in a life insurance policy?
Collateral and absolute (also known as permanent)
Which section of a life insurance policy specifies the conditions, times, and circumstances under which the insured is NOT covered by the policy?
Exclusions
Jamal's agent delivers his life policy to him on February 5. Until what date can Jamal opt to return his policy and receive a full refund of the premiums paid?
February 15
Which standard life provision allows a policyowner to return a life policy, for any reason, within 10 days of delivery for a full refund of the premium
Free-look provision
Ramon's premium payment was due on June 1, but the company did not receive it until June 28. Which policy provision kept Ramon's policy from lapsing?
Grace period
Which of the following provisions of a life insurance contract generally helps to keep policies in force if policyowners neglect to pay their premiums?
Grace period
Alecia buys a life insurance policy and names her spouse, Max, as a beneficiary. Alecia's children, Rosa and Manuel, are to share the benefits equally if Max dies before her. Her church is to receive the proceeds if her spouse and children predecease her. How would the proceeds of Alecia's policy be distributed if both her children predecease her?
Max would receive 100% of the proceeds
An insured may apply for reinstatement of a life policy within what period of time after voluntarily surrendering the life policy?
Never
If a life insurance policy specifically names a beneficiary other than the insured's estate, what recourse may the creditors of the deceased insured take to attach the policy proceeds?
Nothing, because life insurance proceeds are exempt from the claims of the deceased insured's creditors as long as there is a named beneficiary other than the insured's estate
What can a policyowner do if 9 days after an individual life insurance policy is delivered, he decides not to keep it?
Return it for a full refund of premiums
Which of the following policyowner rights relates directly to the cash value of permanent insurance?
Right to take a policy loan
Which of the following statements pertaining to reinstating a life insurance policy is NOT correct?
The cash surrender value must be forfeited to the insurer.
Which of the following phrases best describes a life insurance policy under the entire contract clause?
The policy, any amendments or riders, and a copy of the signed application
What is the insurer's consideration or exchange of value regarding an insurance policy?
To pay death benefits to the beneficiary when the insured dies.
Which of the following statements about the reinstatement of individual life insurance policies is NOT correct
To reinstate a policy, the insured is never required to provide evidence of insurability.
Which of the following causes of death is generally NOT covered by a life insurance policy?
War
Individual life insurance policies must include all of the following provisions EXCEPT
a conversion provision
An individual life insurance policy must contain all of the following provisions EXCEPT
accelerated benefit
To have an individual life insurance policy reinstated, a person must do all of the following EXCEPT
agree to a new policy without another reinstatement provision
All of the following are standard modes of premium payments EXCEPT
biennially
Alexandria assigns her $10,000 life insurance policy to a bank as collateral for a loan. The assignee is
the bank
All of the following are required provisions in an individual life insurance contract EXCEPT
home health care
Edna stopped paying premiums on her permanent life insurance policy 7 years ago, though she never surrendered it. She is still insurable and has no outstanding loan against the policy. The company will probably decline to reinstate the policy because the time limit for reinstatement has expired. The limit is
3 years
Which of the following statements pertaining to reinstatement of a life insurance policy is CORRECT
A new contestability period is renewed with a reinstated policy.
Which of the following statements is CORRECT?
After a policy is delivered to and accepted by the policyowner, it cannot be changed in any way, except in accordance with terms stated in the contract.
Which of the following statements pertaining to the suicide clause in a life insurance policy is NOT correct
An insured with a $75,000 life insurance policy issued December 15 commits suicide two years later, on December 24th The beneficiary of the policy will receive a return of the premiums paid for the policy
A beneficiary receives the proceeds from a life insurance policy in a lump-sum payment. Which of the following statements best explains how the proceeds will be treated in relation to the debts of the beneficiary?
It can be subject to the beneficiary's debts and creditors.
In which of the following cases would the insurance company most likely cover the loss under a life insurance policy?
Joe, a retired army general, dies of a heart attack at age 85.
John purchased a life insurance policy with a $250,000 death benefit at age 32. When John died the insurer discovered that he was really 25 years old at the time of application. How much will the beneficiary receive?
The death benefit will be increased according to how much coverage the premium John paid would have purchased had he reported his correct age.
What action will an insurer take if it learns that a deceased life insurance policyholder was actually older than the insurer had believed?
The face amount will be lowered to reflect the proper amount based on the correct age.
Which of the following statements regarding trusts in life insurance is NOT correct
The grantee is the party that manages a trust.
While Debby was out of the country on vacation, she forgot to pay her life insurance premium, missed the grace period and wants to reinstate her policy. Which of the following is NOT a condition of reinstatement?
assignment of a new beneficiary
After Joe died, Well Life Insurance Company discovered that he had misrepresented his health status when he applied for a life insurance policy 7 years ago. The insurer
cannot void or revoke the policy
When a policyowner cannot exercise her rights of ownership without the policy beneficiary's consent, the beneficiary is designated
irrevocable
The best reason for designating a trust as a life insurance policy beneficiary is to
make it possible to manage the policy proceeds for the long-term benefit of an individual or organization
Nicole plans to take out a $200,000 mortgage for a vacation home. Her bank, however, requires her to provide some type of collateral for the loan. If Nicole owns a $500,000 whole life insurance policy, the policy
may be used as collateral for the loan
Which life insurance policy provision refers to the prompt payment of the death benefit?
payment of claims
The purpose of the common disaster provision is to
protect the interests of the contingent beneficiary
Premium payment amounts can be all of the following EXCEPT
static
Which of the following is NOT a part of what constitutes the entire contract?
the invoice for first month's premium
The policy provision that permits the insurer to adjust benefits because of an incorrect age is
the misstatement of age provision
All of the following are rights of policy ownership EXCEPT
to determine the method of submitting claims
A lapsed life insurance policy may be reinstated if all of the following requirements are met EXCEPT
waiting 7 years after the premium default date to reinstate
If a life insurance policy lapses for nonpayment, within how many years from the date of premium default may the policy be reinstated?
3 years
The insurer is generally required to pay the death benefit claim within
60 days
What happens if a claim arises during the grace period of an individual life insurance policy?
Benefits will be paid, but unpaid premiums can be deducted from the policy proceeds.
All of the following are life insurance policy provisions EXCEPT
notice of claim
The purpose of the incontestability provision is to protect
the insured
Under a common disaster clause in a life insurance policy, it is assumed that
the insured died last, unless the primary beneficiary lives beyond a stipulated period
Tina's grandparents purchased a $250,000 universal life insurance with the intent to permanently transfer ownership to her when she turned 21. What is that transfer of rights known as?
an absolute assignment
Which provision sets forth the insurer's basic promise to pay benefits upon the insured's death?
Insuring clause
Which of the following statements about the spendthrift clause is NOT correct
It gives the beneficiary the right to use the death benefit as collateral for a loan.
When the insured and the beneficiary in a life insurance policy die simultaneously, how must the proceeds of the policy be distributed?
As if the insured had survived the beneficiary
When a life insurance beneficiary is revocable,
the policyowner can change that beneficiary at any time with written notice
What happens if, when paying benefits, the insurer discovers that a person's age had been misstated on his individual life insurance application?
Benefits will be paid for the amount of coverage the premium would have purchased at the correct age.
Which of the following statements pertaining to life policy assignment is NOT correct
The policyowner must obtain approval from the insurance company before a policy can be assigned.
A life insurance policyowner has all of the following rights EXCEPT
the right to change the grace period
The contract provision that states that the policy, a copy of the application, and any attached papers constitute the complete insurance contract is the
entire contract provision
Which of the following causes of death would most likely be covered in a life insurance policy issued today, though for many years it was typically excluded from coverage?
A fare-paying passenger is killed in a commercial airplane crash while flying to visit a relative.
Winston, the insured, and his spouse, Irene, his sole beneficiary, both died in a hotel fire. Hospital physicians witnessed that Irene lived at least 2 hours longer than Winston. The life policy had no common disaster clause. Which of the following will receive the policy proceeds?
Irene's estate
Which of the following best describes the basic purpose for the facility-of-payment clause found in some life insurance policies?
It authorizes the insurer to designate the payee of the life insurance death benefits if the designated beneficiary cannot be located.
Abner's age was misstated in his application for a $50,000 life policy. What will the company do when it discovers the error?
It will adjust either the premium rate or the amount of protection.
All of the following policyowner rights contribute to the flexibility of a life insurance policy EXCEPT
classification of the applicant
The significance of a free-look provision is that it
provides life insurance policyholders with the right to return their policies for any reason within 10 days of delivery for a full refund of premiums
Individual life insurance policies can exclude benefits if death occurs as a result of any of the following EXCEPT
suicide, if within 5 years from the date of policy issue
All of the following statements regarding the insuring agreement are true EXCEPT
the agent or producer must sign the clause
The incontestability period is usually
the same for both individual and group life insurance policies
The death benefit proceeds of a life insurance policy are protected from the beneficiary's creditors unless
they are paid out in a lump sum
Which of the following statements pertaining to the spendthrift clause in a life insurance policy is NOT correct
A beneficiary receives $125 per month from a life policy under the fixed-amount settlement option and a spendthrift clause. The beneficiary may have the company send the payments to a creditor to pay off a debt.
In which of the following cases would the insurance company most likely cover the loss under a life insurance policy?
During a cross-country flight to a shareholders' meeting, Judy's commercial airliner suffers engine failure and crashes with no survivors.
Which of the following statements regarding the grace period for life insurance is NOT correct
It is usually shorter than 30 days.
Which of the following statements regarding the insuring clause is NOT correct
It is usually signed by the insured.
Which of the following statements pertaining to the insuring clause in a life insurance policy is NOT correct
It specifies the length of the grace period.
Which of the following terms indicates the insured's right to change beneficiaries in a life insurance policy?
Revocable
Endorsements or modifications to a contract
must be in writing and agreed to by both the insurer and the policyowner
To reinstate a lapsed policy, the insured must do all of the following EXCEPT
sign a Notice to the Applicant Regarding Replacement
Roland purchases a life insurance policy and names his spouse, Carol, as a beneficiary. Roland's children, Sasha and Alex, are to share the benefits equally if Carol dies before him. His church is to receive the proceeds if his spouse and children all predecease him. The primary beneficiary is
Carol
Ted, the insured in a $75,000 life policy, and his sole beneficiary, Maxine, are killed instantly when their car is struck by a train. Under the Uniform Simultaneous Death Act, to whose estate will the policy proceeds be payable?
Ted's estate
Which of the following is stated in the consideration clause of a life insurance policy?
The amount and frequency of premium payments
Janet, the insured, dies during a grace period for her $50,000 life policy. What happens, considering that her premium has not been paid?
The amount of the premium due is deducted from the policy proceeds paid to the beneficiary.
Who must sign endorsements, modifications, or any other changes to a life insurance contract?
an executive officer of the company
All of the following are required provisions of group life insurance policies EXCEPT
an individual policy contract
If the insured and the beneficiary of the insured's life insurance policy both die simultaneously, the policy proceeds will be distributed
as if the insured had survived the beneficiary
A new life insurance policyowner has just received her policy. How long does she have to review and return it if she is not satisfied with it?
10 days
The free look, or right to examine provision allows a policyowner the right to review and then return a policy for a full refund within no less than how many days?
10 days
Vivian commits suicide 4 years after taking out a $100,000 life insurance policy on herself. Her beneficiary is concerned that the death claim will be denied. Which of the following statements is NOT correct
The company has definite proof of the cause of her death, so it can refuse to pay the death benefit.
Which of the following statements about reinstating an individual life insurance policy is CORRECT
The insured must pay all back premiums with interest premium loans before the policy can be reinstated.
A life insurance policy must give the policyowner at least how many days after delivery of the policy to cancel the policy?
10 days
A policy's grace period is usually no more than
31 days
Henry owns a variable life insurance policy in which his spouse, Colin, is the primary beneficiary. His children, Jacob and Charlotte, are equal secondary beneficiaries. The American Red Cross and his alma mater are listed as equal tertiary beneficiaries. If both Colin and Jacob predecease Henry, how will the policy's death benefit be distributed at Henry's death?
Charlotte will receive 100% of the death benefit.
Kevin, the insured in a $200,000 life insurance policy, and his sole beneficiary, Lynda, are killed instantly in a car accident. Under the Uniform Simultaneous Death Act, to whose estate will the policy proceeds be paid?
Kevin's estate
Suppose a whole life insurance policy was issued on August 3. On August 31 two years later, the insured committed suicide. What action will the insurer probably take?
Pay the policy's face amount
Which of the following is a required provision in all individual life insurance policies?
Reinstatement
Who designates the beneficiary of a life insurance policy?
The policyowner
An assignment in which the assignee receives full control over the policy is called
an absolute assignment
Death benefits paid out to a beneficiary may NOT be protected from the insured's creditors
if the beneficiary is the insured's estate
When Mary applied for a life insurance policy, she did not disclose that she had just been treated for cancer 3 months ago. In addition, Mary intentionally misstated her age so that her premiums would be lower. If the insurer issues the policy but discovers the misrepresentations 1 year later,
the insurer can challenge the validity of the contract
Samiya purchased a $500,000 life policy from LHC Insurance Company at the age of 35. At her death the insurance company discovered that her primary beneficiary was older than Samiya had stated on the application. How much will Samiya's beneficiary receive?
$500,000
All individual life insurance policies must include a reinstatement provision providing that the policy can be reinstated at any time within how many years from the date of premium default?
3 years
An insured that wants to reinstate a lapsed permanent life policy must do so within
3 years
Joshua's insurance agent delivered his new term life policy to him. Three days later Joshua changed his mind—he no longer wanted the life policy and returned it to his agent. Joshua had paid the initial premium. Under the free-look provision, what is Joshua entitled to receive?
A full refund of the initial premium
Which of the following statements pertaining to reinstatement of a life insurance policy is NOT correct
A suicide exclusion period is renewed with a reinstated policy.
An exchange of value, consideration, is necessary to form a valid contract. Whose consideration is it, in a contract for insurance, to make truthful statements on an application?
The insured
A provision in a policy that expressly cites a risk that is NOT covered is known as
an exclusion
All of the following are rights of policy ownership EXCEPT
changing a policy provision with the agent's approval
Jerry has just purchased a life insurance policy and is taking time to review the policy's provisions. He will find that his policy excludes death by all of the following means EXCEPT
cancer
The provision that allows a person to select the premium payment mode, settlement options, borrow cash values that have accumulated or cancel the policy is known as
the ownership rights provision
The beneficiary on Lina's life insurance policy is listed as "children of the insured." Which of the following terms best describes this type of beneficiary designation?
Class beneficiaries
The payment of claims provisions states that the insurer will pay the death benefit within how many days after receiving notification of the claim?
60 days
Clarence, the insured, designated his estate as the beneficiary of his life insurance policy. Which of the following statements is CORRECT?
Clarence's creditors can make claims against the proceeds more readily than if the proceeds were paid to named beneficiaries.
Winnie is insured under a life insurance policy. She designates "all natural children of the insured" as beneficiaries in her life insurance policy. Which of the following phrases best describes this type of beneficiary designation?
Class beneficiaries
In which of the following circumstances would the incontestable clause of an insurance policy apply?
Concealment of smoking
An exchange of value is necessary to form a valid contract. What is the legal term that means something of value?
Consideration
If an individual life insurance policy contains a spendthrift provision, the policy can prohibit the beneficiary from taking all of the following actions EXCEPT
receiving equal installment payments under the policy
What happens if the insurer discovers that the insured's age was accidentally misstated on an application for an individual life insurance policy?
Benefits will be calculated according to how much coverage the premium paid would have purchased for the correct age.
When the insured dies, who stands first to receive the life policy's death benefit?
The primary beneficiary
All of the following are required provisions in life insurance policies EXCEPT
a replacement provision
Which of the following statements about life insurance is NOT correct
A policyowner must notify the beneficiary before transferring ownership.
What type of beneficiary on a life policy can only be changed with the written consent of that individual beneficiary?
Irrevocable
Ron, the insured, dies during the grace period for his $100,000 life insurance policy. Considering that the premium on the policy has not been paid, what happens?
The amount of the premium is deducted from the policy proceeds paid to the beneficiary.
An individual life insurance policy must include all of the following EXCEPT
a table showing the annual loan values of the policy for at least 30 years
Stella sends a written request to her insurer for a change to be made on her policy. What is that change called?
an endorsement
Which type of provision in a life insurance policy ensures that a beneficiary will not spend all of the insurance proceeds at once?
Spendthrift provision
With respect to life insurance policy beneficiaries, all the following are examples of a class designation EXCEPT
my sister Mimi and my nephew Rodolfo