Life Insurance Policy Provisions, Options & Riders

The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?

The policyowner can specify the way proceeds are split in the policy

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

One-year term option

Which settlement option provides a single beneficiary with income for the rest of his/her life?

Single Life

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

A policyowner has a $10,000 term life policy. He paid his annual premium on February 1. He fails to renew the policy and dies on February 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from the policyowner's insurance company?

$9,800

An insured just died. The insured's beneficiary promptly sent the insurer proof of death. According to Arizona law, this insurer may now establish a period of time during which the settlement will be made. What is the greatest amount of time the insurer can mandate for this particular period?

2 months

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Common Disaster Clause

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the original policy for as long as the cash values will purchase

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

Guaranteed Insurability

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the

Incontestability clause

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

The insured's contingent beneficiary

Which of the following is NOT a standard exclusion, included in most life insurance policies?

A policy issued following a misstated age

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Becomes terminally ill

Which of the following is TRUE about a class designation?

Beneficiaries are not identified by name

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider

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?

Pay the death benefit

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit

Life insurance policies that have cash value must provide for a maximum policy loan interest rate of no more than

8% per annum

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

Cost of Living Rider

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed Period

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium

When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value?

Outstanding loans and interest

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid-up Option

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

Policy owner

All of the following are beneficiary designations EXCEPT

Specified

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

Universal Life

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

The insured's premiums will be waived until she is 21

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time

What type of insurance would be used for a Return of Premium rider?

Increasing Term