Life Insurance Policy Provisions, Options and Riders

The sole beneficiary of a life insurance policy dies before the insured. If the Policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate

Which of the following settlement options in life insurance is known as straight life?

life income

Which of the following is NOT typically excluded from life policies?

Death due to plane crash for a fare-paying passenger

Which of the following is TRUE about a policy assignment?

It transfers rights of ownership from the owner to another person

Which of the following riders would NOT cause the death benefit to increase?

Payor Benefit rider

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from charging or borrowing from the planned installments?

Spendthrift provision

If the Policyowner, the insured, and the beneficiary are three different people, who has the ownership rights?

Policyowner

An insured has 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?

$9,800

Which of the following is TRUE about a class designation?

Beneficiaries are not identified by name

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium

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

Increasing term

For how long is an insurance company allowed to defer policy loan requests?

6 months

When a Policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called

Class designation

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

It has the highest amount of insurance protection

Which of the following statements about the reinstatement provision is true?

It requires the Policyowner to pay all overdue premiums with interest before the policy is reinstated

If the 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

An insured purchased a 15 year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. the insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as settlement?

$200,000

A provision in a life or health insurance policy that may assist an insurance company in determining the cause of death of an insured is called

autopsy

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?

2 years

The automatic premium loan provision is activated at the end of the

Grace period

A Policyowner fails to pay the premium due on his whole life policy after the grade period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan

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

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

Interest

All of the following are nonforfeiture options EXCEPT

Interest only

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 cash value would buy as a single premium

If a settlement option is not chosen by the Policyowner or the beneficiary, which option will be used?

Lump sum

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

A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury is called

accelerated benefit provision

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in

adjustment in the amount of death benefit

Under an extended term nonforfeiture option, the policy cash value is converted to

the same face amount as in the whole life policy

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?

$50,000

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

What is the waiting period on a waiver of premium rider in life insurance policies?

6 months

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

Using a class designation for beneficiaries means

Naming beneficiaries as a group

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

Outstanding loans and interest

Items stipulated in the contract that the insurer will not provide coverage for are found in

Exclusions clause

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

What kind of policy allows withdrawals or partial surrenders?

Universal life

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of an insured's death?

a minor son of the insured

All of the following are true regarding insurance policy loans EXCEPT

policy loans can be made on policies that do not accumulate cash value

If a life insurance policy has an irrevocable beneficiary designation,

the beneficiary can only be changed with written permission of the beneficiary

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

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life

All of the following statements concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term

The Policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that principal will be paid to their children when they reach a certain age. Which settlement option should the Policyowner choose?

Interest only option

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

If a policy has an automatic premium loan prevision, 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

Upon the death of the insured, the primary benefit discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will only receive payments of the interest earned on the death benefit

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

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