Life Insurance Policy Provisions, Options, and Riders Exam FX

What are the five riders affecting the death benefit

Accidental Death Guaranteed Insurability Cost of Living Return on Premium Accelerated (living) benefit

Pays multiple of the face amount if death is the result of an accident as defined in the policy.

Accidental death rider

A person's essential activities that include bathing, dressing, eating, transferring, toileting, continence

Activities of daily living (ADLs)

When adding, if the insured and the primary beneficiary dies in common disaster it is presumed that the primary beneficiary died first so the proceeds are paid to __.

Common Disaster Clause Contingent beneficiary or insured's estate

A beneficiary who has second claim to the policy proceeds after the death of the insured (usually after the death of the primary beneficiary)

Contingent beneficiary

Addresses inflation factor by automatically increasing the amount of insurance without evidence of insurability

Cost of living rider

Face value of policy may be increased by a cost of living factor tied to an inflation index such as the consumer price index (CPI)

Cost of living rider

A decision about how the cash value in the policy should be protected, how excess premium will be invested, and how payments will be made.

Options

By the bloodline distributes the benefits of a beneficiary who died before the insured to the beneficiary's heirs

Per Stripes

___ are only available in policies that have cash value (whole life)

Policy Loans

The manner or frequency that the policyowner pays the policy premium

Premium Mode

Misstatement of age on the application will result in adjustment of __ or __.

Premium or benefits

A beneficiary who has the first claim to the policy proceeds after the death of the insured

Primary beneficiary

the face value of the policy; the original amount invested before the earnings

Principal amount

Assignment is a

Provision

Written modifications attached to a policy that provide benefits not found in the original policy.

Riders

Policy Maturity

Settlement

What option type has the following options available 1. Cash (Auto) 2. Life Income 3. Interest Only 4. Fixed Period 5. Fixed Amount

Settlement

___ are the methods used to pay the death benefits to a beneficiary upon the insured's death, or to pay the endowment benefit if the insured lives to the endowment date.

Settlement Options

___ are triggered by the insured's death or age 100

Settlement options

___ can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.

Single Life Option

Proceeds paid to beneficiary in fixed period or fixed-amount installments

Spendthrift

When included, protects beneficiaries from the claims of their creditors, as well as prevents the beneficiary's reckless spending of benefits.

Spendthrift clause

What are three types of riders that covering additional insureds.

Spouse Children Family

The beneficiary designation provides for levels of priority or choice.

Succession

What are four available riders for disability?

1. Waiver of Premium 2. Waiver of Cost 3. Disability Income 4. Payor Benefit

___ assignment is complete and permanent while ___ assignment is partial and temporary

Absolute Collateral

Transfers of rights of policy ownership

Assignment

___ does not change the insured or amount of coverage; it only changes who has the policy ownership rights.

Assignment

Policyowner surrenders policy for current cash value at a time when coverage is no longer needed or affordable

Cash Surrender Value

Need for premium is lower

Dividend Options

Uses policy cash value to convert to term insurance for the same face amount as the former permanent policy

Extended Term

A provision clause that prevents an insurer from denying a claim due to statements in the application after the policy has been in force for __ years regardless of misstatement or concealment

Incontestability; 2

Under ___, the beneficiary would receive the remaining funds in the form of continued annuity payments

Installment Refund Option

Insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.

Interest-only option

An ___ designation may not be changed without the written consent of the beneficiary.

Irrevocable

Cash value - (Unpaid loans + interest) =

Loan Value

Right to Examine (Free Look) is a Hint : Rider, Option, Provison

Policy Provision

Policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a reduced face amount.

Reduced paid-up insurance

An arrangement in which funds or property are held by a person or corporation for the benefits of another person (trust beneficiary)

Trust

What are the parties to the insurance contract?

1. Policyowner 2. Insurer/Insurance Company 3. Beneficiary

Free look period is ___ from policy receipt delivery

10 days

Transferring all rights of ownership to another person or entity.

Absolute Assignment

What are the types of policy assignment?

Absolute and Collateral

Early full or partial payment of policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years.

Accelerated Benefit or living needs rider

Provide funds to take care of necessary medical and nursing home expenses that incur as a result of the terminal illness.

Accelerated benefit or living needs rider

___ protect policyholders from losing insurance coverage if they are late on a premium payment.

Grace Period

Purchase additional coverage at specified future dates or events without evidence of insurability

Guaranteed insurability

Guarantees an income for two or more recipients for as long as they live.

Life income joint and survivor

Recipient is provided with the best of both worlds in terms of lifetime income and guaranteed installment period.

Life income with period certain option

___ and ___ Guarantee total annuity fund will be paid out to the annuitant or to the beneficiary

Life refund income Cash refund

____/___ provides the recipient with an income that he or she cannot outlive.

Life-income option/Straight life

An organization composed of insurance commissioners from all 50 states, the District of Columbia and 5 U.S. territories, formed to resolve insurance regulatory issues

National Association of Insurance Commissioners (NAIC)

What option type has the following options available 1. Reduced paid-up 2. Extended Term (auto) 3. Cash

Nonforfeiture

What option type is in regards to permanent policies having cash values have guarantees built into the policy that cannot be forfeited by policy owner

Nonforfeiture

What are the three types of options?

Nonforfeiture Dividend Settlement

Cash surrender value, reduced paid-up insurance, and extended term are all types of

Nonforfeiture options

____ are triggered by a policy surrender or lapse

Nonforfeiture options

Policy Lapses

Nonforfeture

Offer insurers and insureds ways to invest or distribute a sum of money available in a life policy.

Options

Provides coverage for one or more family members other than the insured

Other Insured Rider

Among ___ are naming and changing the beneficiary, receiving the policy's living benefits, selecting a benefit payment options, and assigning the policy.

Ownership rights

Stipulates when premiums are due and how often they are to be paid and to whom

Payment of Premiums

Primarily used with juvenile policies, in the event the payor becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age.

Payor benefit

By the head, evenly distributes benefits among the living beneficiaries

Per Capita

Stipulate the rights and obligations of an insurance contract and are fairly universal from one policy to the next.

Provisions

This provision allows a lapsed policy to be put back in force usually within a max of __ years after policy lapse.

Reinstatement; 3

Implemented by using increasing term insurance

Return of premium

Provides that at death prior to a given age, beneficiary can receive original face amount plus premiums previously paid

Return of premium rider

The policyowner without consent or knowledge of the beneficiary may change a ___ designation at any time.

Revocable

Modify provisions that already exist and are used to increase or decrease policy benefits and premiums.

Riders

Can be used as estate planning, most commonly used for minor or to create a scholorship

Trusts

____ If the insured and primary beneficiary died in same accident (can't tell who first), the policy proceeds are to be distributed as if the ___ died first.

Uniform Simultaneous Death Law Primary Beneficiary

The waiver of cost of insurance (or waiver of monthly deductions) riders is found in ___ life insurance.

Universal Life

Waives the premium for the policy if the insured becomes totally disable after a waiting period.

Waiver of Premium rider

This rider waives the cost of the insurance and other expenses, but doe snot waive the cost of premiums necessary to accumulate cash values.

Waiver of cost of insurance

A special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.

Automatic Premium Loss

Under ___ the annuitant dies before the annuity fund is depleted, a lump sum settlement of the remainder would be made to the beneficiary

Cash Refund Option

Provide temporary life insurance coverage on all children of the family for one premium

Children's term riders

A ___ of beneficiary is using a designation such as "my children"

Class

Transfer of partial rights to another person.

Collateral Assignment

___ Provides benefits in the event of the insured's disability, while other riders provide for partial partial payment of the death benefit priori to the insureds death called ____

Disability Riders Accelerated/Living benefits riders

With this rider, in the event of disability the insurer will waive the policy premiums and pay a monthly income to the insured.

Disability income benefit

___ are a return of excess premiums; therefore not taxable when paid to the policyowner

Dividend Opiton

What option type has the following options available 1. Cash 2. Reduction of Premium 3. Accumulation of Interest 4. Paid-Up additions (auto) 5. Paid Up insurance 6. One-year term

Dividend options

The ___ provision stipulates that the policy and a copy of the application along with any riders or amendments, constitute the ___.

Entire Contract Entire Contract

If no beneficiary is named or all pass, policy proceeds go to the insured's ___

Estate

The most common ___ found in life insurance policies are aviation, hazardous occupation, and war and military service

Exclusions

The types of risks the policy will not cover

Exclusions

___ is the automatic nonforfeiture option: same face amount, shorter term of coverage.

Extended term

Spouse term + Children's term =

Family Term

A specified period of years is selected and equal installments are paid to the recipient

Fixed period installment or period certain

The common disaster clause protects the ___

contingent beneficairy

During ___ the policyowner is required to pay all back premiums plus interest, and may be required to repay outstanding debt

reinstatement

A policy that has been ___ cannot be reinstated

surrendered