Life Insurance Policy Provisions, Options, and Riders
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100,000
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. How much will the beneficiary receive from the policy?
$200,000
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 waiting period on a Waiver of Premium rider in life insurance policies?
6 months
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance.
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?
A minor son of the insured
A policyowner fails to pay the premium due on his whole life policy after the grace period, but the policy remains in force. This is due to what provision?
Automatic premium loan
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
What limits the amount that a policyowner may borrow from a whole life insurance policy?
Cash value
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
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
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called
Cost of living rider
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
All of the following are features requirements of the Living Needs Rider EXCEPT
Diagnosis must indicate that death is expected within 3 years.
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.
All of the following are dividend options EXCEPT
Fixed-period installments
An individual is purchased 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
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value.
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
If the father is disabled for more than 6 months.
An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceases the insured
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die.
What type of insurance would be used for a Return of Premium rider?
Increasing Term
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest
All of the following are Nonforfeiture options EXCEPT
Interest only
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term
Which of the following statements about the reinstatment provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary?
It will decrease the benefits paid to the beneficiary.
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount.
Which of the following settlement options in life insurance is known as straight life?
Life income
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 benefit
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider
Which of the following allows the insurer to relieve a minor insured form premium payments if the minor's parents have died or become disabled?
Payor benefit
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium
An insured died by suicide one year after the life insurance policy was issued. The insurer will
Refund the premiums paid.
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy?
Return of premium
Which of the following describes attachments made to policies that either add or modify coverage?
Riders
All of the following are beneficiary designations EXCEPT
Specified
Which if NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured.
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to
The insured's estate.
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.
Which is true about a spouse term rider?
The rider is usually level term insurance.
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 has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
What kind of policy allows withdrawals or partial surrenders?
Universal life
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 is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
War or military service