Life Insurance Policy Provisions, Options, and Riders

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 after10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

Which o 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

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?

The death benefit will be smaller

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

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender

What limits the amount that a policyowner may borrow from a whole life insurance policy?

Cash value

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

Collateral assignment

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the

Entire contract

J applied for a life insurance policy one January 10th. The policy was issued January 31st. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18th. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?

February 28th, or 10 days after the time the policy is delivered

The Ownership provision entitles the policyowner to do all of the following EXCEPT

Set premium rates

Which is true about a spouse term rider?

The rider is usually level term insurance

Which of the following statements is TRUE concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary

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

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

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

An insured committed suicide one year after his life insurance policy was issued. The insurer will

Refund the premiums paid

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?

Reinstatement provision

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income

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

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

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

Which of the following applies to the 10-day free-looking privilege?

It permits the insured to return the policy for a full refund of premiums paid

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

Which of the following statements is TRUE about a policy assignment?

It transfers rights of ownership from the owner to another person

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount

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

Single life

The interest earned on policy dividends is

Taxable

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

The contingent beneficiary