Quiz: Life Insurance Policy Provisions, Riders, and Options

Collateral Assignment

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 loans. The business owner decided to use her $250,000 LI policy to secure the loan. Which provision makes this possible?

Cost of Living Rider

A rider that may be attached to a LI policy that will adjust the face amount based upon specific index, such as CPI, is

DB smaller

Accelerated benefits have what size DB

Original age is used for premium determination

Advantage of reinstating a policy instead of applying for a new one?

Monthly premium waiver and monthly income

After 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? (Length of pre, length of income)

Refund the premiums paid

An insured died by suicide one year after the LI policy was issued. The insurer will

Paid-up additions

An insured has a LI policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the DB. The dividend option that the insured has chosen is

Pay the DB

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?

Cash option

Annual dividend check

Grace Period

Automatic premium loan provision is activated at the end of the

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

Fixed-period settlement option

6 months

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

6 months

How long an insu company is allowed to defer policy loan requests

Until the beneficiary's death

How long will the beneficiary receive payments under the single life settlement option?

Increasing term

Insurance for Return of Premium rider

The insured's age at death

Insured had his wife named as benef of LI. To ensure his wife had income for life after the insured's death, he chose the LI settlement option. The amount of payment will be determined by taking into account all of the following EXCEPT

Incontestability clause

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

Temporary storage of funds for beneficiary

Main purpose of Retained Asset Account

Interest only

Nonforfeiture option EXCEPT

Reduced paid-up

Nonforfeiture option provides coverage for the longest period of time?

Extended Term

Nonforfeiture option with the highest amount of insurance protection?

To purchase a smaller amount of the same type of insurance as the original policy

Paid-up addition option uses the dividend

Universal life

Policy allows for withdrawals or partial surrenders

Conditions for Payment Form

Required for accelerated DB

Payor Benefit

Riders would NOT cause the DB to increase

Lump Sum

Settlement option not chosen by policyowner or beneficiary, which option is used

It provides income the beneficiary cannot outlive

Single Life settlement option

Dividend amounts are guaranteed in policy

True about dividends EXCEPT

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

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

Within 2 years

When is D by suicide following the effective date, is the insurer's liability to refund the premium?

Purchase a single premium policy for a reduced face amount

When whole life policy lapses or surrendered prior to maturity, the cash value can be used to