Unit 7: Life Insurance Policy Provisions

Janet, the insured, dies during a grace period for her $50,000 life policy. What happens, considering that her premium has not been paid?

the amount of the premium due is deducted from the policy proceeds paid to the beneficiary

What action will an insurer take if it learns that a deceased life insurance policyholder was actually older than the insurer had believed?

the face amount will be lowered to reflect the proper amount based on the correct age

The time period between the date when premium is due and when coverage lapses is called

the grace period

Which of the following statements regarding trusts in life insurance is NOT correct?

the grantee is the party that manages a trust

Under a common disaster clause in a life insurance policy, it is assumed that

the insured died last, unless the primary beneficiary lives beyond a stipulated period

Which of the following statements about reinstating an individual life insurance policy is CORRECT?

the insured must pay all back premiums with interest premium loans before the policy can be reinstated

The provision that allows a person to select the premium payment mode, settlement options, borrow cash values that have accumulated or cancel the policy is known as

the ownership rights provision

Who designates the beneficiary of a life insurance policy?

the policyowner

When a life insurance beneficiary is revocable,

the policyowner can change that beneficiary at any time with written notice

John leaves his $300,000 estate to his 3 children to split equally according to a per capita distribution. One of his children dies before John does. Upon John's death, which of the following statements is TRUE?

the proceeds are split 2 ways between the remaining children only

Which of the following causes of death is generally NOT covered by a life insurance policy?

war

Which of the following is allowed when policy proceeds are being paid through a spendthrift clause?

The proceeds are paid directly to the beneficiary in monthly installments

An insured and the primary beneficiary died in a car accident. Which of the following states that the primary beneficiary died first unless there is evidence to the contrary?

The uniform simultaneous death act

Tina's grandparents purchased a $250,000 universal life insurance with the intent to permanently transfer ownership to her when she turned 21. What is that transfer of rights known as?

an absolute assignment

Stella sends a written request to her insurer for a change to be made on her policy. What is that change called?

an endorsement

If the insured and the beneficiary of the insured's life insurance policy both die simultaneously, the policy proceeds will be distributed

as if the insured has survived the beneficiary

What happens if the insurer discover that the insured's age was accidentally misstated on an application for an individual life insurance policy?

benefits will be calculated according to how much coverage the premium paid would have purchased for the correct age

All of the following are standard modes of premium payments EXCEPT

biennially

Jerry has purchased a life insurance policy and is taking time to review the policy's provisions. He will find that his policy excludes death by all of the following means EXCEPT

cancer

After Joe died, Well Life Insurance Company discovered that he had misrepresented his health status when he applied for a life insurance policy 7 years ago. The insurer

cannot void or revoke the policy

in which of the following cases would the insurance company most likely cover the loss under a life insurance policy?

during a cross-country flight to a shareholders' meeting, Judy's commercial airliner suffers engine failure and crashes with no survivors

Which clause identifies the components of the contract?

entire contract clause

Which provision of a life insurance policy declares that the application is part of the contract?

entire contract clause

The contract provision that states that the policy, a copy of the application, and any attached papers constitute the complete insurance contract is the

entire contract provision

Which section of a life insurance policy specifies the conditions, times, and circumstances under which the insured is NOT covered by the policy?

exclusions

All of the following are designations of beneficiaries EXCEPT

final beneficiary

Which standard life provision allows a policy owner to return a life policy, for any reason, within 10 days of delivery for a full refund of the premium?

free-look provision

Death benefits paid out to a beneficiary may NOT be protected from the insured's creditors

if the beneficiary is the insured's estate

Which clause contains the basic promise of the life insurance company to pay a specified sum of money to a beneficiary upon the death of the insured?

insuring clause

What type of beneficiary on a life policy can only be changed with the written consent of that individual beneficiary?

irrevocable

Which of the following statements about the spendthrift clause is NOT correct?

it gives the beneficiary the right to use the death benefit as collateral for a lon

Which of the following statements regarding the grace period for life insurance is NOT correct?

it is usually shower than 30 days

Which of the following statements regarding the insuring clause is NOT correct?

it is usually signed by the insured

Endorsements or modifications to a contract

must be in writing and agreed to by both the insurer and the policyowner

Suppose a whole life insurance policy was issued on August 3. On August 31 the insured committed suicide. What action will the insurer probably take?

pay the policy's face amount

Which life insurance policy provision refers to the prompt payment of the death benefit?

payment of claims

The purpose of the common disaster provision is to

protect the interests of the contingent beneficiary

What can a policy owner do if, 9 days after an individual life insurance policy is delivered, he decides not to keep it?

return it for a full refund of premiums

Which of the following terms indicates the insured's right to change beneficiaries in a life insurance policy?

revocable

If the named beneficiaries cannot be found, under the facility of payment provision the insurer may

select a beneficiary

Premium payment amounts can be all of the following EXCEPT

static

Individual life insurance policies can exclude benefits if death occurs as a result of any of the following EXCPET

suicide, if within 5 years from the date of policy issue

All of the following statements regarding the insuring agreement are true EXCEPT

the agent or producer must sign the clasuse

Carl purchased a life insurance policy when he was 44. The insurer accidentally recorded his age as 42. When the accident is discovered in a review of the files 5 years later

the coverage will be reduced because the premium is lower than it should have been

All of the following can be named beneficiaries in a life insurance contract EXCEPT

the insured

An exchange of value, consideration, is necessary to form a valid contract. Whose consideration is it, in a contract for insurance, to make truthful statements on an application?

the insured

The purpose of an incontestability provision is to protect

the insured

John leaves his $300,000 estate to his 3 children to split equally according to per stripes distribution. One of his children dies before John does. Upon John's death, which of the following is TRUE?

the proceeds are split 3 ways between the remaining children and the beneficiary of the deceased child's estate

The incontestability period is usually

the same for both individual and group life insurance policies

The death benefit proceeds of a life insurance policy are protected from the beneficiary's creditors unless

they are paid out in a lump sum

What is the insurer's consideration or exchange of value regarding an insurance policy?

to pay death benefits to the beneficiary when the insured dies

A lapsed life insurance policy may be reinstated if all of the following requirements are met EXCEPT

waiting 7 years after the premium default date to reinstate

In which of the following cases would the insurance company most likely cover the loss under a life insurance policy?

Joe, a retired army general, dies of a heart attack at age 85

Abner's age was misstated in his application for a $50,000 life policy. What will the company do when it discovers the error?

It will adjust either the premium rate or the amount of protection

Peggy takes out a $50,000 10-year term policy on herself and names her 2 children, aged 11 and 12, as primary beneficiaries to share equally in the proceeds. How much would each child receive if Peggy should die when the children are aged 19 and 20?

$25,000

Roberta is the insured in a $30,000 life insurance policy for which she pays an annual premium of $700. There is an outstanding policy loan of $2,500. Her last premium due has not been paid and she dies during the grace period. How much will her beneficiary receive?

$26,800

Micah pays $220 annually for a $50,000 life insurance policy. The premium is due June 1, however it is not paid until June 24. If Micah died on June 15, what would the amount of the death benefit?

$49,780

Samiya purchased a $500,000 life policy from LHC Insurance Company at the age of 35. At her death the insurance company discovered that her primary beneficiary was older than Samiya had stated on the application. How much will Samiya's beneficiary receive?

$500,000

A free look, or right to examine provision allows a policyowner the right to review and then return a policy for a full refund within no less than how many days?

10 days

A new life insurance policyowner has just received his policy. How long does he have to review and return it if he is not satisfied with it?

10 days

The incontestability provision is usually in effect after

2 years

An insured that wants to reinstate a lapsed permanent life policy must do so within

3 years

Edna stopped paying premiums on her permanent life insurance policy 7 years ago though she never surrendered it. She is still insurable and has no outstanding loan against the policy. The company probably will decline to reinstate the policy because the time limit for reinstatement has expired. The limit usually is:

3 years

If a life insurance policy lapses fro nonpayment, within how many years from the date of premium default may the policy be reinstated?

3 years

A policy's grace period is usually no more than

31 days

What happens if a claim arises during the grace period of an individual life insurance policy?

Benefits will be paid, but unpaid premiums can be deducted from the policy proceeds

Winston, the insured, and his spouse, Irene, his sole beneficiary, both died in a hotel fire. Hospital physicians witnessed that Irene lived at least 2 hours longer than Winston. The life policy had no common disaster clause. Which of the following will receive the policy proceeds?

Irene's estate

Henry owns a variable life insurance policy in which his wife, Colin, is the primary beneficiary. His son and daughter, Jacob and Charlotte, are equal secondary beneficiaries. The American Red Cross and his alma mater are listed as equal tertiary beneficiaries. If both Carol and Jacob predeceased Henry, how would the policy's death benefit be distributed at Henry's death?

Charlotte will receive 100% of the death benefit

Jamal's agent delivers his life policy to him on February 5. Until what date can Jamal opt to return his policy and receive a full refund of the premiums paid?

February 15

Ginny is a revocable primary beneficiary on her mother's life insurance policy. Which of the following statements is TRUE?

Ginny will receive benefits before any other beneficiary upon her mother's death

Alecia buys a life insurance policy and names her spouse, Max, as a beneficiary. Alecia's children, Rosa and Manuel, are to share the benefits equally if Max dies before her. Her church is to receive the proceeds if her spouse and children predecease her. How would the proceeds of Alecia's policy be distributed if both her children predecease her?

Max would receive 100% of the proceeds

When Tom dies, Rosemary receives the death benefit. If Rosemary had died before Tom, George would have received the benefit. Which of the following statements is TRUE?

Rosemary is the primary beneficiary, and George is the contingent beneficiary

Steve is the beneficiary on his spouse's life insurance policy. When they divorce, his spouse cannot remove him as a beneficiary on the policy without his written permission because

Steve is an irrevocable beneficiary

Ron, the insured, dies during the grace period for his $100,000 life insurance policy. Considering that the premium on the policy has not been paid, what happens?

The amount of the premium is deducted from the policy proceeds paid to the beneficiary

Vivian commits suicide 4 years after taking out a $100,000 life insurance policy on herself. Her beneficiary is concerned that the death claim will be denied. Which of the following statements is NOT correct?

The company has definite proof of the cause of her death, so it can refuse to pay the death benefit

The aviation exclusion eliminates coverage for all of the following EXCEPT

a commercial flight

Individual life insurance policies must include all of the following provisions EXCEPT

a conversion provision

Joshua's insurance agent delivered his new term life policy to him. Three days later Joshua changed his mind—he no longer wanted the life policy and returned it to his agent. Joshua had paid the initial premium. Under the free-look provision, what is Joshua entitled to receive?

a full refund of the initial premium

Which of the following statements about life insurance is NOT correct?

a policy owner must notify the beneficiary before transferring ownership

An exchange of value is necessary to form a valid contract. What is the legal term that means something of value?

consideration

Which clause identifies the fact that the policyowner must pay something of value for the insurer's promise to pay benefits?

consideration clause

Which of the following provisions of a life insurance contract generally helps to keep policies in force if policy owners neglect to pay their premiums?

grace period

Which of the following best describes the basic purpose for the facility-of-payment clause found in some life insurance policies?

it authorizes the insurer to designate the payee of the life insurance death benefits if the designated beneficiary cannot be located

Which of the following statements pertaining to the insuring clause in a life insurance policy is NOT correct?

it specified the length of the grace period

The best reason for designating a trust as a life insurance policy beneficiary is to

make it possible to manage the policy proceeds for the long-term benefit of an individual or organization

All of the following are life insurance policy provisions EXCEPT

notice of claim

To reinstate a lapsed policy, the insured must do all of the following EXCEPT

sign a Notice to the Applicant Regarding Replacement

Which of the following is NOT required in order to reinstate a lapsed permanent life policy?

submit an application for reinstatement within 4 years of the lapse

Which of the following is stated in the consideration clause of a life insurance policy?

the amount and frequency of premium payments

Kevin, the insured in a $200,000 life insurance policy, and his sole beneficiary, Lynda, are killed instantly in a car accident. Under the Uniform Simultaneous Death Act, to whose estate will the policy proceeds be paid?

Kevin's estate

All of the following are rights of policy ownership EXCEPT

changing a policy provision with the agent's approval

What are the 2 types of assignment of rights to another in life insurance policy?

collateral and absolute (also known as permanent)

In which of the following circumstance would the incontrestable clause of an insurance policy apply?

concealment of smoking

An individual life insurance policy must include all of the following EXCEPT

a table showing the annual loan values of the policy for at least 30 years

Which of the following statements is CORRECT?

after a policy is delivered to and accepted by the policy owner, it cannot be changed in any way, except in accordance with terms stated in the contract

To have an individual life insurance policy reinstated, a person must comply with all of the following EXCEPT

agree to a new policy without another reinstatement provision

An assignment in which the assignee receives full control over the policy is called

an absolute assignment

When the insured and the beneficiary in a life insurance policy die simultaneously, how must the proceeds of the policy be distributed?

as if the insured has survived the beneficiary

While Debby was out of the country on vacation, she forgot to pay her life insurance premium, missed the grace period and wants to reinstate her policy. Which of the following is NOT a condition of reinstatement?

assignment of a new beneficiary