Chapter 2- Policy Provisions, Options and Riders
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy? $400 $800 $2,000 $4,000
4,000
If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?
A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age.
Which of these is considered to be a Living Benefit option in a life insurance policy?
Accelerated death benefit
Which of the following is considered to be an alternative to a life settlement?
Accelerated death benefit rider
A double indemnity provision in a life insurance policy pertains to an insured's death caused by a
Accident
Of the following dividend options, which of these is taxable?
Accumulation at interest
Which of the following is NOT part of an insurance contract? Policy Application Riders Certificate of Authority
Certificate of Authority
Ownership of a life insurance policy may be temporarily transferred with
Collateral assignment
Life insurance policies will normally pay for losses arising from
Commercial aviation
All of these are standard exclusions found in a life insurance policy EXCEPT
Disability
What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
Entire contract
Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n)
Guaranteed insurablility rider
What is the purpose for having an accelerated death benefit on a life insurance policy?
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
A guaranteed issue insurance policy has no
Medical Underwriting
What is an insurer required to do when faced with an error made under the Misstatement of Age provision?
Pay age-corrected benefits
Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
Payor Benefit
Which situation accurately describes a reduced paid-up nonforfeiture option?
Policy has a decreased face amount
Which of the following is a reinstatement condition? Proof on insurability Changes in the insuring clause Premium increase Premium decrease
Proof on insurability
An endorsement found in an insurance plan which modifies the provisions of the policy is called
Rider
James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount? The original face amount will be paid to the beneficiary The policy will be voided with no death benefits paid The death benefit paid will be what the premium would have purchased at the correct age The amount of premiums paid will be returned with interest
The death benefit paid will be what the premium would have purchased at the correct age
Under a life insurance policy, what does the insuring clause state? The agent's obligation to provide the proper amount of coverage The insurer's obligation to return all premiums upon an approved death claim The insurer's obligation to pay a death benefit upon an approved death claim The agents obligation to pay a death benefit upon an approved death claim
The insurer's obligation to pay a death benefit upon an approved death claim
All of the following riders can increase the death benefit amount EXCEPT
Waiver of premium
All of these are valid policy dividend options for a life insurance policyowner EXCEPT
accumulate without interest
A waiver of premium rider allows an insured to waive premium payments if the insured is
completely and permanently disabled
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid
minus indebtedness and without interest
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of
past due premiums that have not been paid by the end of the grace period
A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a
payor rider
The two major actions required for a policyholder to comply with the Reinstatement Clause are provide evidence of insurability, agree to a new incontestable period provide evidence of insurability, pay past due premiums pay past due premiums, agree to a new incontestable period pay past due premiums, agree to a reduction in coverage
provide evidence of insurability, pay past due premiums
A life insurance policyowner does NOT have the right to
revoke an absolute assignment
Loans obtained by a policyowner against the cash value of a life insurance policy are treated as taxable income would not be treated as taxable income are limited by the face amount of the policy would be subject to a Federal estate tax
would not be treated as taxable income