Chapter 4 Exam: Life Provisions

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

$50,000

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000

P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 minus any outstanding policies

A term life rider offers the insured

Additional life ocvergage

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

Additional whole life coverage at specified times

What does the insuring agreement in a life contract establish?

An insurers basic promise

What does a Guaranteed Insurability rider provide a Disability Income policyowner?

At future dates specified in the contract with no evidence of insurability required.

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

What action will an insurer take if an interest payment on a policy loan is not made on time?

Automatically add the amount of interest due to the loan balance

The Automatic Premium Loan Provision is designated to:

Avoid a policy lapse

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT

Beneficiary's Age

A whole life policy owner does not have the right to

Change the grace period

Whose life is covered on a life insurance policy that contains a payor benefit clause?

Child

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied under suicide clause of the policy

Which of these actions is taken when a policy-owner uses a life insurance policy as collateral for a bank loan?

Collateral Assignment

Which statement regarding the misstatement of Age Provision is considered to be true?

Coverage will be adjusted to reflect the insured's age if a misstatement of age is discovered

Additional coverage can be added to a whole life policy by adding an:

Decreasing Term Rider

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued

What provision in a life insurance policy states that the application is considered part of the contract?

Entire Contract Provision

D is the policyholder and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries ownership of his policy to his new wife.If D dies without making any further changes, to whom will the policy proceeds be paid to?

Ex-Wife

In a life insurance policy, which feature states that the policy will not cover certain risks?

Exclusion

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion

When an insurer issued a policy that refuses to cover certain risks, this is refereed to as:

Exclusion

D owns a whole life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which nonforfeiture option will the insurer likely proceed with?

Extended Term

Which nonforfeiture options offers the highest death benefit?

Extended Term

An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

Full face amount minus any past due premiums

A long term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

Inability to perform more than 2 activities of daily living

All of these statements about the waiver of premium provision are correct, EXCEPT:

Insured must be eligible for Social Security Disability for claim to be accepted.

The agreement in a life insuring contract states that a specific sum of money will be paid to a designated person upon an insured's death is called a(n):

Insuring Agreement

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT

Interest Only

Dividends paid from a life insurance policy are

Issued by the insurer

Which of these are NOT an example of a nonforfeiture?

Life Income

The accelerated death benefit provision is also known as a(n):

Living Benefit

Which of following is correct about accelerated death benefits?

Must have a terminal illness to qualify

K wants a whole life policy. If K wants an increasing Death Benefit to protect against inflation, which dividend option should she chose?

Paid Up Additional Insurance

All are true regarding a policy's grace period except:

Past due premiums are waived

Which of the following provisions guarantees that premiums will be waived if a juvenile Life PolicyOwner becomes disabled?

Payor Clause

Which insurance rider typically appears on a juvenile life policy?

Payor benefit rider

A provision in a life policy that pays the policy owner an amount that does not surpass the guaranteed cash value is called:

Policy Loan Provision

A provision in a life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability stated amounts of

Policy Loan Provision

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Pay-Up

What is suicide prevention designated to do?

Safeguard the insurer from an applicant who is contemplating suicide

Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?

Taxed as Ordinary Income

The advantage of reinstating an original life policy is

The premiums are based on younger age

When is the face amount of a whole life policy paid?

When dies or policy's maturity date

What does the ownership clause in a life insurance policy state?

Who the policy-owner is and what rights the policy-owner is entitled to

The incontestable clause allows an insurer to:

contest a claim during the contestable period

Variable whole life insurance can be described as:

Both an insurance and security product

The purpose of the ________ period clause to to avoid unintentional lapse of a life policy.

Grace

The provision that can be used to put an insurance policy back in force after it has lapsed due to non payment is called

Reinstatement

The provision that can be used to put an insurance policy back in force after it has lapsed due to non payment is called:

Reinstatement

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

Void policy if it is discovered during contestable period or proven material

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached

Waiver of Premium