ExamFX LI Policy Provisions, Options and Riders
what is the purpose of the free look period
To allow the insured to return the policy with a full refund
to meet the requirement of the entire contract policy provision, an insurance policy must contain what?
a copy of the original insurance application
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?
absolute assignment
Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?
cash surrender
what are the three nonforfeiture option sin LI policies?
cash surrender, reduced paid-up, extended term
What are the dividend options in life insurance policies?
cash, reduced premium, accumulation at interest, paid up additions, paid up option, one year term
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
collateral assignment
What type of beneficiary is next in line after the primary beneficiary?
contingent
what LI policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?
entire contract
what nonforfeiture option is automatically selected by the company if not chosen by the policyowner?
extended term
what provision in a LI policy extends coverage beyond the premium due date?
grace period
what required provision protects against unintentional policy lapse?
grace period
What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?
incontestability
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?
it will be paid to the insured's estate
If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?
lump sum payment
What settlement options are available in life insurance policies?
lump sum, fixed period, fixed amount, life income, interest only
Is the beneficiary required to have insurable interest in the insured?
no
what is the name for a LI policy rider that provides coverage on the insured's family members?
other-insured rider
What dividend option can increase the death benefit of the existing life policy?
paid up additions
What dividend option is automatically selected by the company if not chosen by the policyowner?
paid up additions
An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?
pay a reduced death benefit
what is the advantage of reinstating a LI policy as opposed to applying for a new one?
policy premium in reinstated policy will be set according to the insured's original age
With the interest only settlement option, what happens to the policy's death benefit?
policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary.
who controls changes in premium payments, face values, and loans in a LI policy?
policyowner
who has the right to the cash value of LI policy?
policyowner
What beneficiary designation has first claim to the death proceeds of a life insurance policy?
primary beneficiary
What nonforfeiture option provides coverage for the longest period of time?
reduced paid up
what provision allows the policyowner to reactivate a lapsed life insurance policy w/in a specified period of time with proof of insurability?
reinstatement
what are the policy dividends?
return of unused premiums
What type of beneficiary can be changed at any point by the policyowner?
revocable
what term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?
settlement options
A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?
the amount of the loan will be subtracted from the death benefit
what happens to a policy's cash value under an extended term nonforfeiture option?
the cash value is converted to the same face amount as in the whole life policy.
who does the disaster clause protect?
the contingent beneficiary
an applicant for LI misstated her age on the policy application. How will this affect the death benefit?
the death benefit will be adjusted to the amount that the insured could obtain for her correct age.
with the reduction of premium dividend option, how is the dividend used?
the dividend is applied to the next year's premium (it reduces the next year's premium)
what does the term double indemnity mean?
the insurer will pay the benefit of twice the face amount
in the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?
the longer the period selected, the smaller each instalment will be
what happens to the proceeds of a LI policy if there is no named beneficiary?
the proceeds are paid to the insured's estate
what is the purpose of settlement options in life insurance policies
to determine how the death benefit will be paid to the beneficiary
what is the purpose of the Automatic Premium Loan Provision?
to prevent the unintentional lapse of a policy because of nonpayment of the premium
What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?
waiver of premium
what are the most common exclusions in LI policies?
war and military service, hazardous occupation, aviation
When can an insurance company use suicide as a defense against paying a death claim?
when a suicide is committed within a specified period oftime after the policy is purchased (usually 2 years)
When will a contingent beneficiary receive death benefit from a life insurance policy?
when the primary beneficiary dies before the insured