Life and Health Insurance Chapter 4: Life policy provisions and options

Provisions

Benefits provided in the contract with no additional charge

8

If a policy loan has a fixed rate, it may not be more than __ percent.

Extended Term

Jamie has a $200,000 permanent policy and cannot continue making the premium payments. She still, however, wants the peace of mind of being covered for the same $200,000 in death benefit although it may be for an abbreviated period of time. The Nonforfeiture Option Jamie should choose is:

Fixed Period

Which Settlement Option pays for a specified period, regardless of who may receive the payments?

6

An insurer, by law, can defer granting a policy loan for up to _ months.

They are the property of the owner and cannot be forfeited

By law, what happens to any values remaining in a life insurance policy when it lapses due to non-payment of premiums?

Paid-Up Additions

Frank has a life insurance policy in which he chooses to have the dividends increase the death benefit. Which Dividend Option did he select?

Life Income Only

Fred owns a 40-Pay Life Policy. He designated his wife, Ethel, as primary beneficiary. Upon Fred's death, Ethel receives a set amount for life. Fred chose which Settlement Option?

Suicide Clause

If the insured commits suicide, while sane or insane, within typically 2 years from the issue date, the insurer's liability is limited to a refund of premium. If the insured commits suicide after the suicide clause has expired, the insurer must pay out the death benefit to the named beneficiary.

beneficiary

If the owner of the policy does not select a Settlement Option while alive, then the ........ may choose an option at the time of claim.

Reduced Paid-Up -

Present cash value is used to buy a single premium, permanent paid-up policy of a reduced face amount. This option provides the longest period of coverage provided by a nonforfeiture option. Coverage, although reduced in face value, will continue to age 100.

nonforfeiture

Reduced paid-up is a __________ option, not a dividend option.

The grace period in a life insurance policy is typically 31 days, which allows:

The payment of the premium after the due date without a penalty or lapse in coverage

Creditors of the insured and/or the beneficiary

The spendthrift laws of each state protect life insurance proceeds against the claims of?

Facility of Payment Clause

This provision allows the insurer to pay a relative or anyone it deems entitled to the benefits in the absence of a properly designated beneficiary or in cases of no living beneficiaries

Extended term

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option?

To adopt the annuity as his/her own and become the annuitant or to name another annuitant

When the owner and annuitant is the same person, a spouse beneficiary is permitted what choice under the Internal Revenue Code if the annuitant dies prior to annuitizing the contract?

Fixed amount

Which Settlement Option pays a -specified dollar amount- until benefits are exhausted?

Incontestability clause

Within the first 2 years of a policy, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud. A material misstatement is one in which the insurer would not have issued the policy had they known the true information.

taxable

any interest earned on the dividends is