Life Ch. 4 Types of Policies & Provisions

The function of a Discretionary Provision is to protect the beneficiary policyowner insurer insured

Discretionary Provisions are designed to protect the insurance company by giving the insurer authority to determine eligibility for benefits or to interpret the terms or provisions of the policy.

A rider that is normally used with a Juvenile Life policy is called a Child Term Waiver of Premium Family Maintenance Payor Benefit

The Payor Benefit is typically used for a Juvenile Life policy and waives the premiums if the adult premium-payor becomes disabled or dies.

Under what circumstances can an insurer contest a life insurance policy according to the Incontestable clause? Intentional and material misrepresentations submitted on the application Accidental death Natural death Immaterial misrepresentations submitted on the application

Intentional and material misrepresentations submitted on the application can be contested for a specified period of time under the Incontestable clause.

How are dividends from a participating life insurance policy normally treated? Typically subject to Estate taxes Typically not subject to Federal income taxes Typically subject to Federal income taxes Typically subject to a penalty

Dividends received from a participating life insurance policy are generally not subject to Federal income taxes because they are considered a return of premium.

A Survivorship Life policy's proceeds are typically used to pay estate taxes pay off an existing mortgage pay a lump sum to the surviving insured pay for funeral expenses

Survivorship life policies are typically purchased to provide funds to pay estate taxes. It pays upon the death of the last surviving insured.

The dividend option which reduces the annual premium payment of a life insurance policy is called the Reduction of premium option Extended term option Paid-up option Interest-only option

The reduction of premium dividend option decreases the annual payment of a policy.

When a policyowner stops making payments on a Whole Life policy, which feature is designed to keep the policy from lapsing? Reinsatement clause Spendthrift clause Cash Value provision Automatic Premium Loan provision

The Automatic Premium Loan provision keeps a Permanent (Whole) Life policy from lapsing when the policyowner has stopped making premium payments.

Life insurance that does NOT pass the 7-day test is called a(n) Modified Endowment Contract Modified Life Contract Graded Premium Life policy Adjustable Life policy

A life insurance policy that fails to pass the 7-pay test is called a Modified Endowment Contract (MEC).

Life insurance that allows the face amount to be modified is known as Whole Life Modified Life Variable Life Adjustable Life

Adjustable life allows the policy owner to adjust the policy's face amount, premium, and type/length of coverage without having to complete a new application.

A policyowner who permanently changes the ownership of a life insurance policy is exercising which contractual option? Unconditional assignment Absolute assignment Collateral assignment Irrevocable assignment

An absolute assignment permanently changes the ownership of a life insurance policy.

The type of life policy best suited to cover a husband and wife for mortgage protection would be Joint Life Graded Life Survivorship Life Family Income Life

Joint Life policies pay on a first-to-die basis and is best suited, in this situation, to cover a husband and wife for mortgage protection.

Which of these can be altered by the policyowner in an adjustable life insurance policy? issue date choice of investments underwriting procedures amount of premium paid

One of the changes a policyowner can make in an adjustable life insurance policy is the amount of premium paid.

The life insurance provision which allows the policyowner to change the policy's beneficiary designation is called the Beneficiary clause Assignment clause Ownership clause Irrevocable clause

The Assignment clause allows the policyowner to change the policy's beneficiary designation.

A life insurance policy that covers multiple insureds and pays the face amount following the death of the last insured is called Family Life Survivorship Life Joint Life Variable Life

A survivorship life policy pays not upon the death of the first insured to die, but upon the death of the last surviving insured.

A Modified Life policy has similar characteristics and serves the same purpose as Graded Term Life Decreasing Term Life Survivorship Life Graded Premium Whole Life

A Modified Life policy has similar characteristics and serves the same purpose as Graded Premium Whole Life.

A life insurance policyowner falls behind on his premium payments and dies during the grace period. How will the insurer handle this claim? Full face amount will be paid Net premiums paid will be refunded Claim will be denied Pay the stated death benefit minus past due premium and interest

A life insurance company will pay the stated death benefit minus the past due premium and interest if the insured dies during the grace period.

A Waiver of Premium benefit for a life insurance policy is utilized when the insured becomes eligible for Social Security Disability Income becomes partially disabled becomes totally disabled becomes unemployed

An insured can become eligible for a life insurance waiver of premium benefit after becoming totally disabled.

What type of permanent life insurance offers a guaranteed minimum face amount and allows for future increases in coverage? Modified Whole Life Increasing Whole Life Increasing Term Life Variable Whole Life

A Variable Life policy guarantees a minimum death benefit while also allowing for an increasing death benefit depending on the success of the investment element.

A life insurance policy which is characterized by flexible premium payments is called Variable Life Term Life Whole Life Variable Universal Life

A Variable Universal Life policy offers the policyowner flexible premium payments.

Which type of life insurance is characterized as having two insureds and matures when the first insured dies? Joint Life Family Maintenance Survivorship Life Graded Life

A joint life policy covers two or more people. Using some type of permanent insurance (as opposed to term), it pays the death benefit when one of the insureds dies.

A life insurance policy that offers cash value and is tied to the S&P with a guaranteed minimum rate of return is called Adjustable Life Equity Indexed Life Variable Universal Life Modified Life

Equity Indexed life policies have cash values whose accumulation is tied to performance of the S&P with a minimum guarantee.

What advantage does an equity-indexed life insurance policy have over a variable life policy? Cash value can be borrowed against A minimum guaranteed rate of return Policyowner can choose investments A minimum guaranteed face amount

Equity indexed life insurance policies typically contain a minimum guaranteed fixed interest rate component.

A husband and wife own a life insurance policy with their son named as beneficiary. The wife dies first, followed by the husband 5 years later. Their son receives the policy's face amount after his father dies. What type of policy was owned? Family Maintenance Dual Life Joint Life Survivorship Life

Survivorship life insurance ("second-to-die" or survivor insurance) provides one policy that insures the lives of two people, usually spouses. No proceeds are paid when the first spouse dies. The policy remains in effect and premiums may need to be paid. The death benefit is not paid to the beneficiary until the death of the second insured.

When a premium payment for a life insurance policy is missed, what provision will dictate the actions taken by the insurer? Reinstatement clause Grace Period clause Premium Mode clause Incontestable clause

When a premium payment for a life insurance policy is missed, the Grace Period clause will dictate the actions taken by the insurer.

Universal Life insurance is characterized as having more flexibility than Whole Life a fixed death benefit a fixed premium payment no build-up of cash value

Universal Life offers flexible premiums and a flexible face amount.

What type of life insurance policy covers a husband and wife as well as any future children for no additional premium? Family Income Joint Life Survivorship Life Family Protection

On Family Protection Policies (or Family Policies), additional children are automatically included at no extra cost.