life insurance chapter 4

The life insurance policy clause that prevent an insurance company from denying payment of a death claim after a specified period of time is known as the?

Incontestability clause (if an insurer wishes to contest any statements on an application, they must do so within the first two years)

which of the following is true regarding the spendthrift clauses in life policies?

It can protect the policy proceed from creditors of the beneficiary (the spendthrift clause in a life insurance policy prevent the beneficiary's reckless spending the benefits, and protects the policy proceeds from creditors of the beneficiary or policyowner)

which is true about a spouse term rider?

The rider is usually level term insurance

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called?

guaranteed insurability (guaranteed insurability is a rider that is included at the time of the application which allows the insured increase the amount of insurance without proving evidence of insurability)

What type of insurance would be used for a Return of Premium rider?

increasing term (when added to a whole life policy it provides that at death prior to a given age, not only is the original face payable, but also all premiums previously paid are payable to the beneficiary)

what would be an advantage of naming a contingent (or secondary) beneficiary in a life insurance policy?

it determines who receives policy benefits if the primary beneficiary is decreased

Which of the following statements about the reinstatement provision is true?

it requires the policyowner to pay all overdue premiums with interest before the policy is reinstated (upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest)

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

200,000 (the beneficiary will most likely receive twice the face value of the policy, since the insured's fatal injuries were caused by an accident and he died within the 90 days benefit limit stipulated in most policies

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

Cost of living rider (adjust the face amount of a policy to maintain the relationship of the face amount and increases the cost of living)

children's rider attached to whole life policies are usually issued as what type of insurance?

Term (children's term riders provide term insurance with coverage expiring when the minor reaches a certain age)

the interest earned on policy dividends is?

taxable (dividends are return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income)

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

the policyowner

which of the following is TRUE about nonforfeiture values?

they are required by state law to be included in the policy

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

universal life (universal life policies allow for policyholders to withdraw a limited portion of the policy's cash value)