Life Insurance Policy Provisions, Options and Riders

All of the following statements are true of the modifications provision in a life insurance policy, EXCEPT:

Insurance producers can make any policy change.

Which of the following is a situation where the insurance company refunds premiums paid?

Insured commits suicide during the suicide clause period

A settlement option that would leave the proceeds of the insurance policy with the insurer and the insurer would pay interest to the beneficiary on an installment basis is called:

Interest only option

Of the following life insurance settlement options, which pays only the interest earned on the principal in periodic payments?

Interest-only

Which of the following explanations best describes the purpose of the waiver of premium provision of a life insurance policy?

It waives the insured's premiums if the insured is totally disabled before a specified age.

Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value?

Nonforfeiture option

All of the following statements are true of beneficiary designations in a life insurance policy, EXCEPT:

Only one beneficiary may be named.

Marcella purchases a modified life insurance policy at the age of 31. Thinking she could get a slightly better rate on her policy, she lists her age as 21. If the insurance company discovers the error upon Marcella's death, what action will the insurance company take?

Pay the death benefit based on Marcella's actual age

All of the following are ownership rights, EXCEPT:

Right to make changes to the policy

Gerry forgets to pay his life insurance premium, and the policy lapses. If he is within the reinstatement period and decides to reinstate his policy, he will be required to take all of the following actions, EXCEPT:

Surrender or cancel the policy within 10 years of the reinstatement date

James is past due on his life insurance premium by 5 days. His policy has a 30 day grace period. If James dies on day 15 of his grace period, what would the beneficiary receive?

The full face amount, minus any past due premium

Which of the following best describes the automatic premium loan provision of a life insurance policy?

The insurer will automatically use the policy cash value to pay an overdue premium.

When a juvenile covered by a payor rider reaches the specified age, what happens to the ownership of the policy?

The juvenile can assume ownership of the policy.

Which of the following statements is not true about a revocable beneficiary on a life insurance policy?

The policyowner cannot change the beneficiary without their knowledge.

Which of the following types of life insurance beneficiary designations should be used to establish a scholarship fund?

Trust

Under what conditions will the waiver of premium rider pay benefits?

If the insured is totally and permanently disabled

Which of the following is a provision that requires any change to a life insurance policy be made by an executive officer of the insurer, and attached to the policy?

Modifications

Riders covering additional insureds can be added to life policies. A popular rider is the children's term rider. All of the following can be covered by the children's term rider, EXCEPT:

Younger siblings of the policyholder

Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use?

Accumulation at interest

Which life insurance rider affecting the policy's death benefit protects against the chance of depleting income during prolonged life?

Annuity rider

All of the following are life insurance settlement options, EXCEPT:

Automatic premium loan

All of the following life insurance provisions are considered exclusions, EXCEPT:

Cash loan

Which life insurance dividend option does not increase a policy's cash value?

Cash payment

Which of the following nonforfeiture options does not allow the insured to reinstate the policy:

Cash surrender

Julie applies for a life insurance policy. Her consideration consists of:

Completed application and initial premium

All of the following is true regarding lump-sum payment of life insurance policy proceeds, EXCEPT:

Distribution is taxed.

The stipulated period of time, allotted by the insurance company, to allow a policyholder to make an overdue payment while the policy remains in force and coverage is provided is called the _____________.

Grace period

Which of the following settlements of a life insurance policy is taxable?

Interest-only

Of the following settlement options for life insurance, which can result in the insurer paying more in benefits than the principal plus interest?

Life income

Some riders can affect the death benefit of a life insurance policy. Which of the following riders can decrease the death benefit?

Long-term care rider

Which provision in a life insurance policy provides the insurer with the right of medical examination and autopsy?

Medical examination and autopsy

The Guaranteed Insurability Rider, or GIR, allows the insured to buy:

More insurance coverage at specified points in the future, without proof of insurability

A life insurance policy is a contract between the insurer and the policyowner. After the insured has died, the contractual arrangement is between the insurer and the beneficiary. What responsibilities does the insurer have to the insured's creditors?

None

This dividend option provides additional permanent coverage:

Paid-up additions

Roberta wants to buy a life insurance policy, naming her son Marvin as beneficiary, but she wants to keep all ownership rights under the policy. How should Roberta name Marvin as beneficiary?

Roberta should name Marvin as a revocable beneficiary.

All of the following are true regarding the period certain life insurance settlement option, EXCEPT:

Shorter payment periods result in lower payments.

Abigail and Bob have a joint life insurance policy. They name their three children, Simon, Stacey, and Terry as beneficiaries: Simon is primary, Stacey is secondary, and Terry is tertiary. If Abigail and Bob die in a car accident, who will receive the policy proceeds?

Simon

What are the two types of war/military service exclusions?

Status clause and results clause

All of the following are true regarding the fixed-amount installment life insurance settlement option, EXCEPT:

The larger the payment amount, the longer time period payments will be received.

A fixed period option pays policy proceeds in equal installments over a period of months or years. Which of the following is NOT considered when determining the amount of the installment?

The relationship of the beneficiary to the insured

Which of the following best describes the return of premium rider

The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy.

What is the purpose of the hazardous occupation clause?

To exclude losses if the insured dies as a result of a hazardous occupation or hobby

Jennifer is trying to add her insurance premium payments to her budget. All of the following are accepted payment mode options, EXCEPT:

When she feels like it

Of the following life insurance policy riders, which does not alter the amount of the death benefit?

Payor

Rick is planning on getting married next month. He currently has a $100,000 whole life participating policy. Because he is planning a family, he wants to increase his life insurance while keeping his costs down. Which of the following options would best suit his needs?

Rick could use the dividends to purchase paid-up additions.

Of the following individuals, who has the right to change the beneficiary designations in a life insurance policy?

The policyowner

Who may choose the settlement option for a life insurance policy?

The policyowner and the beneficiary

Which clause states that the policy owner must pay something of value for the insurer's promise to pay benefits?

Consideration clause

If the primary beneficiary predeceases the insured, the policy proceeds are paid to the ________________ upon the death of the insured.

Contingent beneficiary

Which provision prevents the insurer from making changes to a contract by citing documents not included in the policy itself?

Entire Contract provision

Which nonforfeiture option is the "automatic" option?

Extended term option

Withdrawals or partial surrenders can be made on the cash value of a universal life policy. Which of the following is specified in the policy?

How much can be withdrawn

What will the insurance company do if an insured commits suicide after the suicide clause expires?

Pay the death benefit

What is the primary purpose of the entire contract provision in a life insurance policy?

Provide assurance that the policyholder has all necessary policy documents in their possession

Abel and Raquel are married. Raquel owns a life insurance policy, naming her husband Abel as the primary beneficiary and her children from a prior marriage as contingent beneficiaries. According to the Uniform Simultaneous Death Act, who receives the death benefit if Abel and Raquel are in a car accident and there is no evidence of who died first?

Raquel's children from her prior marriage

What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value?

Reduced paid-up insurance

Which of the following is not a dividend option?

Reduced paid-up insurance

If a policy loan is unpaid, the automatic premium loan provision has the effect of deducting the amount of the loan with interest from the death benefit. What should the policyowner do to avoid this reduction in the death benefit?

Repay the loan with interest

Which life insurance rider pays an amount equal to the total premiums paid as long as the insured dies during a certain time period, as stated in the policy?

Return of premium

What is the term for a policy element that adds or takes away coverage?

Rider

The insuring clause of a policy includes all of the following, EXCEPT:

The amount of the policy premium

All of the following statements are true about the accidental death benefit (ADB), EXCEPT:

The amount paid is one half of the face amount of the life insurance policy.

All of the following statements are false regarding the beneficiary designation of a life insurance policy, EXCEPT:

The beneficiary does not need to have an insurable interest in the life of the insured.

When Dakota's life insurance policy was written, it stated on the policy that Dakota was male. However, Dakota is female. On average, women tend to live several years longer than men. When Dakota died this misstatement was discovered. How did this impact the policy?

The death benefit was increased.

Jon's life insurance policy contains a disability income benefit that will pay him a periodic income in the event he becomes disabled. What factor determines the amount of the benefit?

The face amount of the policy

Gail has no children and has decided to make a gift of her life insurance to her alma mater. This type of assignment is voluntary and also usually absolute and complete. Specifics of this type of assignment include:

a. All of the above b. All the rights of the policy are assigned. c. The assignee has the right to use the cash value of the policy. d. The policyowner cannot recover surrendered rights.

It is important to specify beneficiary designations very carefully. Taking care when the policy is written will avoid problems later, such as:

a. Litigation b. Confusion c. Conflicts d. All of the above

This provision identifies the named insured, type, and amount of coverage provided by the policy:

Insuring clause

How long is the loan period on STOLI arrangements?

2 years

In most states, the period of contestability for material misrepresentations made on a life insurance application is:

2 years

To prevent individuals intending to commit suicide from purchasing life insurance, policies include a suicide clause. How long is the suicide clause in effect.

2 years

The appropriate rider allows premium payments to be waived in the event of disability. What is the normal waiting period for premiums to be waived?

3 or 6 months

The principal sum of a AD&D rider attached to a life insurance policy pays:

A principal sum if the insured loses both arms

What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?

Extended term

The aviation clause excludes all of the following accidents, EXCEPT:

Individual who dies while flying in a commercial aircraft as a fare-paying passenger