Life Insurance Policy Provisions, Options And Riders
Which of the following settlement options in life insurance is known as straight life?
life income
Which of the following riders would NOT cause the Death Benefit to increase?
payor benefit rider
Fixed-period installments is a _____, not a dividend option.
settlement option
Who can make changes to the policy once it is in effect?
An executive officer of the insurer
Which of the following is TRUE about a class designation?
Beneficiaries are not identified by name.
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value.
the complete and permanent transferof ownership rights
absolute assignment
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in
Adjustment in the amount of death benefit.
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
Becomes terminally ill.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
if the insured and the primarybeneficiary died in the same accident and there is no sufficient evidence to showwho died first, the policy proceeds are to be distributed as if the primarybeneficiary died first.
Uniform Simultaneous Death Law
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?
collateral assignment
Children's riders attached to whole life policies are usually issued as what type of insurance?
term
Accidental Death Rider
the insured dies from an accident, DB is a multiple of the Face Amount.v
Which of the following is true regarding a single life settlement option?
It provides income the beneficiary cannot outlive.
What is the other term for the cash payment settlement option?
lump sum
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
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income.
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.
the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child
Guaranteed Insurability Rider,
stipulate the rights and obligations of an insurance contract and are fairly universal from one policy to the next
provisions
Which of the following is NOT typically excluded from life policies?
Death due to plane crash for a fare-paying passenger
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium
a person's essential activities that include bathing, dressing, eating,transferring, toileting, continence
activities of daily living (ADLs)
Which settlement option provides a single beneficiary with income for the rest of his/her life?
single life
All of the following are dividend options EXCEPT
Fixed-period installments.
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?
2 years
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium.
Elijah and Mary are to receive the proceeds of a life insurance policy jointly until the first one dies. If either one should die within a specified time, the other one will receive benefits until the end of the specified time. This settlement option is known as:
Joint Life with Term Certain
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One-year term option.
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit.
Which is true about a spouse term rider?
The rider is usually level term insurance.
Which of the following is TRUE about nonforfeiture values?
They are required by state law to be included in the policy.
Nonforfeiture values include
cash surrender, extended term and reduced paid-up. Interest only is a settlement option.
All of the following are Nonforfeiture options EXCEPT
interest only
Payor Benefit Rider
it only pays the premium if the payor is disabled or dies.
entire contract provision stipulates that
the policy and a copy of theapplication ,along with any riders or amendments, constitute the entire contract.
Which nonforfeiture option provides coverage for the longest period of time? AExtended term
Reduced paid-up
the partial and temporarytransfer of rights.
collateral assignment
an organization composed of insurance commissioners from all 50 states, the District of Columbia and the 4 U.S. territories, formed to resolve insurance regulatory issues
National Association of Insurance Commissioners (NAIC)
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
interest only option
Entire contract =
policy + copy of application + any riders or amendments
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?
policyowner
manner or frequency that the policyowner pays thepolicy premium.
premium mode
who modifies provisions that already exist and are used to increase or decrease policy benefits and premiums.
riders
protects the contingent beneficiary
common disaster clause
increases DB to keep pace with inflation
cost of living rider
protects beneficiaries from the claims of their creditors.
spendthrift clause
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
If the father is disabled for more than 6 months
Loan value =
Cash value - (unpaid loans + interest)
Which of the following statements is TRUE concerning irrevocable beneficiaries?
They can be changed only with the written consent of that beneficiary.
a beneficiary who has second claim to the policy proceeds after the death of the insured (usually after the death of the primary beneficiary)
contingent beneficiary
The Waiver of Cost of Insurance rider is found in what type of insurance?
Universal Life
