Life Insurance Policy Provisions, Options, & Riders Chapter 2 EXAM
All of these are standard exclusions found in a life insurance policy, EXCEPT: -Hazard occupations -Aviation -Disability -War
Disability -Disability is not one of the standard exclusions found in life insurance policies
A life insurance policy normal contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT: -Fare-Paying Passenger -Pilot of Personal Airplane -Suicide -War
Fare-Paying Passenger A policy may contain provisions excluding or restricting coverage as specified in the event of death under all of these situations EXCEPT a fare-paying passenger.
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy? -Interest Only -Reduced paid-up insurance -Extended Term Insurance -Cash Surrender
Interest Only -In a whole life insurance policy, all of these are Nonforfeiture options, EXCEPT Interest Only
Which of these is NOT considered to be a common life insurance nonforfeiture option? -Cash Surrender -Extended Term Insurance -Reduced Paid-Up Insurance -Life Income Annuity
Life Income Annuity -All of these are common life insurance nonforfeiture options, EXCEPT a life income annuity
Of the following options, which of these is taxable? Reduction of Premium One year term Paid-up additions Accumulation of interest
Accumulation of interest -Accumulation of interest is a taxable dividend option
Which of the following is NOT part of an insurance contract? -Policy -Application -Riders -Certificate of Authority
Certificate of Authority -A Certificate Of Authority allows an insurer to conduct business in a state. It is NOT part of an insurance contract.
Matt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt -is killed while committing a felony -Dies of a stroke -Dies instantly from a car accident -is injured in a skiing accident and dies 18 months later
Dies instantly from a car accident -Matts beneficiary will be provided with the Double Indemnity Rider if Matt dies instantly from a car accident
Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake? -Reinstatement Clause -Entire Contract Clause -Incontestable Clause -Nonforfeiture Clause
Incontestable Clause -A clause that protects a Policyowner from a misrepresentation caused by his or her own innocent mistake is an incontestable clause
Which type of rider will waive the premium if the parent paying the premium dies? -Waiver of Premium -Juvenile Waiver -Guaranteed Insurability -Payor Benefit
Payor Benefit -A Payor Benefit will waive the premium on a Juvenile Life Insurance policy if the parent paying the premium dies.
Which situation accurately describes a reduced paid-up nonforfeiture option? -Policy has a decreased face amount -Face amount of a new policy equals that of the original policy -Cash value is surrendered to the policy owner -Premiums must continue to be paid
Policy has a decreased face amount -With a reduced paid-up nonforfeiture option, the policy will have a decreased face amount.
All of the following are considered to be nonforfeiture options available to a policyowner, EXCEPT: -Extended Term Insurance -Cash Surrender -Reduction of Premium -Reduced Paid-Up Insurance
Reduction of Premium -All of these are nonforfeiture options, EXCEPT Reduction of Premium
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision sates the insurer will continue as if: -The insured outlived the beneficiary -The beneficiary outlived the insured -No beneficiary was ever named -The insured and beneficiary died at the same time
The insured outlived the beneficiary -A common disaster provision states that if the beneficiary dies from the same accident as the insured individual, the insurer will proceed as if the insured outlived the beneficiary. This allows proceeds to go to the contingent beneficiary.
Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires, -He has the option of resuming the original policy and paying the same premium -The coverage can be extended with a lump sum payment -All remaining cash values are paid to the policyowner -The protection ends
The protection ends -When the Term Insurance expires in an extended term option, there is no more protection
The free-look provision gives the policyowner: -The right to return the policy for a partial refund within a specified number of days -The right to contest the terms of the policy -the right to change a policy provision -The right to return the policy for a full refund within a specified number of days.
The right to return the policy for a full refund within a specified number of days. -Within a specified number of days, a Free-Look Provision gives the policyholder the right to return the policy for a full refund.
A guaranteed issue insurance policy has no: -Initial premium requirement -incontestable period -waiting period -medical underwriting
medical underwriting -A guaranteed issue policy refers to an insurance policy with no medical underwriting.
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has cone up 4%, how much may Ron increase the face value of the policy? -$400 -$800 -$2,000 -$4,000
$4,000 -In this situation, Ron may increase the face value of his policy by $4,000. $100,000 X .04=$4,000
Which of the following is considered to be an alternative to a life settlement? -Accelerated death benefit rider -waiver of premium rider -Extended term option -Decreasing Term Insurance
Accelerated Death Benefit Rider -An alternative to a life settlement is an accelerated death benefit rider
A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n) -Automatic Premium Loan -Nonforfeiture Option _Collateral Assignment -Irrevocable Assignment
Collateral Assignment -A collateral Assignment Provision allows a person to temporarily give up a portion of their ownership rights to secure a loan
Ownership of a life insurance policy may be temporarily transferred with a(n) -Collateral Assignment -Absolute Assignment -Transferable Assignment -Beneficiary Assignment
Collateral Assignment -Ownership of a life insurance policy may transfer ownership temporarily with a collateral assignment
In what part of an insurance policy are Policy Benefits found? -Declarations -Entire Contract -Waivers -Conditions
Declarations -Essentially, the Insurance Declaration Page is like a quick guide to the insurance policy, providing all of the basic information the policyholder needs to know.
A provision in a whole life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n): -Insuring Clause -Payor Provision -Reinstatement Provision -Nonforfeiture Provision
Nonforfeiture Provision -A nonforfeiture Provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.
A life insurance policyowner does NOT have the right to: -Change a beneficiary -Select a beneficiary -Take Out a Policy Loan -Revoke an Absolute Assignment
Revoke an Absolute Assignment -A policyowner may NOT revoke an aboslute Assignment
If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies? -No death benefit is owed because of the misstatement of age -the full original death benefit listed on the policy -a prorated death benefit based on the amount of insurance the insured's premium would have purchased at the correct age -the original death benefit on the loan minus any outstanding loans and interest
A prorated death benefit based on the amount of insurance the insured's premiums would have purchased at the correct age. -In this situation, the insurer must pay a prorated amount of the policy based on the amount of insurance the insured's premiums would have been if purchased at the correct age.
Kur is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death? -Active -Status -Results -Leave
Results The "Results Clause" states the insurer is excused from paying the amount ONLY if the death is the result of war.
Which of these is considered to be a living benefit option in a life insurance policy? Reinstatement Waiver of Premium Accelerated Death Benefit Payor Benefit
Accelerated Death Benefit Accelerated Death Benefit is considered to be a Living Death Benefit Option in a life insurance policy
All of these are valid policy dividend options for a life insurance policy owner, EXCEPT: -Cash Outlay to the Policyowner -Accumulate Without Interest -Reduction in Policy Premium -Buy Additional Life Insurance Coverage
Accumulate Without Interest -Policyowner dividends normally accumulate WITH interest.
An error was made on Mary's life insurance application. Which of the following areas are errors commonly made on applications for which the incontestable clause does NOT apply? -Marital status -Age -Address -Income
Age -The Incontestable Clause does not apply to the misstatement of age provision
Life insurance policies will normally pay for losses arising from -Commercial aviation -War -Suicide -Hazardous Jobs
Commercial Aviation -Live insurance policies routinely cover losses arising from commercial aviation
A life insurance policyowner was injured in an automobile accident which results in a total and Permanent disability. Which rider would pay a monthly amount because of this disability? -Long-Term Care Rider -Disability Income Rider -Annuity Rider -Waiver of Premium
Disability Income Rider -The rider which pays a life insurance policy owner a monthly amount in the event of a total and permanent disability is called a disability income rider.
What is the name of the provision which states that a copy of the application must be attached to the policy when issued? -Policy Summary -Buyer's Guide -Entire Contract -Entire Policy
Entire Contract -The provision that the policy & a copy of an application is endorsed upon or attached to the policy when issued is the Entire Contract provision
Barbra's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(an) -Guaranteed Insurability Rider -Payor rider -Endowment rider -Family Income Rider
Guaranteed Insurability Rider -A guaranteed insurability rider allows for the insured to purchase additional insurance at specific dates or events without evidence of insurability
What is the purpose for having an accelerated death benefit on a life insurance policy? -It allows for a spouse to be added as a rider to a life insurance policy -It allows for policy loans to be advanced to the insured in the event of unemployment. It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill -It allows for a third party to purchase a life insurance policy at the discounted rate and immediately advance a portion of the death benefit
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill -An accelerated death benefit allows for cash advances to be paid against the death benefit if the insured becomes terminally ill.
The automatic premium loan provision authorizes an insurer to withdraw form a policy's cash value the amount of: -Any interest payable form an outstanding policy loan balance -Past due premiums that have not been paid by the end of the grace period -The outstanding policy loan balance -Any surrender charges owed by the policyowner
Past due Premiums that have no been paid by the end of the grace period -In a life insurance cash value policy, the automatic premium loan provision authorizes the insurance company to withdraw from the policy's cash values the amount of premiums due if the premium has not been paid by the end of the grace period.
What is an insurer required to do when faced with an error made under the Misstatement of Age Provision? -Cancel the Policy -Pay the age-corrected benefits -Pay full benefits as stated in the policy -Bill the policyowner for back premiums
Pay age-corrected benefits -Under the Misstatement of Age Provision, when done in error, an insurer must pay Age-Corrected Benefits
A rider assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n): -Waiver of Premium Rider -Payor Rider -Automatic Premium Loan Rider -Juvenile Waiver Rider
Payor Rider -A payor Rider assures the premiums will be paid on a juvenile policy until the insured child reaches a specific age.
Which situation accurately describes a reduced paid-up nonforfeiture option? -Policy has a decreased face amount -Face amount of the new policy equals that of the original policy -Cash value is surrendered to policyowner -Premiums must continue to be paid
Policy has a decreased face amount -With a reduced paid-up nonforfeiture option, the policy will have a decreased face amount
Which of the following is a Reinstatement Condition? -Proof of Insurability -Changes in the Insuring Clause -Premium Increase -Premium Decrease
Proof of Insurability -One of the conditions required for an insurance policy reinstatement is Proof of Insurability.
The two major actions required for a policyowner to comply with the Reinstatement Clause are: -Provide evidence of insurability, agree to new incontestable period -Provide evidence of insurability, pay past due premiums -Pay past due premiums, agree to new incontestable period -Pay past due premiums, agree to reduction in coverage
Provide evidence of insurability, pay past due premiums -The two important actions usually required for the policyholder to satisfy the conditions of the reinstatement Clause would be to provide evidence of insurability and pay past due premiums.
An endorsement found in an insurance plan which modifies the provisions of the policy is called a(an) -Attachment -Add-on -Rider -Supplement
Rider -An endorsement found in an insurance plan which modifies the provisions of the policy is called a "Rider"
A whole life insurance policy accumulates cash value that becomes: -The Policy Loan Value which the insured may borrow against The Death Benefit The source of funding for administration feeds -A source of funding a Term Rider to the policy
The Policy Loan Value which the insured may borrow against -Accumulated Cash Value of a whole life insurance policy becomes the policy loan value upon which the insured may borrow.
All of the following riders can increase the death benefit amount, EXCEPT: -Cost of Living -Waiver of Premium -Accidental Death Rider -Guaranteed Insurability
Waiver of Premium -All of the following riders can increase the Death Benefit amount, EXCEPT waiver of premium.
Loans obtained by a policyowner against the cash value of a life insurance policy: -Are treated as taxable income -Would not be treated as taxable income -Are limited by the face amount of the policy -Would be subject to Federal Estate Tax
Would not be treated as taxable income -Loans may generally be obtained against the cash value of a personal life insurance policy and are not treated as taxable income.
James is insured on the life insurance policy where is age was misstated on the application. Which of the following is CORRECT regarding the death benefit option? -the original face amount will be paid to the beneficiary -the policy will be voided with no death benefits paid -the death benefit paid will be what the premium would have been had it been purchased at the correct age -the amount of premiums paid will be returned with interest
the death benefit paid will be what the premium would have been had it been purchased at the correct age -Under the Misstatement of Age & Gender provision, the amount paid will be what the premium would have been had he purchased the policy at the correct age.
