Life Insurance Policy Provisions, Options, and Riders

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

Automatic premium loan

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Becomes terminally ill

What limits the amount that a policy owner may borrow from a whole life insurance policy?

Cash value

A long stretch of national economic hardship causes a 7% rate of inflation. Devote notices that the face value of her life insurance policy has been raised 7% as a result. What is the name of the provision that caused this change?

Cost of Living Rider

All of the following are features and requirements of the Living Needs Rider EXCEPT

Diagnosis must indicate that death is expected within 3 years

All of the following statements concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider

If a beneficiary wanted a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what option would a beneficiary select?

Fixed period

The automatic premium loan provision is activated at the end of the

Grace period

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

Guaranteed insurability

If Tom's policy allows him to make periodic additions to the face amount at standard rates, without proving insurability, his policy includes a

Guaranteed insurability option

All of the following are Nonforfeiture options EXCEPT

Interest only

Which of the following is true regarding the spendthrift clause in life insurance policies?

It can protect the policy proceeds from creditors of the beneficiary

Which of the following is true about the mandatory 10-day free look in a Life Insurance policy?

It commences when the policy is delivered

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

When a reduced-paid up nonforfeiture option is chose 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

Which of the following applies to the 10-day free-look privilege?

It permits the insured to return the policy for a full refund of premiums paid

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

Military service or war

What is the term for how frequently a policy owner is required to pay the policy premium?

Mode

Which of the following explains the policy owner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's rights

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

Abigail's father dies leaving her the designated beneficiary on his life insurance policy. She is surprised to see that in addition to the face amount of the policy, she will also receive a refund of all the premiums he had paid. Which rider is attached to the policy?

Return of premium

The interest earned on policy dividends is

Taxable

Nonforfeiture values guarantee which of the following for the policy owner?

That the cash value will not be lost

Which of the following situations would be addressed by The Uniform Simultaneous Death with a Common Disaster provision?

The insured and primary beneficiary are injured in the same car accident, and the beneficiary dies within 30 days of the insured

An insured is involved in a car accident and is disabled. If the policy contains a Waiver of Premium rider, which of the following statements is true regarding the policy premiums?

The insured will have to pay premiums for 6 months, after which the premiums will be reimbursed and subsequent premiums will be waived

What is the purpose of a fixed-period settlement option?

To provide a guaranteed income for a certain amount of time

Who has the legal title of the property in a trust?

Trustee

The Waiver of Cost Insurance rider is found in what type of insurance?

Universal Life

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium

When may an insurance company use suicide as a defense against paying a death claim?

When death occurs within a specified period of time after the policy was issued

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

A father purchases a life insurance policy on his teenage daughter and added 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

Sam has a life insurance policy from a participating company and receives quarterly dividends. Sam has instructed the company to apply his dividends to the policy to increase the death benefit. The dividend option that Sam has chosen is called

Paid-up additions

All of the following are beneficiary designations EXCEPT

Specified

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

When a policy is surrendered for its cash value,

Coverage ends and the policy cannot be reinstated

What provision in an insurance policy extends coverage beyond the premium due date?

Grace period

When Mary's husband John died, she was the beneficiary of his $100,000 life insurance policy. She decided to assure that she would have income for life, so she chose the life income settlement option. The amount of her payments will be determined by using all of the following EXCEPT

John's age at death

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

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

Policy owner

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?

A minor son of the insured

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount

Equal to the original policy for as long a period of time that the cash values will purchase

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy

A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury is called

Accelerated Benefit provision

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit

Which of the following is true about a class designation?

Beneficiaries are not identified by name

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

Common Disaster

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

Increasing term

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

It requires the policy owner to pay all overdue premiums with interest before the policy is reinstated

Using a class designation for beneficiaries means

Naming beneficiaries as a group

Which of the following factors determines the amount of each installment paid in a Life Income Option arrangement?

Recipient's life expectancy and amount of principal (The recipient's life expectancy and the amount of principal determine the amount of each installment paid in the Life Income Option arrangement

Because of financial obligations, John felt that he needed more insurance than the insurer was willing to issue. John's insurance producer told him that he could maximize the death benefit without increasing the face amount by the use of a(n)

Return of premium rider

Which of the following describes attachments made to policies that either add or modify coverage?

Riders

The dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as the

One-year term option

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing

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

What is true about nonforfeiture values?

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

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider

Which of the following methods to designate a beneficiary literally means "by the head?"

Per capita

A policy owner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policy owner should have her husband named as the

Revocable beneficiary

If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?

0% (If an insured accepts an accelerated death benefit, the death benefit received by the beneficiary will be reduced by the amount paid by the accelerated death benefit, as well as the amount of earnings lost by the insurance company in interest income. Because it is legal for an insurer to pay 100% of the death benefit before an insured dies, it is possible that the beneficiary of a policy would not receive any benefits after the insured's death)

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die (The Life Income Joint and Survivor option guarantees an income for two or more recipients for the duration of their lives. Most contracts stipulate that the surviving partner will receive a reduced payment after the other dies, although some will continue to pay the same amount. There is no guarantee that all the life insurance proceeds will be paid out)

The clause that protects to proceeds of a life insurance policy from creditors after the death of the insured is known as the

Spendthrift clause

Under which of the following circumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider (The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance)

An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at the time that the insured concealed information during the application process. What can they do?

Pay the death benefit (The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The policy will terminate when the loan amount with interest equals or exceeds the cash value

What type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor

Which of the following is true regarding a single life settlement option?

It provides income the beneficiary cannot outlive