Life Insurance Policy Provisions, Options And Riders

To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

A copy of the original insurance application

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Cash surrender

What are the three nonforfeiture options in life insurance policies

Cash surrender, reduced paid-up, and extended term

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Incontestability

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?

It will be paid to the insured's estate.

If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?

Lump-sum payment

What settlement options are available in life insurance policies?

Lump-sum/cash, fixed period, fixed amount, life income, interest only

Is the beneficiary required to have insurable interest in the insured?

No. Beneficiaries do not have insurable interest in the insured.

What is the name for a life insurance policy rider that provides coverage on the insureds family members

Other-insured rider

What dividend option can increase the death benefit of the existing life policy?

Paid-up additions

What dividend option is automatically selected by the company if not chosen by the policyowner?

Paid-up additions

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one

Policy premium in a reinstated policy will be set according to the insured's original age.

With the interest only settlement option, what happens to the policy's death benefit?

Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary

Who controls changes in premium payments, face values, and loans in a life insurance policy?

Policyowner

Who has the right to the cash value of a life insurance policy

Policyowner

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Primary beneficiary

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

Reduced Paid-Up

What are policy dividends?

Return of unused premiums

What happens to a policy's cash value under an extended term nonforfeiture option

The cash value is converted to the same face amount as in the whole life policy

What happens to the proceeds of a life insurance policy if there is no named beneficiary

The proceeds are paid to the insured's estate

What type of beneficiary is next in line after the primary beneficiary?

contingent beneficiary

Who does the common disaster clause protect?

contingent beneficiary

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Waiver of Premium

What are the most common exclusions in life insurance policies

War and military service, hazardous occupation, and aviation

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

When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Pay a reduced death benefit

What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability

Reinstatement

What type of beneficiary can be changed at any point by the policyowner?

Revocable

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

The death benefit will be adjusted to the amount that the insured could obtain for her correct age.

With the reduction of premium dividend option, how is the dividend used?

The dividend is applied to the next year's premium (it reduces the next year's premium)

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Absolute assignment

What is the purpose of a free-look period

To allow the insured to return the policy with a full refund

What is the purpose of settlement options in life insurance policies

To determine how the death benefit will be paid to the beneficiary

What required provision protects against unintentional policy lapse?

grace period

A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?

The amount of the loan will be subtracted from the death benefit.

What are the dividend options in life insurance policies?

Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term, and acceleration of endowment

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

Entire Contract

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Extended term

What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?

Settlement options

What does the term double indemnity mean

The insurer will pay a benefit of twice the face amount

In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments

The longer the period selected, the smaller each installment will be

What is the purpose of the Automatic Premium Loan provision

To prevent the unintentional lapse of a policy because of nonpayment of the premium

When will a contingent beneficiary receive death benefits from a life insurance policy

When the primary beneficiary dies before the insured

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

collateral assignment

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

grace period