Life Policy Provisions, Riders, and Options

accumulation at interest

Insurer keeps the dividend in an account where it accumulates interest

Cash Surrender Value

Nonforfeiture option that allows the policyowner to receive the policy's cash value in exchange for loss of insurance

extended term

Nonforfeiture option that permits the policyowner to use the policy's cash values to buy paid-up term insurance.

Reduced Paid-Up Insurance

Nonforfeiture option where cash value is used as a single premium to purchase a permanent policy with a reduced face amount

reduction of premium

The insurer uses the dividend to reduce the next year's premium

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

indemnity

a principle of reimbursement on which insurance is based; in event of loss, an insurer reimburses the insureds or beneficiaries for the loss

guaranteed insurability rider

allows for purchase of additional insurance at specified times without evidence of insurability

revocable right

beneficiary can be changed at any time

irrevocable right

beneficiary can only be changed with their consent

which of the following best describes fixed-period settlement option

both the principal and interest will be liquidated over a selected period of time

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

cash option

what happens when a policy is surrendered for its cash value

coverage ends and the policy cannot be reinstated

one-year term

dividend is used to buy additional insurance

paid-up addition

dividend is used to increase the face amount

paid-up insurance

dividend is used to pay up a policy early

accelerated benefit

early payment if insured is diagnosed with a specified catastrophic illness, portion of death benefit

Which nonforfeiture option has the highest amount of insurance protection?

extended term

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

return of premium rider

increasing term is added to a whole life policy that provides that if death occurs prior to a given age, not only is the death benefit payable to the beneficiary, but all premiums paid as well

interest only settlement

insurer retains the principal and only pays out interest

which of the following policy components contains the company's promise to pay

insuring clause

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

which of the following statements is true concerning the accidental death rider

it will pay double or triple the face amount

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

accidental death rider

pays double or triple indemnity if accidental death occurs as defined in policy within 90 days of accident

cash loans available

policy's cash value minus any unpaid loans and interest

automatic premium loans

prevent unintentional policy lapse due to nonpayment of premium

life income

provides the recipient with an income that he or she cannot outlive

when an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all premiums paid. Which rider is attached to the policy?

return of premium

which of the following information will be stated in the consideration clause of a life insurance policy?

the amount of the premium payment

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

the balance of the loan will be taken out of the death benefit

a man buys a whole life policy and names his wife as his only beneficiary. his wife dies 10 years later. he never remarries and dies, leaving 2 grown children. assuming he never changed the beneficiary, the policy proceeds will go to

the insured's estate

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

waiver of monthly deductions

waives the cost of insurance in the event of the insured's disability

waiver of premium

waives the premium if the insured becomes totally disabled; 6-month waiting period before benefits begin