Life Policy Riders, Provisions, Options, an Exclusions

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?

$9,800

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

For how long is an insurance company allowed to defer policy loan requests?

6 Months

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

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

A minor son of the insured

Which of the following best describes fixed-period settlement option?

Both the principal and interest will liquidated over a selected period of time.

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

Cash option

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 has what provision?

Common Disaster

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

Cost of Living Rider

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

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy can not be reinstated

All of the following statements are concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy

Which nonforfeiture option has the highest amount of insurance protection?

Extended Term

All of the following are dividend options EXCEPT

Fixed period installments

which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

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

Increasing Term

Which provision of a life insurance policy states the insurers duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Insuring clause

All of the following are Nonforfeiture options EXCEPT

Interest only

What would be an advantage to naming a cotangent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits in the primary beneficiary is deceased.

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

It has the highest amount of insurance protection

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

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

Which of the following settlement options in life insurance is known as straight life?

Life Income

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

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

Lump sum

A rider attached to a life insurance policy that provides

Other- insured rider

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

Paid- up Additions

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

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

An insured has a continuous premium whole life policy. she would like to use the policy dividends to pay off her policy sooner rather than would have been possible otherwise. What dividend option could she use?

Pay- up option

Which of the following riders would NOT cause the death benefit to increase?

Payor Benefit Rider

When a whole life policy lapses or 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

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

An insured dies by suicide one year after the life insurance policy was issued. the insurer will

Refund the premiums paid

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

The amount of 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 f the death benefit

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

The insured's contingent beneficiary

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy

What is the advantage if reinstating a policy instead of applying for a new one?

The original age is used for the premium determination

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

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

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

Which of the following is TRUE about non forfeiture values?

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

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

To provide a guaranteed income for a certain amount of time

The paid-up addition option uses the dividend

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

An absolute assignments is a

Transfer of all ownership rights in a policy

The two types of assignments are

absolute and collateral

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

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

it requires the policyowner to pay all overdue premiums with interest before the policy is reinstated