Life Policy Riders, Provisions, Options, & Exclusions

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? a. Cost of Living Rider b. Value Adjustment Rider c. Return of Premium Rider d. Inflation Rider

a

According to the entire contract provision, what document must be made part of the insurance policy? a. Copy of the original application b. Buyer's guide c. Agent's report d. Outline of coverage

a

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a. Guaranteed insurability option b. Dividend options c. Guaranteed renewable option d. Nonforfeiture options

a

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? a. Reduction of Premium b. Accumulation at Interest c. Cash Option d. Flexible Premium

a

An insured receives an annual life insurance dividend check. What term best describes this arrangement? a. Cash option b. Reduction of Premium c. Annual Dividend Provision d. Accumulation at Interest

a

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a. One-year term option b. Paid-up option c. Accelerated endowment d. Paid-up additions

a

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy? a. It is reduced to the amount of what the cash value would buy as a single premium b. It is increased when extra premiums are paif c. It decreases over the term of the policy d. It remains the same as the original policy, regardless of any differences in value

a

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 the premiums paid. Which rider is attached to the policy a. Return of premium b. Cost of living c. Decreasing term d. Accidental death

a

Which is NOT true about beneficiary designations? a. The beneficiary must have insurable interest in the insured b. The beneficiary may be a natural person c. The policy does not have to have a beneficiary named in order to be valid d. Trust can be valid beneficiaries

a

Which of the following allows the insured to relieve a minor insured from premium payments if the minor's parents have died or become disabled? a. Payor benefits b. Jumping Juvenile c. Juvenile Premium Provision d. Waiver of Premium

a

Which of the following is true about the mandatory free look in a Life Insurance policy? a. It commences when the policy is delivered b. It commences when the application is signed c. It applies only to term life insurance policies d. It is optional on all life insurance policies

a

Which of the following policy components contains the company's promise to pay? a. Insuring clause b. Premium mode c. Owner's rights d. Entire contract provision

a

Which of the following statements is TRUE concerning irrevocable beneficiaries? a. They can be changed only with the written consent of that beneficiary b. They may be changed at any time c. They can never be changed d. They may be changed only on the anniversary date of the policy

a

Which nonforfeiture option provides coverage for the longest period of time? a. Reduced paid-up b. Extended Term c. Paid-Up Option d. Accumulated at Interest

a - option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy

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? a. Interest only option b. Life income with period certain c. Joint and survivor d. Fixed amount option

a - the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals

A 40 year old 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 at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to a. The insurance company b. The insured's estate c. The insured's firstborn child d. Both children who share equally on a per-capita basis

b

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? a. Medical exam and parents' medical history b. Proof of insurability is not required c. Medical exam d. Her parents' federal income tax receipts

b

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a. Payor rider b. Other-insured rider c. Change of insured rider d. Juvenile rider

b

An insured has chosen joint and ⅔ survivor as the settlement option. What does this mean to the beneficiaries? a. One of the beneficiaries will receive ⅓ and the other ⅔ of the proceeds when the insured dies b. The surviving beneficiary will continue receiving ⅔ of the benefit paid when both beneficiaries were alive c. The beneficiary will receive ⅔ of the lump sum up front, and the remaining ⅓ will be paid over time d. The beneficiary will receive ⅔ of the total benefit, with the final ⅓ payable when the first beneficiary dies

b

If an insured continually uses the automatic premium loan option to pay the policy premium, a. The insurer will increase the premium amount b. The policy will terminate when the cash value is reduced to nothing c. The face amount of the policy will be reduced by the automatic premium loan amount d. The cash value will continue to increase

b

When a policyowner designates a group of individuals as beneficiaries of a life insurance death benefit without specifically naming the individuals, this is called a. Stirpes designation b. Class designation c. Revocable designation d. Irrevocable designation

b

Which 2 terms are associated directly with the premium? a. Renewable or convertible b. Level or flexible c. Fixed or variable d. Term or permanent

b

Which of the following is true concerning the Accidental Death Rider? a. It is only available in group insurance b. It will pay double or triple the face amount c. It is also known as a triple indemnity rider d. This rider is only available to insured over the age of 65

b

Which nonforfeiture option has the highest amount of insurance protection? a. Reduced Paid-Up b. Extended Term c. Conversion d. Decreasing Term

b - the extended term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time

A policyowner 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 policyowner should have her husband named as the a. Irrevocable beneficiary b. Revocable beneficiary c. Secondary beneficiary d. Contingent beneficiary

b - the policyowner may change a revocable designation at any time and without the consent of the beneficiary; irrevocable beneficiaries, on the other hand, have a vested interest in the policy, so the policyowner may not be able to exercise certain rights without their consent

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a. Payments for life b. Yearly premium waiver and income c. Monthly premium waiver and monthly income d. Percentage of medical costs paid by the insurer

c

All of the following are Nonforfeiture options EXCEPT a. Extended term b. Reduced paid-up c. Interest only d. Cash surrender

c

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a. The interest is credited at a rate specified by the policy b. The policyholder has the right to withdraw the accumulations at any time c. The interest is not taxable since it remains inside the insurance policy d. The annual dividend is retained by the company

c

An insured has a $10,000 term life policy. The annual premium of $200 was due February 1; However, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a. $0 b. $200 c. $9,800 d. $10,000

c

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? a. $0 b. $100,000 c. $200,000 d. $100,000 plus the total of paid premiums

c

For how long is an insurance company allowed to defer policy loan requests? a. 30 days b. 60 days c. 6 months d. 1 year

c

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without providing insurability, the policy includes a a. Cost of living provision b. Nonforfeiture option c. Guaranteed insurability rider d. Paid-up additions option

c

Life income joint and survivor settlement option guarantees a. Payout of the entire death benefit b. Equal payments to all recipients c. Income for 2 or more recipients until they die d. Payment of interest on death proceeds

c

The interest earned on policy dividends is a. Tax deductible b. 40% taxable, similar to a capital gain c. Taxable d. Nontaxable

c

The paid-up addition option uses the dividend a. To reduce the next year's premium b. To accumulate additional savings for retirement c. To purchase a smaller amount of the same type of insurance as the original policy d. To purchase a one-year term insurance in the amount of the cash value

c

Under which of the following circumstances would an insurer pay accelerated benefits? a. An insured is looking for a way to put her daughter through college b. A couple wants to build a house and would life to make a larger down payment c. An insured is diagnosed with cancer and needs help paying for her medical treatment d. A couple is nearing retirement and needs a steady stream of income

c

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? a. The beneficiary will receive the lump sum, plus interest b. The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments c. The beneficiary will only receive payments of the interest earned on the death benefit d. The beneficiary must pay interest to the insurer

c

What is the other term for the cash payment settlement option? a. Face amount b. Proceeds c. Lump sum d. Principal amount

c

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? a. Single life b. Fixed-amount c. Life income with period certain d. Joint and survivor

c

Which of the following is true of a children's rider added to an insured's permanent life insurance policy? a. The policy covers only the natural children of the insured b. Each child covered must show evidence of insurability c. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age d. It is permanent insurance

c

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy? a. Guaranteed insurability rider b. Payor benefit rider c. Substitute insured rider d. Term rider

c

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? a. Guaranteed insurability rider b. Change of insured rider c. Term rider d. Accidental death and dismemberment rider

c

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a. Children's rider b. Additional insured rider c. Family term rider d. Spouse rider

c

Which type of insurance would be used for a Return of Premium rider? a. Decreasing Term b. Annually Renewable Term c. Increasing Term d. Level Term

c

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a. $20,000 b. $25,000 c. $50,000 d. The face amount will be determined by the insurer

c - the face of the term policy would be the same as the face amount provided under the whole life policy

All of the following are true regarding insurance policy loans EXCEPT a. The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies b. The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy c. Policyowners can borrow up to the full amount of their whole life policy cash value d. Policy loans can be made on policies that do not accumulate cash value

d

All of the following are true regarding the guaranteed insurability rider EXCEPT: a. The insured may purchase additional coverage at the attained age b. The insured may purchase additional insurance up to the amount specified in the base policy c. It allows the insured to purchase additional amounts of insurance without providing insurability only at specified dates or events d. This rider is available to all insured with no additional premium

d

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? a. Refuse to pay the death benefit because of the misstatement on the application b. Pay a decreased death benefit c. Sue for the right to not pay the death benefit d. Pay the death benefit

d

Children's riders attached to whole life policies are usually issued as what type of insurance? a. Variable life b. Adjustable life c. Whole life d. Term

d

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? a. The death benefit will be forfeited b. The death benefit will be the same as the original face amount c. The death benefit will be larger d. The death benefit will be smaller

d

The accelerated benefits provision will provide for an early payment of the death benefit when the insured a. Needs to borrow money b. Has earned enough credits c. Becomes disabled d. Becomes terminally ill

d

The automatic premium loan provision is activated at the end of the a. Free-look period b. Elimination period c. Policy period d. Grace period

d

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the a. Total contract b. Aleatory contract c. Complete contract d. Entire contract

d

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called a. Guaranteed insurability b. Waiver of cost of insurance c. Payor benefit d. Waiver of premium

d

What is the waiting period on a Waiver of Premium rider in life insurance policies? a. 30 days b. 3 months c. 5 months d. 6 months

d

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? a. The insurance company b. The insured's estate c. The primary beneficiary's estate d. The insured's contingent beneficiary

d

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a. Purchase a term rider to attach to the policy b. Pay back all premiums owed plus interest c. Receive payments for a fixed amount d. Purchase a single premium policy for a reduced face amount

d

Which is true about a spouse term rider? a. Coverage is allowed for an unlimited time b. The rider is decreasing term insurance c. Coverage is allowed up to age 75 d. The rider is usually level term insurance

d

Which of the following riders would NOT cause the Death Benefit to increase? a. Guaranteed Insurability Rider b. Cost of Living Rider c. Accidental Death Rider d. Payor Benefit Rider

d

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid? a. Entire clause clause b. Beneficiary clause c. Consideration clause d. Insuring clause

d