LOMA 281 Module 3

dread disease (dd) benefit

(critical illness benefit) pays a portion of a policy's face amount if the insured suffers from one of several diseases listed in the benefit's contract wording. - the benefit can be paid in a lump sum or in installments over 6 to 12 months

policy reinstatement advantages

- Premium rate is based on the insured's age at original policy's purchase date - Original policy's cash value is reinstated - Original policy may contain more liberal provisions than do insurer's current policies. Example: The interest rate for a policy loan may be lower under the original policy than for the new policy.

Juvenile Inusrance

- protecting Childs insurability. - child will be able to purchase life insurance off of this - important to have ability to get future insurance locked in when they were the healthiest and its cheap

Childrens Insurance Rider

- sold in coverage units - premium per coverage unit is the same regardless of the number and ages of children - made for single parent households

property

A bundle of rights a person has with respect to something. - a life insurance policy is a type of property

automatic premium loan option

A cash value life insurance policy nonforfeiture option under which the insurer will automatically pay an overdue premium for the policyowner by making a loan against the policy's cash value as long as the cash value equals or exceeds the amount of the premium due.

Policy loan provision

A cash value life insurance provision that specifies the terms on which the policyowner can obtain a loan against the policy's cash value. - can borrow up to the amount of the policy's cash value less one year's interest on the loan. Features of policy loans: - Only applicable to cash value policies - The insurer does not do a credit check -The insurer charges interest, usually annually -The interest rate may be fixed or may vary with economic conditions (often guaranteed not to be more than a stated maximum rate) - No repayment schedule for policy loan balance or accrued interest - The insurer subtracts any outstanding loan balance plus accrued interest from the death benefit or cash surrender value

Closed contract

A contract for which only those terms and conditions that are printed in—or attached to—the contract are considered to be part of the contract. issued by a stock or mutual insurer documents that make up an entire contract for a closed contract life insurance policy: - insurance policy - policy riders - application for insurance

misrepresentations

A false or misleading statement in an application for insurance.

accidental death benefit

A supplemental life insurance policy benefit that provides a death benefit in addition to the policy's basic death benefit if the insured dies as a result of an accident. - double indemnnity: doubles the face amount payable when the insured dies in an accident -

An insured becomes eligible for DD benefits when he or she has a disease or undergoes a medical procedure identified as a DD in the supplementary benefit. Which of the following diseases or procedures do you think typically qualifies an insured for DD benefits? (Choose all that apply.) a. Life-threatening cancer b. Acquired Immune Deficiency Syndrome (AIDS) c. Diabetes d. End-stage kidney failure e. Heart attack f. Stroke g. Multiple sclerosis h. Coronary bypass surgery

A, B, D, E, F, & H

A spouse and children's insurance rider on Grace Wilson's $100,000 whole life policy allows her to purchase 10 coverage units of term insurance. What is the maximum amount of insurance she can buy for her husband, Walt, her 16-year-old son, Frederick, and her 6-year-old daughter, Fern? What is the maximum amount of insurance can Grace buy for her daughter, Fern? $10,000 $5,000

A.

Personal property

All property other than real property. - life insurance policy is a personal property - personal property can be tangible or intangible

Long-term care (LTC) Insurance Benefit

An accelerated death benefit under which the insurer agrees to pay a monthly benefit to a policyowner if the insured requires constant care for a medical condition. - premiums on basic life insurance polciy and the ltc benefit rider waived while insured receives ltc - waiting period-typically 90 days - monthly LTC benefit-stated as a percentage of policy face amount such as 2 percent - payments stop when specified percetage (50 to 100 percent) of policy benefit has been paid out

reinstatement provision

An individual life insurance policy provision that describes the conditions that the policyowner must meet to put back into force a life insurance policy that either has been terminated because of nonpayment of renewal premiums or has been continued under the extended term or reduced paid-up insurance nonforfeiture option. - Original policy usually cannot have been surrendered - Policy loan must be repaid or reinstated

Entire contract provision

An insurance and annuity policy provision that defines the documents that constitute the contract between the insurance company and the policyowner.

incontestability provision

An insurance and annuity policy provision that describes the time limit within which the insurer has the right to avoid the contract on the ground of material misrepresentation in the application. - 2 year contestable period and after that it is incontestbale

Free-look provision

An insurance and annuity policy provision that gives the policyowner a stated period of time—usually at least 10 days—after the policy is delivered in which to examine the policy. Also known as free-examination provision. - policyowner can cancel for a full refund of initial premium - coverage is in effect

avation exclusion

Aviation Exclusion Insurers may apply an aviation exclusion if the insured engages in military aviation, pilots experimental aircraft, or is a pilot or crew member on a privately owned plane.

A rider on Benjamin Mumford's policy covering the life of his daughter provides that the insurer will waive the policy's renewal premiums if Mr. Mumford dies or becomes totally disabled. a. Disability income benefit rider b. Waiver of premium for payor rider c. Waiver of premium for disability rider

B.

There are two primary categories of property: real property and personal property. Which type of property is a life insurance policy? a. Real property b. Personal property

B.

Accelerated death benefits are payable only after the death of the policyowner-insured. a. True b. False

B. - Accelerated death benefit riders provide that, under certain conditions, a policyowner can receive all or part of the policy's death benefit before the insured's death

Ray Novak is the policyowner-insured of a $100,000 whole life insurance policy. A rider attached to his policy gives him the right to purchase $20,000 of additional whole life insurance on specific dates without providing evidence of insurability. If Ray doesn't purchase $20,000 of additional whole life coverage on every option date, his GI rider will be canceled, and he will have no additional options for purchasing coverage. a. true b. false

B. Under most GI riders, if the policyowner does not exercise the option on a specified date,that option is lost forever, although the policyowner can still exercise the next option when it comes due. A paid-up additions option rider will terminate if the policyowner does not exercise the purchase option for a stated number of years.

A rider on Mary Margaret Satterfield's insurance policy specifies that her insurer will pay her renewal premiums if she becomes disabled. a. Disability income benefit rider b. Waiver of premium for payor rider c. Waiver of premium for disability rider

C.

Identify the type of accelerated death benefit to its example. Michelle Young's accelerated death benefit rider will pay her because her attending physician has certified that she has a life expectancy of less than 12 months. A. Dread disease benefit rider B. Long-term care benefit rider C. Terminal illness benefit rider

C.

Kevin Walter was the policyowner-insured of a $75,000 life insurance policy that included a typical $75,000 accidental death and dismemberment (AD&D) benefit rider. While his policy was in force, Mr. Walter, who had been diagnosed with terminal stomach cancer, died in a traffic accident. If Mr. Walter's insurance company determines that the accident was the cause of his death, the total death benefit payable to the policy's beneficiary would be a. 0 b. $75,000 c. $150,000

C.

The WP benefit typically defines total disability for the insured as being unable to perform the duties of? a. Any occupation b. The insured's own previous occupation c. Any occupation for which the insured is reasonably suited by education, training, or experience

C.

To add a waiver of premium for payor benefit to a life insurance policy, who do you think must be insurable? a. The insured b. The policyowner c .Both the insured and the policyowner d. Neither the insured or the policyowner

C.

Under which type of rider is the additional coverage not related to the coverage provided under the basic policy? a. Spouse and children's insurance rider b. Children's insurance rider c. Second insured rider

C.- The amount of additional coverage under the second insured rider is not related to the coverage under the basic policy. The additional coverage under the spouse and children's insurance rider and the children's insurance rider is based on the coverage units of the basic policy.

policy owner must

Complete the reinstatement application New contestability period based only on information in reinstatement Provide new evidence of insurability

An insured needs to show evidence of insurability to purchase additional insurance under which of these benefits? a. GI benefit b. Paid-up additions option benefit c. Both benefits d. Neither benefit

D. A policyowner must provide evidence of the insured's insurability to add a guaranteed insurability (GI) or paid-up additions rider to an in-force policy. But, once the rider is in force, no new evidence of insurability is necessary to purchase the additional insurance.

UL policy grace period

In a universal life policy, the grace period provision applies when the cash value is insufficient to meet policy's monthly mortality and expense charges. So, for a UL policy, if the grace period starts when the - Cash value is less than the mortality and expense charge, then the grace period is 61 or 62 days - Cash value equals zero, then the grace period is 30 or 31 days

Wavior of premium for disability benefits compared

Insurer waives policy premiums if the insured becomes totally disabled. Designed for policies in which the policyowner is also the policy's insured Total disability defined as • The insured's inability to perform the essential duties of her own occupation OR any other occupation for which she is reasonably suited by education, training, or experience.

Real property

Land and whatever is growing on or attached to the land.

policy reserves

Policy reserves are amounts of money that an insurer projects it will need to pay its future obligations to customers. Insurance laws require insurers to establish policy reserves so that they'll be able to pay policy benefits when the benefits come due.

Fixed-premium policy

Policyowner must pay all missed premiums plus interest

flexible premium policy

Policyowner must pay the mortality and expense charges for a stated amount of time

net cash surrender value

The amount the owner of a cash value life insurance policy actually receives—after the insurer makes any additions or subtractions to the cash surrender value—upon surrendering the policy. insurers calculate the net cash surrender value by adjusting the cash value as follows: - add the cash value of any paid-up additions - add any premiums paid in advance - add any accumulated policy dividends - minus any policy loans and policy loan interest outsanding

reinstatement

The process by which an insurer puts back into force a life insurance policy that either has been terminated because of nonpayment of renewal premiums or has been continued under the extended term or reduced paid-up insurance nonforfeiture option.

other exclusions

War exclusion clauses—proceeds not paid if death results from war Hazardous activities exclusion provisions—proceeds not paid if death resulted from specific dangerous activities, such as sky diving or scuba diving Aviation exclusion provisions—proceeds not paid if death resulted from aviation-related activities

reduced paid-up insurance nonforfeiture option

A cash value life insurance policy nonforfeiture option under which the policyowner discontinues paying premiums and uses the policy's new cash surrender value as a net single premium to purchase paid-up life insurance of the same plan as the original policy.

Waiver of premium for disability (WP) Benefit

A supplemental life insurance policy benefit under which the insurer promises to give up—to waive—its right to collect premiums that become due while the insured is totally disabled. - satisfies a 3-6 month waiting period: meaning for the first 3-6 months the person must cover it

A spouse and children's insurance rider on Grace Wilson's $100,000 whole life policy allows her to purchase 10 coverage units of term insurance. What is the maximum amount of insurance she can buy for her husband, Walt, her 16-year-old son, Frederick, and her 6-year-old daughter, Fern? What is the maximum amount of insurance can Grace buy for her husband, Walt? a. $100,000 b. $50,000

B.

In his application for a life insurance policy with the Star Life Insurance Company, Louis Kahn indicated no disease or disorder of the lungs. In fact, Mr. Kahn was being treated for tuberculosis. Star issued Mr. Kahn the policy, which contained a typical incontestability provision. In this situation, Star most likely a. must pay the death benefit b. can avoid the contract

B. - In this case, the contestable period has not expired, and Star most likely can avoid the contract.

Wavior of premium for payor benefit compared

Insurer waives policy premiums if the policyowner dies or becomes totally disabled. Designed for third-party policies in which the policyowner is not the policy's insured Total disability defined as • The policyowner's inability to perform the essential duties of her own occupation during the first two years of disability • The policyowner's inability to perform the essential duties of any occupation for which she is reasonably entitled by education, training, or experience after the first two years of disability

How is a second insured rider different from a spouse and children's rider? (Choose all that apply.) a. The coverage amount for the second insured is not related to the primary policy coverage. b. The premium charged is based on the risk characteristics of the second insured rather than the primary insured. c. The second insured cannot be married to the primary insured.

A & B -The second insured's coverage amount is not related to the primary insured's coverage. The premium for additional coverage is based on the second insured's own risk characteristics. The second insured can be the spouse or some other relative of the primary insured.

extended term life insurance nonforfeiture option

A cash value life insurance policy nonforfeiture option under which the policyowner discontinues paying premiums and uses the policy's net cash surrender value to purchase term insurance for the full coverage amount provided under the original policy, for as long a term as the net cash surrender value can provide.

nonforfeiture provision

A cash value life insurance policy provision that sets forth the options available to the policyowner if the policy lapses or if the policyowner decides to surrender—or terminate—the policy.

open contract

A contract that identifies the documents that constitute the contract between the parties, but all the enumerated documents are not necessarily attached to the contract. issued by a fraternal insurer documents taht make up the entire contract for an open contract life insurance policy: - insurance policy - policy riders - memebership application - declaration of insurability - fraternal charter, constitution, and by-laws

Misstatement of age or sex provision

A life insurance or annuity policy provision that describes the action the insurer will take to adjust the amount of the policy benefit in the event that the age or sex of the insured is incorrectly stated. before death: - If discovery of a misstatement occurs before the insured's death, the policyowner has the option of either paying—or receiving a refund of—any difference in the premium amount caused by the misstatement. after death: - If discovery of a misstatement occurs after the insured's death, the insurer adjusts the face amount to the benefit the policy premiums would have purchased for the insured's correct age or sex.

suicide exclusion provision

A life insurance policy provision which states that policy proceeds will not be paid if the insured dies as the result of suicide as defined by the policy within a specified period following the date of policy issue.

material misrepresentation

A misrepresentation that is relevant to an insurance company's evaluation of the proposed insured. - insurer can ask a court to void the policy on the basis that no valid contract ever existed

fraudulent misrepresentation

A misrepresentation that was made with the intent to induce the other party to enter into a contract and that did induce the innocent party to enter into the contract.

automatic nonforfeiture benefit

A specific nonforfeiture benefit that becomes effective automatically when a renewal premium for a cash value life insurance policy is not paid by the end of the grace period and the policyowner has not elected another nonforfeiture option.

Spouse and children's insurance rider

A supplemental life insurance policy benefit offered by some insurers that provides term life insurance coverage on the insured's spouse and children. Also known as a family insurance rider. one coverage unit equals: - 5,000 for a spouse - 1,000 for a child

Paid-up additions option benefit

A supplemental life insurance policy benefit that allows the owner of a whole life insurance policy to purchase single-premium paid-up additions to the policy on stated dates in the future without providing evidence of the insured's insurability. paid-up additions option benefit - Policyowner does not need to provide evidence of the insured's insurability - Premiums for the paid-up additions are based on the insured's age at the time of purchase - Paid-up additions have a cash value - The policyowner has to exercise the option; the purchase doesn't happen automatically - If the policyowner doesn't exercise the option for a certain number of years, the option terminates, but the purchased additions remain in force

Guaranteed Insurability (GI) benefit

A supplemental life insurance policy benefit that gives the policyowner the right to purchase additional insurance of the same type as the basic life insurance policy—for an additional premium amount—on specified option dates (typically every three years) during the life of the policy without supplying evidence of the insured's insurability. Also known as a guaranteed insurability option (GIO). GI Benefit - Benefit amount limited to policy face amount or a specific amount such as $10,000, whichever is less - May allow purchase of additional insurance at certain events, such as birth of child - Option usually ends at age 40 - Option is automatic, but purchase is not

Disability Income Benefit

A supplemental life insurance policy benefit that provides a monthly income benefit to the policyowner-insured if she becomes totally disabled while the policy is in force. - 3- 6 month waiting period - some for riders provide a partially disabled benefit

Accidental death and dismemberment (AD&D) benefit

A supplemental life insurance policy benefit that provides an accidental death benefit and provides a dismemberment benefit payable to the insured if an accident causes the insured to lose any two limbs or the sight in both eyes. - the dismemeberment benefit amount is same as accidental death benefit - a smaller benefit may be payable for loss of one limb or one eye

Second insured rider

A supplemental life insurance policy benefit that provides term insurance coverage on the life of a person other than the policy's insured. Also known as optional insured rider or additional insured rider. provides coverage for another person such as: - spouse - relative - business partner

Terminal illness (TI) benefit

A supplemental life insurance policy benefit under which the insurer pays a portion of the policy's death benefit to a policyowner if the insured is suffering from a terminal illness and has a physician-certified life expectancy less than a stated time, generally 12 or 24 months. - ti benefits are commonly used to pay for medical care, living expenses, or outstanding debts, they can be used for any purpose, such as travel expense two other forms of accelerated death benefits: - dread disease benefit - long-term care insurance benefit

accelerated death benefit (living benefit)

A supplemental life insurance policy benefit which provides that a policyowner may elect to receive all or part of the policy's death benefit before the insured's death if certain conditions are met. Also known as a living benefit. - typically over 100k: - payment reduces death benefit to the beneficiary - usually, paid in a lump sum that is 25% to 75% of the policy face amount

Waiver of premium for payor benefit

A supplemental life insurance policy benefit which provides that the insurance company will waive the right to collect a policy's renewal premiums if the policyowner dies or becomes totally disabled.

Policy withdrawal provision

A universal life insurance policy provision that permits the policyowner to reduce the amount of the policy's cash value by withdrawing up to the amount of the cash value in cash. Also known as a partial surrender provision. - no interest charged - cash value is reduced by the amount of the withdrawal - withdrawal fee may be charged - number of withdrawals each year may be limited

Select each true statement about the reinstatement provision. (Choose all that apply) a. Reinstatement usually isn't available if policy was surrendered for its cash value b. Reinstatement puts original policy back in effect; insurer does not issue a new policy c. Conditions to reinstate include completing a reinstatement application, providing evidence of insurability, paying a specified amount of money, and repaying any policy loan plus interest (or reinstatement of loan with the policy)

A, B & C

Accidental death benefit riders typically include certain exclusions. In other words, the insurer will not pay accidental death benefits if the insured's death results from certain stated causes. Which of the following causes of death do you think are typically excluded? (Choose all that apply.) a. Death resulting from suicide b. Death as a result of war-related accidents c. Aviation-related accidents other than as a passenger on an airplane d. Death occurring during the commission of a crime

A, B, C & D

Select the causes of death that life insurance policies might exclude from coverage. Choose all that apply. a. Death resulting from suicide 6 months after policy issue b. Death as a result of war c. Death resulting from mountain climbing d. Death of a passenger on a commercial airplane that crashed e. Death of the pilot of a private airplane f. Death resulting from suicide within 3 years of policy issue

A, B, C, & E

Peter Hay owns a life insurance policy issued by Azure Life, which issues only closed contracts. Choose all of the documents that constitute the entire contract between Peter and Azure. a. The policy b. The brochure describing the policy c. The attached application for insurance d. Any riders attached to the policy e. The canceled check for the initial premium payment.

A, C & D - The entire contract for Peter's policy consists of the policy, any attached riders, and the attached copy of the application for insurance.

A spouse and children's insurance rider on Grace Wilson's $100,000 whole life policy allows her to purchase 10 coverage units of term insurance. What is the maximum amount of insurance she can buy for her husband, Walt, her 16-year-old son, Frederick, and her 6-year-old daughter, Fern? What is the maximum amount of insurance can Grace buy for her son, Frederick? $10,000 $5,000

A.

Identify the supplemental disability benefit rider with its example. The UL insurance policy Drew Stephens owns on his life includes a rider that will pay him a monthly benefit if he becomes totally disabled. a. Disability income benefit rider b. Waiver of premium for payor rider c. Waiver of premium for disability rider

A.

Identify the type of accelerated death benefit to its example. Kyle Zabriski's accelerated death benefit rider will pay him because he is suffering from kidney failure, which is an affliction specified in the rider. A. Dread disease benefit rider B. Long-term care benefit rider C. Terminal illness benefit rider

A.

Once a policyowner completes the reinstatement application and provides new evidence of insurability, what else is needed to complete the policy's reinstatement? a. the policy owner has to pay all missed premiums b. the beneficiary has to agree in writing to reinstatement

A.

Why is an accidental death benefit sometimes called a double indemnity benefit? a. It frequently doubles the policy's face amount b. It requires two forms of proof that the death was accidental c. It doubles the premium for the coverage

A.

Marla Ross is the policyowner-insured of a $50,000 term life policy. The policy's annual renewal premium is due on May 1. The policy contains a 31-day grace period provision. If Marla dies on May 15 without having paid the renewal premium due, the insurance company will deduct the amount of the unpaid renewal premium from the policy's proceeds. a. true b. false

A. - Because Marla's policy is still in the grace period, the insurance coverage is still in force and the insurer is liable for the policy's full benefit less the amount of the unpaid premium.

Antoinette Childe is the policyowner-insured of a $100,000 whole life insurance policy issued by Shamrock. Shamrock has recently discovered that Ms. Childe overstated her age by 5 years on her insurance application. Ms. Childe is still alive. Shamrock most likely will refund Ms. Childe an amount that is equal to the difference in premiums paid and what she should have paid had her age had been stated correctly on the application. a. true b. false

A. - Because Ms. Childe is still living, Shamrock will most likely refund her an amount that represents the overpayment of premium caused by the misstatement.

Seamus Rafferty was the policyowner-insured of a $100,000 whole life insurance policy issued by the Shamrock Life Insurance Company. The application lists Mr. Rafferty's age as 45. While processing Mr. Rafferty's death claim, Shamrock discovered he was actually 50 when he purchased the policy. To account for the misstatement of Mr. Rafferty's age, Shamrock most likely will pay the beneficiary an amount that is a. Less than the policy's face amount b. More than the policy's face amount

A. - Shamrock most likely will reduce the policy's face amount to what the premiums paid would have purchased for a male insured age 50. As a result, the policy beneficiary will receive less than the policy's face amount.

Amanda Kensington from our previous example is insured by a $50,000 cash value life insurance policy. Disregarding any accrued interest, if Amanda dies with a policy loan of $4,000 outstanding, what death benefit will the policy's beneficiary receive? a. $46,000 b. $50,000 c. $54,000

A. - The death benefit payable is calculated as the $50,000 face amount - $4,000 loan = $46,000.

Marla Ross's sister Janine is the policyowner-insured of a universal life policy. Janine has not made a premium payment in four years; the insurer has used the policy's cash value to pay the monthly mortality and expense (M&E) charges. On June 1, the cash value of Janine's policy is zero. The grace period for Janine's policy begins on that date. If Janine from the previous example dies during the grace period without having made a payment, the insurer will deduct the amount of overdue M&E risk charges from the policy proceeds. a. true b. false

A. Because Janine's policy is still in the grace period, the insurance coverage is still in force. Therefore, the insurer will pay the policy proceeds but will first deduct the amount of overdue M&E risk charges.

Ray Novak is the policyowner-insured of a $100,000 whole life insurance policy. A rider attached to his policy gives him the right to purchase $20,000 of additional whole life insurance on specific dates without providing evidence of insurability. The rider that allows Ray to purchase the additional insurance on specific dates is known as a a. guaranteed insurability benefit b. second insured benefit

A. The guaranteed insurability benefit gives the policyowner the right to purchase additional insurance of the same type as the underlying life insurance policy—whole life, in this case. A second insured rider provides term insurance on the life of someone other than the policy's insured.

Most insurers limit the number of coverage units that can be purchased for a spouse or child. What do you think is the normal limit for coverage units? a. 5 to 10 b. 10 to 20 c. 20 to 40

A. The limit is normally 5 to 10 coverage units per policy, or $25,000 to $50,000 in coverage for a spouse and $5,000 to $10,000 in coverage for a child.

With a GI benefit, does the policyowner need to do anything to receive the additional insurance coverage? a. Yes b. No c. Sometimes

A. The purchase of additional insurance coverage does not happen automatically. The policyowner must purchase the coverage on a specified option date.Usually, if the policyowner skips purchasing additional coverage on an option date, that opportunity is lost forever. The policyowner can still purchase coverage on the next option date.

exclusion

An insurance policy provision that describes the circumstances under which the insurer will not pay the policy proceeds following an otherwise covered loss. - suicide for a specified period of two years

grace period provision

An insurance policy provision that specifies a length of time following each renewal premium due date within which the premium may be paid without loss of coverage. - usually 30 or 31 days - the coverage is in effect during the grace period - if the premium is not paid by end of grace period, the policy lapses

Can you tell what makes a misrepresentation material? Select each example that represents a material misrepresentation. (Choose all that apply.) a. Denise Rand's application indicated that she broke her left leg. Actually, it was her right leg. b. Jack Anthony's application stated that, on August 20th, he had a routine physical. Actually, he was being treated for heart disease. c. Sam Prada's application stated that he had seen the doctor on January 9th. Actually, it was January 10th. d. Morty Brennan's application indicated that he saw the doctor for treatment of a skin condition. Actually, he was being treated for diabetes.

B & D - The applications of Jack Anthony and Morty Brennan contain material misrepresentations because they did not disclose the serious conditions for which they visited their doctors. The misrepresentations of Denise Rand and Sam Prada are unlikely to change an insurer's evaluation of the risk and so wouldn't be material misrepresentations.

Identify the type of accelerated death benefit to its example. Andrew Wise's accelerated death benefit rider will pay him because he requires constant nursing home care due to advanced Alzheimer's disease. The monthly benefit will equal 2 percent of the policy's face amount. A. Dread disease benefit rider B. Long-term care benefit rider C. Terminal illness benefit rider

B.

In his application for a life insurance policy with the Star Life Insurance Company, Louis Kahn indicated no disease or disorder of the lungs. In fact, Mr. Kahn was being treated for tuberculosis. Star issued Mr. Kahn the policy, which contained a typical incontestability provision. Mr. Kahn died from tuberculosis one year after the policy was issued and his beneficiary promptly submitted a claim. Star discovered the material misrepresentation while evaluating the death claim. In this case, the contestable period a. has expired b. has not expired

B.

Kevin Walter was the policyowner-insured of a $75,000 life insurance policy that included a typical $75,000 accidental death and dismemberment (AD&D) benefit rider. While his policy was in force, Mr. Walter, who had been diagnosed with terminal stomach cancer, died in a traffic accident. If Mr. Walter from the previous question had survived the accident but had lost one arm and one leg, the benefit rider would have provided him with a dismemberment benefit of a. 0 b. $75,000 c. $150,000

B.

Some life insurance policies include an accidental death and dismemberment benefit. Do you think that such policies pay two benefits: one for death caused by an accident and an additional benefit if the deceased is dismembered in the accident? a. Yes b. No c. Sometimes

B.

To reinstate a policy, the original policy usually cannot have been surrendered and any outstanding policy loans must be repaid or reinstated with the policy. Any other requirements? a. Yes, the beneficiary of the reinstated policy must be the same as original policy. b. Yes, the insured must provide evidence of insurability. c. Yes, the policyowner's home address must be the same as before. d. No, that's all.

B.

Which condition usually is necessary for reinstatement? - The policyowner MUST have surrendered policy. - The policyowner MUST NOT have surrendered policy. - The policyowner MUST NOT have a policy loan outstanding.

B.

Marla Ross's sister Janine is the policyowner-insured of a universal life policy. Janine has not made a premium payment in four years; the insurer has used the policy's cash value to pay the monthly mortality and expense (M&E) charges. On June 1, the cash value of Janine's policy is zero. The grace period for Janine's policy begins on that date. Beginning on June 1, Janine will have how many days to make a premium payment to cover the M&E charges and keep the policy from lapsing? a. 15 days b. 30 or 31 days c. 61 or 62 days

B. - The grace period for a universal life insurance policy will last for 61 or 62 days, beginning on the date on which the cash value is insufficient to cover the M&E charge. However, on the date that the cash value is zero, the grace period will continue for 30 or 31 days after that date.

Amanda Kensington has taken out a policy loan. Select each true fact about this situation. a. Amanda is legally obligated to repay the loan. b. The insurance company charges interest on the loan. c. The insurance company performed a credit check on Amanda before approving the policy loan.

B. - The insurance company does charge interest on the loan, usually annually. However, a borrower is not legally obligated to repay a policy loan, and unlike with a bank loan, there is no credit check on the borrower of a policy loan.

When the owner of a universal life insurance policy takes a policy withdrawal, the insurer charges interest on the withdrawal. a. true b. false

B. - The insurer does not charge interest on the withdrawal but instead may charge a fee for the withdrawal and reduces the policy's cash value by the amount of the withdrawal.

When a policy's automatic premium loan (APL) provision is activated, the insurer automatically pays an overdue premium by making a loan against the policy's cash value until the insured dies, regardless of when death occurs. a. True b. False

B. - When an automatic premium loan provision is activated, the insurer automatically pays an overdue premium by making a loan against the cash value for as long as the cash value equals or exceeds the premium due.

Under a children's insurance rider, the premium amount charged for each coverage unit varies with the number of children covered and their ages. a. True b. False

B. The premium charged for each coverage unit is a stated amount, regardless of the number of children covered and their ages.

The premium for children's coverage under a spouse and children's insurance rider increases proportionately with each additional child. a. True b. False

B. The premium for the children's coverage under a spouse and children's insurance rider is a specified, flat amount that does not change with the number of children. Additional children are covered automatically at no extra premium after they reach the age of 15 days.

When a policyowner wishes to cancel an insurance policy during the free-look period, the insurance coverage is a. Not in effect b. In effect, and the policyowner receives a partial refund of the initial premium payment c. In effect, and the policyowner receives a full refund of the initial premium payment.

C. - A free-look provision gives a policyowner a stated time period—usually 10 days—to examine a newly delivered policy. During the free-look period, the policyowner can cancel the coverage and receive a refund of the entire initial premium paid.

What do you think happens to a policy's insurance coverage when the policyowner elects to receive the cash payment nonforfeiture option? a. The insurance coverage continues in a reduced amount. b. The insurance coverage continues for a specified period of time. c. The insurance coverage ends.

C. - When a policyowner elects the cash payment nonforfeiture option, the policyowner surrenders the policy, receives the net cash surrender value in a lump sum, and the insurance coverage ends.

What happens if the insured dies during the grace period without having paid the premium that was due? a. The insurer denies the claim and pays nothing to the beneficiary. b. The insurer denies the claim but returns all premiums paid for the coverage. c. The insurer pays the claim after deducting the amount of the unpaid premium from the benefit payable.

C. Coverage is still in effect during the grace period, so the insurer pays the policy benefit to the beneficiary. However, the insurer can deduct the amount of the unpaid premium from the benefit.

Remember Jack Anthony, who said he had a routine physical but was actually being treated for heart disease? Well, Jack died five years after buying a policy with a typical incontestability provision. While processing the claim, the insurer discovered the material misrepresentation in Jack's application. What do you think happened with Jack's claim? a. The insurer denied the claim for life insurance benefits b. The insurer paid only a portion of the death benefit to the beneficiary c. The insurer paid the full amount of the death benefit to the beneficiary d. I'm not sure.

D. - In most states, an insurer can challenge a policy's validity on the basis of fraudulent misrepresentation even after the expiration of the policy's contestable period. Jack appears to have made fraudulent misstatements in his insurance application. The insurer will evaluate Jack's case and determine whether to contest the claim or pay the death benefit to the beneficiary.