Module 3 - Life Provisions

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount? -Accelerated benefits provision -Entire contract -Accidental death and dismemberment clause -Consideration clause

Accidental death and dismemberment clause: an AD&D clause provides benefits for death due to an accident or for the loss of one or more hands, feet, arms, legs, or loss of sight

Which of the following Dividend options results in taxable income to the policy owner? -Paid-up additions -Cash -Accumulation at interest -Reduced premium

Accumulation at interest: while policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of -Additional term life at any time -Additional term life coverage at specified intervals -Additional whole life coverage at any time -Additional whole life coverage at specified times

Additional whole life coverage at specified times

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will -Pay the death benefit in full -Adjust the death benefit to an increased amount -Adjust the death benefit to a reduced amount -Deny the claim

Adjust the death benefit to a reduced amount

The Consideration clause in a life insurance contract contains what pertinent information? -Summary of benefits -Offer and acceptance -Entire contract -Amount of premium payments and when they are due

Amount of premium payments and when they are due

What action will an insurer take if an interest payment on a policy loan is not made on time? -Cancel the policy if not paid within the grace period -Automatically add the amount of interest due to the loan balance -Subtract from any dividends owed -Disallow any further loans

Automatically add the amount of interest due to the loan balance

The automatic premium loan provision is designed to: -Provide a source of revenue to the insurance company -Avoid a policy lapse -Allow a policy owner to request a policy loan -Allow a policy owner to take out additional coverage without evidence of insurability

Avoid a policy lapse

Variable Whole life insurance can be described as: -Both an insurance and securities product -An insurance product only -A securities product only -The insurance company assumes the investment risk

Both an insurance and securities

A policy loan is made possible by which of these life insurance policy features? -Extended-term provision -Cash value provision -Owner's rights provision -Consideration clause

Cash value provision

Which rider provides coverage for a child under a parent's life insurance policy? -Spouse term rider -Base insured rider -Payor benefit rider -Child term rider

Child term rider: one of the best methods of adding coverage for a child on a parent's life insurance policy is to add a child term rider

How are surrender charges deducted in a life policy with a rear-end loaded provision? -Deducted from the death benefit -Deducted when the policy is discontinued -Deducted from the policy's cash value -Deducted when assigned to another policy owner

Deducted when the policy is discontinued

Which provision prevents an insurer from changing the terms of the contract with the policy owner be referring to documents not found within the policy itself? -Policy exclusion -Incontestable -Entire contract provision -Assignment

Entire contract provision: found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? -Coverage can be added at specific events such as marriage or having a child -Evidence of insurability is not required when the option is exercised -Evidence of insurability is required when the option is exercised -Coverage can be added at specific ages

Evidence of insurability is required when the option is exercised

D is the policy owner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to? -Ex-wife -Current wife -Estate -Split equally between the ex-wife and current wife

Ex-wife: D's ex-wife is still the beneficiary of this policy, even though policy ownership has changed to his current spouse

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n) -Elimination -Exclusion -Limitation -Exception

Exclusion

An insured is past due on his life insurance premium but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period? -Refund of all premiums paid, plus interest -Refund of all premiums paid -Full face amount minus any past-due premiums -Full face amount

Full face amount minus any past due premiums

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n) -Entire contract provision -Consideration clause -Insuring agreement -Assignment agreement

Insuring agreement: the clause or provision sets forth the company's basic promise to pay benefits upon the insured's death

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT -Fixed period -Interest-only -Fixed amount -Life insurance

Interest only

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n): -1035 exchange -Inter vivos gift -Non-forfeiture option -Living benefit

Living benefit

Which of these is NOT considered to be a right given to a policy owner? -Surrendering the policy's cash value -Modify a provision in the insurance contract -Assignment of ownership -Change the beneficiary, if revocable

Modify a provision in the insurance contract

All of the following statements are true regarding a policy's Grace period, EXCEPT: -Past due premiums are waived -Policy loans may still be made -Full coverage continues -Grace period terms are stated in the policy

Past due premiums are waived

Which statement is TRUE in regards to a policy loan? -Past-due interest payments not paid after 3 months will void the policy -Past-due interest on a policy loan is added to the total debt -Insurance companies can send delinquent interest accounts to a collection agency -Insurance companies can charge an interest rate based on the policy owner's credit report

Past-due interest on a policy loan is added to the total debt

Which life insurance rider typically appears on a Juvenile life insurance policy? -Decreasing term rider -Inflation rider -Payor Benefit rider -Waiver of premium rider

Payor benefit rider: provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled

Which of these Nonforfeiture Options continue a build-up of cash value? -Waiver of premium -Extended-term -Reduced Paid-up -Cash Surrender

Reduced paid-up

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called: -Reinstatement -Grace period -Automatic premium loan -Waiver of premium

Reinstatement

Which of these provisions require proof of insurability after a policy has lapsed? -Insuring -Conversion -Reinstatement -Consideration

Reinstatement

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? -Payor clause -Automatic Premium loan provision -Reinstatement provision -Waiver of Premium

Reinstatement Provision

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy? -Accelerated death benefit rider -Return of premium rider -Family income rider -Term rider

Return of premium rider

Which of these types of life insurance allows the policy owner to have level premiums and to also choose from a selection of investment options? -Modified whole life -Variable life -Universal life -Adjustable life

Variable life

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached? -Accelerated benefits -Waiver of premium -Cost of living -Return of premium

Waiver of premium: guarantees that the premium will be paid if the insured is disabled for a specified period of time