Pa life insurance ch 4 pt2 policy provisions, options, and riders
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy? $400 $800 $2,000 $4,000
$4,000
A provision that allows a policy owner to temporarily give up ownership rights to secure a loan is called
Collateral assignment
A waiver of premium rider allows an insured to waive premium payments if the insured is
Completely and permanently disabled
In what part of an insurance policy are policy benefits found?
Declarations
Which of these is considered to be a living benefit option in a life insurance policy
Accelerated death benefit
Which of the following is considered to be an alternative to a life settlement
Accelerated death benefit rider
The double indemnity provision in a life insurance policy pertains to an insurers death caused by an
Accident
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?
Accumulation at Interest Option
Of the following dividend options, which of these is taxable? Reduction of premium One year term Paid-up additions Accumulation at interest
Accumulation at interest
An error was made on Mary's life insurance application. Which of the following areas do errors commonly occur in applications and for which the incontestable clause does not apply
Age
A life insurance policyowner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because if his disability
Disability income rider
What is the name of the provision which states that a copy of the application must be attached to the policy when issued
Entire Contract
Which of these would limits company's liability to provide insurance coverage
Exclusion
A life insurance policy normally constrains a provision that restricts coverage in the event of death under all of the following situations except
Fare paying passenger
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability is called
Guaranteed insurability rider
Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability(this rider is called...)
Guaranteed insurability rider
Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake
Incontestable clause
Which of these is not considered to be a nonforfeiture option in a whole life insurance policy
Interest only
What is the purpose for having an accelerated death benefit on a life insurance policy
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
Which of these is not considered to be a common life insurance nonforfeiture option
Life income annuity
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of the premiums paid
Minus indebted and without interest
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE? Net death benefit will be reduced if the loan is not repaid No interest will be charged on loan balance Term life policies are the only type of insurance that allows policy loans A loan can be taken out for up to the face amount of the policy
Net death benefit will be reduced if the loan is not repaid
A whole life policy option where extended term insurance is selected is called an
Nonforfeiture option
A provision that allows a policy-owner to withdraw a policy's cash value interest free is an
Partial surrender
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of
Past due premiums that have not been paid by the end of the grace period
What is an insurer required to do when faced with an error made under the misstatement of age provision
Pay age-corrected benefits
Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
Payor benefit
What is an insurance policy's grace period
Period of time after the premium is due but the policy remains in force
Which situation accurately describes a reduced paid up nonforfeiture option
Policy has a decreased face amount
Which of the following is a reinstatement condition
Proof of insurabiilty
All of the following are considered to be nonforfeiture options available to a policyowner except
Reduction of Premium
A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due? Reduction of premium dividend option Extended term option Paid-up option Cash dividend option
Reduction of premium dividend option
A life insurance policyowner does NOT have the right to
Revoke an absolute assignment
Which of these is not a characteristic of the accelerated death benefit option
The benefit can be offered as a rider at a specific extra cost or may be at no cost
All of the following riders can increase the death benefit amount except (cost of living, waiver of premium, accidental death rider, guaranteed insurability)
Waiver of Premium
Ownership of a life insurance policy may be temporarily transferred with a(n) collateral assignment absolute assignment transferable assignment beneficiary assignment
collateral assignment
Life insurance policies will normally pay for losses arising from
commercial aviation
Matt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt
dies instantly from a car accident
All of these are standard exclusions found in a life insurance policy EXCEPT
disability
An insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period? Incontestable period Probation period Reinstatement period Grace period
grace period
A guaranteed issue insurance policy has no initial premium requirement incontestable period waiting period medical underwriting
medical underwriting
A provision in a whole life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n) insuring clause payor provision reinstatement provision nonforfeiture provision
nonforfeiture provision
A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n) waiver of premium rider payor rider automatic premium loan rider juvenile waiver rider
payor rider
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if
the insured outlived the beneficiary
A whole life insurance policy accumulates cash value that becomes
the policy loan value which the insured may borrow against
If an insured dies during the grace period with no premiums paid the policy would be payable, minus the premium amount the policy would be payable only after the beneficiary makes past due premium payment all past premiums will be refunded with interest the claim would be denied
the policy would be payable, minus the premium amount
Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,
the protection ends
The free-look provision gives the policyowner
the right to return the policy for a full refund within a specified number of days
Loans obtained by a policyowner against the cash value of a life insurance policy are treated as taxable income would not be treated as taxable income are limited by the face amount of the policy would be subject to a Federal estate tax
would not be treated as taxable income
If an insured's age on a life insurance policy has been misstated, what is the insurers liability if the insured dies
A prorated death benefit in the amount of insurance the insureds premiums would have been purchased if at the correct age
An endorsement found in an insurance plan which modified the provisions of the policy is called
A rider
Which of the following is NOT part of an insurance contract
Certificate Authority
James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount? The original face amount will be paid to the beneficiary The policy will be voided with no death benefits paid The death benefit paid will be what the premium would have purchased at the correct age The amount of premiums paid will be returned with interest
The death benefit paid will be what the premium would have purchased at the correct age
Under a life insurance policy, what does the insuring clause state?
The insurer's obligation to pay a death benefit upon an approved death claim
Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?
The policy may be paid up early by using policy dividends
All of these are common exclusions to a life insurance policy EXCEPT
accidental death
All of these are valid policy dividend options for a life insurance policyowner EXCEPT
accumulate without interest
Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?
results
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST remit all past-due premiums within the grace period provide evidence of insurability to the insurer resubmit a new life insurance application provide a valid reason for the lapse
provide evidence of insurability to the insurer
The two major actions required for a policyholder to comply with the reinstatement clause are
provide evidence of insurability, pay past due premiums