POLICIES, PROVISIONS & RIDERS

Life insurance policies that have cash value must provide for a maximum policy loan interest rate of no more than

8%

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider

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 explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's Rights

If a life insurance policy has an irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary.

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

Who has the legal title of the property in a trust?

Trustee

What required provision protects against unintentional lapse of the policy?

Grace period

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.

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

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit plus the earnings lost by the insurance company in interest income from the accelerated benefit.

Which nonforfeiture option has the highest amount of insurance protection?

Extended Term

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

Guaranteed insurability rider.

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?

Interest only option

Which of the following statements is TRUE about a policy assignment?

It transfers rights of ownership from the owner to another person.

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments?

Spendthrift provision

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will only receive payments of the interest earned on the death benefit.

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

The interest credited under this option is not taxable since it remains inside the insurance policy.

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

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?

$50,000

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

6 months

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount.

Equal to the original policy for as long a period of time that the cash values will purchase.

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

Increasing Term

Which settlement option allows the insurer to retain the face amount but pay some income based on gain on the proceeds to the beneficiary at regular intervals?

Interest only

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.

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

The paid-up addition option uses the dividend

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

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate.

All of the following are beneficiary designations EXCEPT

Specified

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed period

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

A life insurance policy does not have a war clause. If the insured is killed during a time war, what will the beneficiary receive from the policy?

The full death benefit

A rider attached to a life insurance policy that provides coverage on on the insured's family members is called the

Other-insured rider

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

Revocable beneficiary.

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

Cash option

The automatic premium loan provision is activated at the end of the

Grace period

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

Lump sum

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

The same face amount as in the whole life policy.