Chapter 3: Life Insurance Policy Riders, Provisions, Options, and Exclusions

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Common disaster clause The Common Disaster Clause provision states that when an insured and beneficiary die in a common accident, and the beneficiary dies before or within a specific period of time after the insured, the insurer will proceed as if the insured outlived the beneficiary.

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the original policy for as long as the cash value will purchase With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount the accidental death rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs writhing 90 days of such an accident

What is the other term for the cash payment settlement option?

Lump sum. Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump sum.

Who can request changes in premium payments, face value, loans, and policy plans?

Policyowner Mandatory provisions give these rights to the policyowner.

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. With the Interest Only settlement option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, or annually).

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

The same face amount as in the whole life policy Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age.

Which of the following components must a life insurance policy have to allow policy loans?

cash value The policy loan option is found only in policies that contain cash value.

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

long term care Long-term care rider provides for the payment of part of the death benefit (called accelerated benefits) in order to take care of the insured's health care expenses, which are incurred in a nursing or convalescent home.

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 Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.

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?

Monthly premium waiver and monthly income The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.

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?

Pay the death benefit the incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Which nonforfeiture option has the highest amount of insurance protection?

Extended Term Same face value as original policy but for shorter period of time

Regarding the free-look provision, the insurance company

Must allow the policyowner to return the policy for a full refund. This provision allows the policvowner a specified number of davs from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The beginning of this free-look period starts when the policyowner receives the policy, not when the insurer issues the policy.