Chapter 3 : Life insurance policy riders, provisions, options, and exclusions
which of the following is NOT typically excluded from life policies
Death due to plane crash for a fare-paying passenger
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
one-year term option
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
What is the other term for the cash payment settlement option
Lump sum
Nonforfeiture values guarantee which of the following for the policyowner?
That the cash value will not be lost
Regarding the free-look provision, the insurance company
Must allow the policyowner to return the policy for a full refund
Which of the following riders would NOT cause the Death benefit to increase
Payor benefit rider
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount
Children's riders attached to whole life policies are usually issued as what type of insurance
term
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy
Guaranteed insurability option
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 life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary
Life income with period certain
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?
Policyowner
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to
The contingent beneficiary
If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy
The death benefit will be smaller
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
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
The insured's premiums will be waived until she is 21
What is the advantage of reinstating a policy instead of applying for a new one
The original age is used for premium determination
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement
$200,000 (the beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.
A couple owns a life insurance policy with a children's term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability
proof of insurability is not required
Which of the following is true about the mandatory free look period in a life insurance policy
it commences when the policy is delivered
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
Which of the following is TRUE about nonforfeiture values
They are required by state law to be included in the policy
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100,000
Which of the following information will be stated in the consideration clause of a life insurance policy
The amount of premium payment
If a life insurance policy has an irrevocable beneficiary designation
The beneficiary can only be changed with written permission of the beneficiary
an absolute assignment is a
Transfer of all ownership rights in a policy
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
fixed amount
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
Life income joint and survivor settlement guarantees
Income for 2 or more recipients until they die
All of the following are Nonforfeiture options EXCEPT
Interest only
Which of the following settlement options in life insurance is known as straight life
Life income
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider
Which of the following explains the policyowner's right to change the beneficiaries, choose options, and receive proceeds of a policy
Owner's rights
An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured has misstated information during the application process. What can they do?
Pay the death benefit
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
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
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military
War or military service
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
becomes termanilly ill
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceased the insured
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner
cash surrender
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
For how long is an insurance company allowed to defer policy loan requests
6 months
What is the waiting period on a waiver of premium rider in life insurance policies
6 months
An insured misstates her age at the time the life insurance application is taken. The misstatement may result in
Adjustment in the amount of the death benefit
Under which of the following circumstances would an insurer pay accelerated death benefits
An insured is diagnosed with cancer and needs help paying for her medical treatment
Which of the following premium payments modes will incur the lowest overall payment
Annual
When may an insurance company use suicide as a defense against paying a death claim
When death occurs within a specified period of time after the policy was issued
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member
family term rider
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
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
Paid-up additions
At the time of the insured purchased her life insurance policy, she added a rider that will allow her to purchased additional insurance in the future without having to prove insurability. This rider is called
guaranteed insurability
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe
Reduction of premium
All of the following are true regarding the guaranteed insurability rider EXCEPT
The rider is available to all insureds with no additional premium
Which of the following is true of a children's rider added to an insured's permanent life insurance policy
it is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years
2 years
Which nonforfeiture option provides coverage for the longest period of time
reduced paid-up
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this.
reduction of premium
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance
An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in the accordance with the terms of the contract. This is called
Consideration
The two types of assignments are
absolute and collateral
Which of the following is true about the premium on the children's rider in a life insurance policy
it remains the same no matter how many children are added to the policy