Chapter 4 (Life Provisions) - Life Insurance Policies - Provisions, Options and Riders

4. 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 premiums paid?

minus indebtedness and without interest

Dividend Options

options policy owner has when receiving dividend payments form an insurance policy 1: Cash (tax-free); 2: Apply to future premiums 3: Retained by Insurer @ interest 4: Buy Paid-up WL policy add-ons 5: Pay-up existing policy 6: Buy 1-yr. Term policy

Policy Loan (cash withdrawal) Provisions

polices that have cash value also have loan and withdrawal provisions. most states after 3 years its available. loans with interest can't exceed the guaranteed cash value or policy is void. policy loans are not taxable. any loans with interest due at time of death will be deducted from policy proceeds

Collateral Assignment

policy created to a creditor as security for a debt. creditor is to be reimbursed out of policy proceeds for amount owed. ownership is temporarily transferred

Entire Contract

states the insurance policy itself, any riders and endorsements/amendments, and the application comprise the entire contract between all parties

14. Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?

Payor Benefit

9. A whole life insurance policy accumulates cash value that becomes

Policy loan value which the insured may borrow against

8. Which of the following protects a policy owner from a misrepresentation caused by an innocent mistake?

Incontestable Clause

11. 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

10. 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

Reinstatement Condition

putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past due premiums. proof of insurability

19. Of the following dividend options, which of these is taxable?

Accumulate at Interest

18. All of these are valid policy dividend options for a life insurance policy-owner EXCEPT

Accumulate without interest

15. Which of the following is NOT part of an insurance contract?

Certificate of Authority

6. Ownership of a life insurance policy may be temporarily transferred with a(n)

Collateral Assignment

2. A whole life policy option where extended term insurance is selected is called a(n)

Nonforfeiture Option

Guaranteed Insurability Rider

Allows insured to purchase additional amounts of disability income insurance at future dates - future dates are policy anniversary dates -added coverage can be attained but must prove income increase - AKA Additional Purchase or Future Increase Option

3. A provision that allows a policy-owner to withdraw a policy's cash value interest free is a(n)

Partial Surender

Reduction of Premium Dividend Option

allows a policy owner to use the dividend to pay all or part of the next premium due on the policy

Accelerated Death Benefits Rider

allows insureds who are terminally ill to collect part or all of their life insurance benefits before they die expected to die in 1-2 years. whatever is taken out is deducted from death benefit when death occurs. offered with NO increase in premium

13. A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)

guaranteed insurability rider

Incontestable Clause

states that the insurer cannot contest the policy after it has been in force two years during the insured's lifetime

16. All of these are standard exclusions found in a life insurance policy EXCEPT

disability

1. Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?

Extended Term Insurance

5. 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

12. Which of the following is a reinstatement condition?

Proof of insurability

7. 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,

Protection ends

20. In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST

Provide evidence of insurability to the insurer

17. A policy-owner 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

Absolute Assignment

assignee receives full control over the policy and full rights to its benefits, typically assigned to secure a debt

Nonforfeiture Options

options you have for your cash value if you terminate the policy that has cash value. Cash Surrender- policy owner receives the policy's cash value, no longer covered. Extended Term Options -policy owner can use cash value to buy level, extended term insurance . no premiums are paid. Reduced Paid-Up Option - policy-owner pays no more premiums but face amount is decreased

Suicide Clause

states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid minus indebtedness and without interest. will not pay claim due to aviation, war or military, crime, alchool/drugs, hazardous job or hobby