ExamFx Life Insurance (Life Policy Provisions, Riders, and Options)

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the cash value to pay the policy up early?

Paid-Up Option

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

Waiting period on a Waiver of Premium rider in life insurance policies is

6 months

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries.

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

Which is not true about beneficiary designations?

The beneficiary must have insurable interest in the insured

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

Payor Benefit Rider

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

Cash Value

What is the term for how frequent a policyowner is required to pay the policy premium?

Mode

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death?

A minor son of the insured

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income

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

Grace period.

All of the following are true regarding the guaranteed insurability rider EXCEPT:

This rider is available to all insureds with no additional premium

If the 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

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time

The interest earned on policy dividends is

Taxable

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months

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

Lump Sum

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

Which of the following information will be stated in the consideration clause of a life insurance policy?

The amount of premium payment.

What is the benefit of choosing extended term as a nonforfeiture option?

It as the highest amount of insurance protection

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

Reduce Paid-Up

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called...

Cost of living rider.

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 the 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

All of the following are Nonforfeiture options EXCEPT:

Interest Only

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

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy?

Substitute Insured Rider

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

The same face amount as in the whole life policy.

An absolute assignment is a

Transfer of all ownership rights in a policy

During partial withdrawal from a university life policy, which portion will be taxed?

Interest

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.

Which type of beneficiary is changeable at anypoint?

Revocable

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called...

Consideration

Which of the following riders would NOT cost 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.

A father owns a life insurance policy on his 15 yr 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.

The Waiver Cost of Insurance rider is found in what type of insurance?

Universal Life

Which kind of policy allows withdrawals or partial surrenders?

Universal Life

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the...

Incontestability Clause

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 values will purchase.

Which provision of life insurance policy states the insurer's duty to pay benefits upon the death of the insured and to whom the benefits will be paid?

Insuring clause

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. hat dividend option could she use?

Paid up Option

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

It transfers rights of ownership from owner to another person

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

Lump Sum

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. This means...

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

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

Collateral Assignment

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

Guaranteed Insurability rider

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