Life insurance chap 4 Chapter Exam 2 - Life Provisions

collateral assignment

A provision that allows a policyowner to temporarily give up ownership rights to secure a loan

partial surrender

A provision that allows a policyowner to withdraw a policy's cash value interest free

Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue? Accumulation at Interest Option Cash Dividend Option Paid-Up Additions Option One-Year Term Dividend Option

Accumulation at Interest Option

Of the following dividend options, which of these is taxable? reduction of premium one year term paid up additions Accumulation at interest

Accumulation at interest

An error was made on Mary's life insurance application. Which of the following areas are errors commonly made on applications for which the incontestable clause does NOT apply? Marital status Age Address Income

Age

Rider

An endorsement found in an insurance plan which modifies the provisions of the policy

What part of the insurance policy states the promise of the insurance company to pay the death benefit? A) Declarations B) Conditions C) wavers D) Entire contract

Declarations

What is the name of the provision which states that a copy of the application must be attached to the policy when issued? Policy Summary Buyer's Guide Entire Contract Entire Policy

Entire Contract

Which of these would limit a company's liability to provide insurance coverage? Waiver Exclusion Rider Provision

Exclusion

An insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period? Incontestable period Probation period Reinstatement period Grace period

Grace period

Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake? Reinstatement clause Entire Contract clause Incontestable clause Nonforfeiture clause

Incontestable clause

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

What is the purpose for having an accelerated death benefit on a life insurance policy? A. It allows for a spouse to be added as a rider to a life insurance policy B. It allows for policy loans to be advanced to the insured in the event of unemployment C. It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill D. It allows for a third party to purchase a life insurance policy at a discounted rate and immediately advance a portion of the death benefit

It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill

Which of these is NOT considered to be a common life insurance nonforfeiture option? Cash surrender Extended term insurance Reduced paid-up insurance Life income annuity

Life income annuity

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 No interest will be charged on loan balance Term life policies are the only type of insurance that allows policy loans A loan can be taken out for up to the face amount of the policy

Net death benefit will be reduced if the loan is not repaid

What is an insurance policy's grace period?

Period of time after the premium is due but the policy remains in force

Which situation accurately describes a reduced paid-up nonforfeiture option? Policy has a decreased face amount Face amount of the new policy equals that of the original policy Cash value is surrendered to policyowner Premiums must continue to be paid

Policy has a decreased face amount

a reduced paid-up nonforfeiture option

Policy has a decreased face amount

All of the following are considered to be nonforfeiture options available to a policy owner EXCEPT Extended Term Insurance Cash Surrender Reduction of Premium Reduced Paid-Up Insurance

Reduction of Premium

Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death? Active Status Results Leave

Results

which of these is NOT a characteristic of the accelerated death benefit option The face amount and policy premium are not affected by the payment Before payment of the benefit is made, specific conditions must exist, such as suffering from a terminal illness There may be a dollar limit on the maximum benefit The benefit can be offered as a rider at a specific extra cost or may be at no cost

The benefit can be offered as a rider at a specific extra cost or may be at no cost

Under a life insurance policy, what does the insuring clause state?

The insurer's obligation to pay a death benefit upon an approved death claim

Exclusion

Which of these would limit a company's liability to provide insurance coverage?

All of these are valid options for what a policy owner may do with policy dividends EXCEPT cash outlay to the policy owner accumulate without interest reduction in policy premium buy additional insurance coverage

accumulate without interest

A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n)

collateral assignment

Life insurance policies will normally pay for losses arising from suicide commercial aviation war hazardous jobs

commercial aviation

Matt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt is killed while committing a felony dies of a stroke dies instantly from a car accident is injured in a skiing accident and dies 18 months later

dies instantly from a car accident

All of these are common exclusions to a life insurance policy EXCEPT hazardous occupations aviation disability war

disability

which of these is not considered to be a nonforfeiture option in the whole life insurance policy

interest only / life income annuity -Reduced paid-up insurance -extended term insurance -cash surrender

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 with interest during the last 12 months minus indebtedness and without interest during the last 6 months

minus indebtedness and without interest

The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of

overdue premium if the premium has not been paid by the end of the grace period

A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n) waiver of premium rider payor rider automatic premium loan rider juvenile waiver rider

payor rider

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

provide evidence of insurability to the insurer

The two major actions required for a policyholder to comply with the Reinstatement Clause are provide evidence of insurability, agree to a new incontestable period provide evidence of insurability, pay past due premiums pay past due premiums, agree to a new incontestable period. pay past due premiums, agree to a reduction in coverage

provide evidence of insurability, pay past due premiums

A policyowner 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 Extended term option Paid-up option Cash dividend option

reduction of premium dividend option

Under a life insurance policy, what does the insuring clause state?

the insured dies, the insurer promises to pay the beneficiary the death benefit as laid out in the policy

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, he has the option of resuming the original policy and paying the same premium the coverage can be extended with a lump sum payment all remaining cash values are paid to the policyowner the protection ends

the protection ends

Payor Benefit

will waive the premium on a child's life insurance policy if the parent paying the premium dies

Loans obtained by a policyowner against the cash value of a life insurance policy are treated as taxable income would not be treated as taxable income are limited by the face amount of the policy would be subject to a Federal estate tax

would not be treated as taxable income