Life Insurance - Individual Life Insurance Contract // Provisions and Options
The Single Life Option can provide a single beneficiary...
income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.
Exclusions are
restrictions of coverage as stated in the policy.
The consideration clause states...
that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.
In the Life Income Option arrangement the recipient's life expectancy and the amount of principal determine
the amount of each installment paid
The spendthrift clause in a life insurance policy prevents...
the beneficiary's reckless spending of benefits, and protects the policy proceeds from creditors of the beneficiary or policyowner.
The Reduction of Premium option allows ...
the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.
An absolute assignment is a
transfer of all ownership rights in a policy
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
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash Option
When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called
Class designation.
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
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
Common Disaster
According to the entire contract provision, what document must be made part of the insurance policy?
Copy of the original application
Per stirpes class designation provides...
Distribution by family line or branch in the event a beneficiary predeceases the insured.
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire Contract
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount
Equal to the original policy for as long a period of time that the cash values will purchase.
Items stipulated in the contract that the insurer will not provide coverage for are found in the
Exclusions clause.
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term
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 individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceases the insured
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die.
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
Interest only option
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
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?
Military service or war
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.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?
Pay a reduced death benefit
What type of beneficiary designation allows the benefit to pass from a deceased primary beneficiary to the beneficiary's heirs, instead of splitting the benefit among surviving primary beneficiaries?
Per stripes
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?
Policyowner
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.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
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
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
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement provision
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.
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.
An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?
The policy will terminate when the loan amount with interest equals or exceeds the cash value.
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy.
What is a major problem with naming a trust as the beneficiary of a life insurance policy?
They are expensive to administer.
California law requires an insurance company's dividends be credited
To participating policies on the anniversary date of the policy provided all premiums are current.
What is the purpose of a suicide provision within a life insurance policy?
To protect the insurer from persons who purchase life insurance with the intention of committing suicide
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
How long will the beneficiary receive payments under the single life settlement option?
Until the beneficiary's death
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. However, it does not apply to statements relating to age, sex and identity.
The cash option allows...
an insurer to send the policyholder an annual, nontaxable dividend check.