Life Insurance Policy Provisions, Options, and Riders
How long is the required grace period in life insurance policies in this state?
1 month
In order to reduce the premium, an insurer can backdate a life policy up to
6 months
Naming a trust as the beneficiary of a life insurance policy can accomplish all of the following for the policyowner EXCEPT
Allow the trustee to transfer the assets of the trust to their personal account
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Cash surrender
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
According to the Entire Contract provision, what document must be made part of the insurance policy?
Copy of the original application
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
Which of the following is NOT typically excluded from life policies?
Death due to plan crash for a fare-paying passenger
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
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount
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
Which settlement option provides a single beneficiary with income for the rest of his/her life?
Singe Life
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
J applied for a life insurance policy on Jan 10. Policy was issued Jan 31. J doesn't want the policy anymore. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?
Feb 28 or 10 days after the time of policy is delivered
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
All of the following are beneficiary designations EXCEPT
Specified
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Pay 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
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
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?
The policyowner can specify the way proceeds are split in the policy
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance
Which of the following provisions would not be allowed as part of a life insurance policy issued in Michigan?
A provision that allows the effective date of the policy to be backdated up to 8 months in order to effect a lower premium rate for the insured
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 of the following applies to the 10-day free-look privilege?
It permits the insured to return the policy for a full refund of premiums paid.
Which of the following is true regarding a single life settlement option?
It provides income the beneficiary cannot outlive
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?
Policyowner
Who can request changes in premium payments, face value, loans, and policy plans?
Policyowner
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy?
Return 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
Children's riders attached to whole life policies are usually issued as what type of insurance?
Term
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 purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
An absolute assignment is a
Transfer of all ownership rights in a policy
