Life Policy Provisions, Riders and Options
A minor son of the insured
What named beneficiary would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death?
Insuring Clause
What policy component contains the company's promise to pay?
Long-Term Care
What rider added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?
Payor Benefit Rider
What rider would NOT cause the Death Benefit to increase?
Fixed Amount
When the policyowner specifies a dollar amount in which installments are to be paid, they have chosen which settlement option?
Life income with period certain
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?
The insured's contingent beneficiary
Who would receive the death benefit if the insured and the primary beneficiary died in the same accident?
Interest
During partial withdrawal from a universal life policy, which portion will be taxed?
Cash Option
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Income for 2 or more recipients until they die
Life income joint and survivor settlement option guarantees
That the cash value will not be lost
Nonforfeiture values guarantee what for the policyowner?
Set premium rates
The Ownership provision entitles the policyowner to
Taxable
The interest earned on policy dividends is
Automatic Premium Loan
What protects the insured from an unintentional policy lapse due to nonpayment of premium?
Increasing Term
What type of insurance would be used for a Return of Premium rider?
Cost of Living Rider 2
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
Refund the premiums paid
An insured committed suicide 6 months after his life insurance policy was issued. The insurer will
Pay a reduced benefit
He purchased policy 3 years ago when he was 40. He is killed and it is discovered that he's actually 45. What will the company do?
The longer the period selected, the smaller each installment will be
In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?
$50,000
Insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
Interest Only Option
Policyowner wants to make sure that 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 come of age. Which settlement option should the policyowner choose?
Universal Life 2
The Waiver of Cost of Insurance rider is found in what type of insurance?
Becomes terminally ill
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
Interest Only
What is NOT a nonforfeiture option?
Insuring Clause 2
What provision of a life insurance policy states that the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Policyowner
Who has the right to the cash value of a life insurance policy?
Transfer of all ownership rights in a policy
An absolute assignment is
Reinstatement Provision
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?
Incontestability Clause
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
They can be changed only with the written consent of the beneficiary
What is TRUE concerning irrevocable beneficiaries?
Contingent Beneficiary
What type of beneficiary is next in line after the primary beneficiary?
Level or flexible
Which 2 terms are associated directly with the premium?
The death benefit will be smaller
If an 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?
Return of unused premiums
What are policy dividends?
When death occurs within a specified period of time after the policy was issued
When may an insurance company use suicide as a defense against paying a death claim?
To purchase a smaller amount of the same type of insurance as the original policy
The paid-up addition option uses the dividend
Both the principal and interest will be liquidated over a selected period of time
What best describes the fixed-period settlement option?
An insured is diagnosed with cancer and needs help paying for her medical treatment
What circumstance would an insurer pay accelerated benefits?
Cash Value
What component of a life insurance policy is required so life insurance policy can allow policy loans?
Size of each installment
What determines the length of time that benefits will be received under the Fixed-Amount settlement option?
It transfers rights of ownership from the owner to another person
What is TRUE about a policy assignment?
Suicide is excluded for ra specific period of years and is covered thereafter
What is TRUE about a suicide life clause in a life insurance policy?
Funds exceeding the premium paid are taxable as ordinary income
What is TRUE about the cash surrender nonforfeiture option?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated
What is TRUE about the reinstatement provision?
It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age
What is TRUE of a children's rider added to an insured's permanent life insurance policy?
To provide a guaranteed income for a certain amount of time
What is the purpose of a fixed-period settlement option?
6 Months 2
What is the waiting period on a Waiver of Premium rider in life insurance policies?
The rider is usually level term insurance
What is true about a spouse term rider?
Annual
What premium payment mode will incur the lowest overall payment?
If the father is disabled for more than 6 months
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit Rider. What scenario will the rider waive the payment of premium?
Common Disaster
An insured and his wife are involved in an accident. The husband dies instantly and the fie 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy has what provision?
The dividend is applied to the next year's premium (reduces next year's premium)
With the reduction of premium dividend option, how is the dividend used?
Pay a reduced death benefit
An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?
Guaranteed Insurability
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
Guaranteed Insurability Option
Purchases policy with face value of $25,000. Wants to be sure he can add additional coverage later. What option should he choose?
One-Year Term Option
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
The same face amount as in the whole life policy
Under an extended term nonforfeiture option, the policy cash value is converted to
Primary Beneficiary
What beneficiary designation has first claim to the death proceeds of a life insurance policy?
Paid-Up Additions
What dividend option can increase the death benefit of the existing life policy?
The insurer will pay twice the face amount
What does the term double indemnity mean?
Dividend amounts are guaranteed in the policy
What is NOT true of dividends?
Policy premium in a reinstated policy will be set according to the insured's original age
What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?
Lump-sum/cash, fixed period, fixed amount, life income and interest only
What settlement options are available in life insurance policies?
Settlement Options
What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?
Collateral Assignment
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
Revocable
What type of beneficiary can be changed at any point by the policyowner?
Term Rider
When attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members
When the primary dies before the insured
When will a contingent beneficiary receive death benefits from a life insurance policy?
Extended Term 2
Which nonforfeiture option has the highest amount of insurance protection?
Reduction of Premium 2
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?
Fixed Period
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?
The Contingent Beneficiary
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to
Owner's Rights
What explains the policyowner's right to change beneficiaries, choose options and receive proceeds of a policy?
The amount of premium payment
What information will be stated in the consideration clause of a life insurance policy?
The beneficiary must have insurable interest on the insured
What is FALSE about beneficiary designations?
This rider is available to all insureds with no additional premium
What is FALSE about the guaranteed insurability rider?
Policy loans can be made on policies that do not accumulate cash value
What is FALSE regarding insurance policy loans?
Fixed-Period Installments
What is NOT a dividend option?
Term Rider
What when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
It determines who receives policy benefits if the primary beneficiary is deceased
What would be an advantage to naming a contingent (secondary) beneficiary in a life insurance policy?
Purchase a single premium policy for a reduced face amount
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Revocable Beneficiary
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as
$9,800
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1, but they failed to pay. How much would the beneficiary receive?
Paid-Up Option 2
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. What dividend option could she use?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
Consideration
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
If the primary beneficiary predeceased the insured
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary and his daughter as contingent beneficiary. Under what circumstance could the daughter collect the death benefit?
Pay the death benefit
An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated the information during the application process. What can they do?
It begins when the policy is delivered
What is TRUE about the 10-day free-look period in a Life Insurance policy?
The beneficiary can only be changed with written permission of the beneficiary
If a life insurance policy has an irrevocable beneficiary designation,
Guaranteed Insurability Rider
If a like policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
The balance of the loan will be taken out of the death benefit
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
6 Months
How long is an insurance company allowed to defer policy loan requests?
Lump-Sum Payment
If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?
Lump Sum 2
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?
The policy will terminate when the cash value is reduced to nothing
If an insured continually uses the automatic premium loan option to pay the policy premium,
Policyowner
If the policyowner, the insured, and the beneficiary under a life insurance policy are 3 different people, who has the ownership rights?
Universal Life
Owns life insurance policy. To pay medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does she have?
10 days after the policy was delivered
Receives policy on February 18 and decides he doesn't want it. When would they need to return the policy to the insurer in order to receive a full refund payment?
$100,000
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
Absolute and Collateral
The two types of assignments are
Joint and Survivor
The type of settlement option which pays throughout the lifetime of two or more beneficiaries is called
2 Years
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 how many years?
The insured's age at death
To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will NOT be determined by
Payor Benefit
What allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
It permits the insured to return the policy for a full refund of premiums paid
What applies to the 10-day free-look period?
Absolute Assignment
Which of the two types of policy assignments require transfer of all ownership rights in the policy to a third party?
Policyowner 2
Who controls the changes in premium payments, face values, loans and policy loans in a life insurance policy?
Cost of Living Rider
A long stretch of economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?
The amount of the loan will be subtracted from the death benefit
A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?
War and military service, hazardous occupation and aviation
What are the most common exclusions in life insurance policies?
Waiver of Premium
What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?
Reduction of Premium
Policyowner pays for 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?
It will be paid to the insured's estate
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?
Paid-Up Additions
What dividend option is automatically selected by the company if not chosen by the policyowner?
The cash value is converted to the same face amount as in the whole life policy
What happens to a policy's cash value under an extended term nonforfeiture option?
The proceeds are paid to the insured's estate
What happens to the proceeds of a life insurance policy if there is no named beneficiary?
The original age is used for premium determination
What is the advantage of reinstating a policy instead of applying for a new one?
Lump Sum
What is the other term for the cash payment settlement option?
To allow the insured to return the policy with a full refund
What is the purpose of a free-look period?
To determine how the death benefit will be paid to the beneficiary
What is the purpose of settlement options in life insurance policies?
To prevent the unintentional lapse of a policy because of nonpayment of the premium
What is the purpose of the Automatic Premium Loan Provision?
It remains the same no matter how many children are added to the policy
What is true about the premium on the children's rider in a life insurance policy?
Incontestability Provision
What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?
Entire Contract
What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?
Extended Term
What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?
Reduced Paid-Up
What nonforfeiture option provides coverage for the longest period of time?
Reinstatement
What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?
Grace Period 2
What provision in a life insurance policy extends coverage beyond the premium due date?
Grace Period
What required provision protects against unintentional policy lapse?
Substitute Insured Rider
What rider is often used in business life insurance policies when the policyowner needs to change the insured under the policy?
When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years)
When can an insurance company use suicide as a defense against paying a death claim?
Equal to the original policy for as long as the cash value will purchase
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Family Term Rider
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Paid-Up Additions`
Has life insurance policy and receives quarterly dividends. Instructed company to apply policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
The loan amounts are deducted from the death benefit
If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?
A copy of the original insurance application
To meet the requirement of the entire contract policy provision, an insurance policy must contain what?
Cash Surrender
Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?
Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term and acceleration of endowment
What are the dividend options in life insurance policies?
Coverage ends and the policy cannot be reinstated
What happens when a policy is surrendered for its cash value?
Life Income
What settlement option in life insurance is known as straight life?
Exclusions Clause
Items stipulated in the contract that the insurer will not provide coverage for are found in the
Monthly premium waiver and monthly income
After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit Rider. What benefits will he receive?
The death benefit will be adjusted to the amount that the insured could obtain for her correct age
An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?
Cash Surrender, Reduced Paid-Up and Extended Term
What are the three nonforfeiture options in life insurance policies?
It is reduced to the amount of what the cash value would buy as a single premium
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
Automatic Premium Loan 2
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
No. Beneficiaries fo not have insurable interest on the insured
Is the beneficiary required to have insurable interest on the insured?
Grace Period 2
The automatic premium loan provision is activated at the end of the
The interest is not taxable since it remains inside the insurance policy
What is FALSE regarding the accumulation at interest option?
Death due to a plane crash for a fare-paying passenger
What is NOT excluded from life policies?
It will pay double or triple the amount
What is TRUE concerning the Accidental Death Rider?
It has the highest amount of insurance protection
What is the benefit of choosing extended term as a nonforfeiture option?
Common Disaster Clause
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Other-Insured Rider
What is the name for a life insurance policy rider that provides coverage on the insured's family members?
Universal Life 3
What kind of policy allows withdrawals or partial surrenders?
Collateral Assignment
Bank required proof of additional assets to secure a loan. Business owner then decided to use her $250,000 life insurance policy to secure the loan. What provision makes this possible?
Mode
The term for how frequently a policyowner is required to pay the policy premium
The beneficiary will only receive payments of the interest earned on 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?
Return of Premium
When they 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?
Paid-Up Option
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest and the policy cash value to pay the policy up early?
Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary
With the interest only settlement option, what happens to the policy's death benefit?
The insured's premiums will be waived until she is 21
A father owns a policy on his daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
Copy of the original application
According to the entire contract provision, what document must be made part of the insurance policy?
They are required by state law to be included in the policy
What is TRUE about nonforfeiture values?