Life Policy Riders, Provisions, Options, and Exclusions
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
for how long is an insurance company allowed to defer policy loan requests?
6 months
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in
adjustment in the amount of death benefit
under which circumstances would an insurer pay accelerated benefits?
an insured is diagnosed with cancer and needs help paying for her medical treatment (when insured's endure financial hardship due to severe illness)
which provision of a 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
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
what is the benefit of choosing extended term as a nonforfeiture option?
it has the highest amount of insurance protection
which of the following is true about a policy assignment?
it transfers rights of ownership from the owner to another person
which two terms are associated directly with the premium?
level or flexible
what is the term for how frequently a policyowner is required to pay the policy premium?
mode
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
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
other-insured rider
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?
paid-up option
Which nonforfeiture option provides coverage for the longest period of time?
reduced paid-up
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
An 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?
$50,000 (the face of the term policy would be the same as the face amount provided under the whole life policy)
which is true about a spouse term rider?
The rider is usually level term insurance
which of the following premium payment modes will incur the lowest overall payment?
annual
which of the following is NOT typically excluded from life policies?
death due to plane crash for a fare-paying passenger
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 value will purchase
which of the following is true of a children's rider added to an insured's permanent life insurance policy?
it is term insurance that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age
which of the following statements is TRUE concerning the Accidental Death Rider?
it will pay double or triple the face amount
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
joint and survivor
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 of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
owner's rights
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
all of the following are true regarding insurance policy loans EXCEPT
policy loans can be made on policies that do not accumulate cash value
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
The Ownership provision entitles the policyowner to do all of the following EXCEPT
set premium rates
an absolute assignment is a
transfer of all ownership rights in a policy
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
waiver of premium
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?
automatic premium loan
the accelerated benefits provision will provide for an early payment of the death benefit when the insured
becomes terminally ill
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
cash surrender
which of the following components must a life insurance policy have to allow policy loans?
cash value
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 rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
family term rider
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
what required provision protects against unintentional policy lapse?
grace period
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
what happens when a policy is surrendered for its cash value?
coverage ends and the policy cannot be reinstated
all of the following are dividend options EXCEPT
fixed-period installments (this is a settlement option)
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
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 include din the policy?
guaranteed insurability option
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
What type of insurance would be used for a Return of Premium rider?
increasing term
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 allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
payor benefit
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
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
Children's riders attached to whole life policies are usually issued as what type of insurance?
term
which of the following, 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?
term rider
which of the following information will be stated in the consideration clause of an insurance policy?
the amount of premium payment
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 NOT true about beneficiary designations?
the beneficiary must have insurable interest in the insured
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
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to
the insured's estate
what is true about a spouse term rider?
the rider is usually level term insurance
which of the following is TRUE about nonforfeiture values?
they are required by state law to be included in the policy
what is the purpose of a fixed-period settlement option?
to provide a guaranteed income for a certain amount of time
