Life Policy Riders, Provisions, Options, and Exclusions

Interest Only

All of the following are Nonforfeiture options EXCEPT A Reduced paid-up B Interest only C Cash surrender D Extended term

This rider is available to all insureds with no additional premium.

All of the following are true regarding the guaranteed insurability rider EXCEPT A. The insured may purchase additional insurance up to the amount specified in the base policy. B. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. C. This rider is available to all insureds with no additional premium. D. The insured may purchase additional coverage at the attained age. Incorrect! The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.

$9,800

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A $0 B $200 C $9,800 D $10,000 Incorrect! In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

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 A. Conditions. B. Utmost good faith. C. Acceptance. D. Consideration.

Cash Option

An insured receives an annual life insurance dividend check. What term best describes this arrangement? A. Reduction of Premium B. Annual Dividend Provision C. Accumulation at Interest D. Cash option Incorrect! The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.

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, A The policy will terminate when the cash value is reduced to nothing. B The face amount of the policy will be reduced by the automatic premium loan amount. C The cash value will continue to increase. D The insurer will increase the premium amount.

reduced paid-up policy

In this policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.

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 A. One-year term option. B. Paid-up option. C. Accelerated endowment. D. Paid-up additions. Incorrect! The dividend is utilized to purchase one-year term insurance.

Joint & Survivor

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called A Fixed period. B Fixed amount. C Joint life. D Joint and survivor.

The same face amount as in the whole life policy.

Under an extended term nonforfeiture option, the policy cash value is converted to A The same face amount as in the whole life policy. B The face amount equal to the cash value. C A lower face amount than the whole life policy. D A higher face amount than the whole life policy. Incorrect! Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.

extended term nonforfeiture option

Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.

Consideration

What is the value offered by the insured to the insurer, and vice versa. The insured makes accurate statements in the application and remits premium payments. In exchange, the insurer provides benefits as stipulated in the contract.

6 Months

What is the waiting period on a Waiver of Premium rider in life insurance policies? A. 30 days B. 3 months C. 5 months D. 6 months

Nonforfeiture Values

What values include cash surrender, extended term and reduced paid-up. Interest only is a settlement option.

A 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? A It is reduced to the amount of what the cash value would buy as a single premium. B It is increased when extra premiums are paid. C It decreases over the term of the policy. D It remains the same as the original policy, regardless of any differences in value.

Term Rider

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? A Guaranteed insurability rider B Change of insured rider C Term rider D Accidental death and dismemberment rider

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? A Dividend Accumulation option B Paid-up option C Accumulation at Interest D Paid-up additions

Paid - Up Option

With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.