Life Provisions
P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
The consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due.
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates specified in the contract with no evidence of insurability required
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic policy loan
Which of the following provisions guarantees that premiums will be waived if a Juvenile life policyowner becomes disabled?
Payor clause.
a provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:
Policy load provision
The ______ is authorized to assign a life insurance policy as collateral for a loan?
Policyowner
The ________ has the right to change a life insurance policy's beneficiary.
Policyowner
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
The consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and?
The initial premium
A life insurance policyowner would like to take out a policy load against the cash value in his whole life policy. The interest rate applied to this load may vary over time. This is referred to as a(n) ______ rate loan.
Variable
When is the face amount of a whole life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first.
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the death benefit
Which rider provides coverage for a child under a parent's life insurance policy?
Child term rider.
D owns a whole life policy that was purchase 10 years ago. If the premium payments suddenly stop and D takes no additional action, which nonforfetuire option will the insurer likely proceed with?
Extended term
In a life insurance contract, an insurance company's promise to pay stated benefits is called the:
Insuring clause
Dividends paid from a life insurance policy are?
Issued by the insurer
What is an example of an Nonforfeiure option?
Life income.
K owns a whole life policy. If K wants an increasing death benefit to protect against inflation, which dividend option should she choose?
Paid-up additional insurance
A term life rider offers the insured?
Additional life coverage
N is covered by a Term life policy and does not make the required premium payment which was due August 1. N dies september 15. What action will the insurer take?
Claim will be denied.
What provision in a life insurance policy states that the application is considered part of the contract?
Entire contract provision
Which provision prevents an insurer from changing the terms of the contract with the policy owner by referring to documents not found within the policy itself?
Entire contract provision
Which of the following nonforfeiture options offers the highest death benefit?
Extended term.
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)
Insuring agreement
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
The AD&D provision in a life insurance policy would pay additional benefits if the insured:
Is blinded in an accident
An inured's inability to perform two or more activities of daily living may trigger which type of life policy rider?
Long term care
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurable contract
Which of the following statement is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify.
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
All of the following statements are true regarding a policy's grace period, EXCEPT?
Past due premiums are waived.
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
What benefit does the payor clause on a Juvenile life policy provide?
Premiums are waived if the payor becomes disabled.
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable life
A cost of living rider gives the insured?
additional death benefits
The incontestable clause allows an insurer to:
Contest a claim during the contestable period.
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premium
In a life insurance policy, which provision states who may select policy options, designate an name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's rights
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called an?
AD&D
The automatic premium load provision is designed to:
Avoid a policy laps
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT?
Beneficiaries age.
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income
A return of premium life insurance policy is?
Whole life and Increasing term
What is the suicide provision designed to do?
safeguard the insurer from an applicant who is contemplating suicide
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000
The purpose of the ________ Period clause is to avoid an unintentional lapse of a life insurance policy.
Grace
A Nonforfetiure clause gives the policyowner?
Guaranteed values even if the policy has lapsed.
A(n) _______ rider may be used to include coverage for children under their parents life insurance policy.
Term
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to.