Life Provisions - Chapter 2

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? Straight life accumulates faster than Limited-pay Life 20-Pay Life accumulates cash value faster than Straight Life Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating 20-Pay Life and Straight Life accumulate cash value at the same rate

20-pay life accumulates cash value faster than straight line

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? $100,000 $50,000 Refund of premiums paid plus interest No claim will be paid because cause of death was from natural causes

50k

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 denied the claim Beneficiary will be denied the claim and refunded all paid premiums Beneficiary will be paid the Death Benefit Beneficiary will be paid a partial Death Benefit

Beneficiary will be paid the Death Benefit

A policy loan is made possible by which of these life insurance policy features? Extended term provision Cash value provision Owner's rights provision Consideration clause

Cash value provision

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 Claim will be paid in full Claim will be partially paid Claim will be decided by an arbitrator

Claim will be denied (due to policy lapse period)

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following? Critical illness Terminal illness Inability of the insured to perform more than 2 Activities of Daily Living (ADL's) Inability of the insured to maintain insurance premiums due to unemployment

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

Which of these are NOT an example of a Nonforfeiture option? Extended Term Reduced Paid-up Cash Surrender Life Income

Life income

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability? P cannot borrow against the policy's cash value while disabled P will have to pay income taxes on the amount of premiums waived P will still receive declared dividends P cannot assign ownership of the policy while premiums are being waived

P will still receive declared dividends

A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options? Paid-Up Additional Insurance Accumulate at Interest Reduced Premiums Cash

Paid-Up Additional Insurance

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled? Family Maintenance clause Payor clause Assignment provision Automatic Premium Loan provision

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 Loan provision Automatic Premium Loan provision Accelerated Benefits provision Consideration clause

Policy Loan provision

What benefit does the Payor clause on a Juvenile Life policy provide? Allows payor to assign ownership in the event payor becomes disabled Allows payor to increase face amount without providing evidence of insurability Premiums are waived if juvenile becomes disabled Premiums are waived if payor becomes disabled

Premiums are waived if payor becomes disabled

Which of these Nonforfeiture Options continue a build-up of cash value? Waiver of Premium Extended Term Reduced Paid-Up Cash Surrender

Reduced Paid-Up

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called Reinstatement Grace period Automatic premium loan Waiver of premium

Reinstatement

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy? Accelerated death benefit rider Return of premium rider Family income rider Term rider

Return of premium rider (since premium payments were paid back)

Which of these life insurance riders allows the applicant to have excess coverage? Automatic Premium Loan rider Waiver of Premium rider Guarantee Insurability rider Term rider

Term Rider

What does the ownership clause in a life insurance policy state? Who the policyowner is and what rights the policyowner is entitled to Who the beneficiary is and what rights the beneficiary is entitled to Ownership cannot be assigned after the incontestable period Allows the policyowner to adjust the death benefit and premium amount at anytime

Who the policyowner is and what rights the policyowner is entitled to

What action can a policyowner take if an application for a bank loan requires collateral? Utilize accelerated benefits provision Borrow against policy cash value and use as a down payment Assign policy ownership to the bank Name bank as beneficiary

assign policy ownership to the bank

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

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take? Void the policy if found during the Contestable period Void the policy, no matter when it is discovered Void the policy at any time only if it is found to be material Void the policy only if it is discovered during the Contestable period and proven to be material

void the policy only if it is discovered during the contestable period and proven to be material