Policy provisions, Options and Riders Chapter Exam
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the value of the policy?
$4,000
If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?
A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age
Which of these is considered to be a Living Benefit option in a life insurance policy?
Accelerated death benefit
Which of the following is considered to be an alternative to a life settlement?
Accelerated death benefit rider
All of these are common exclusions to a life insurance policy EXCEPT
Accidental death
All of these are valid policy dividend options for a life insurance policy owner EXCEPT
Accumulate without interest
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?
Accumulation at Interest Option
Pat owns a 20-pay life policy with a paid up dividend option. Which of the following statements is true?
The policy may be paid up early by using policy dividends
If an insured dies during the grace period with no premiums paid
The policy would be payable, minus the premium amount
The free-look provision gives the policy owner
The right to return the policy for a full refund within a specified number of days
All of the following riders can increase the death benefit amount EXCEPT
Waiver of Premium
An error was made on Mary's life insurance application. Which of the following areas do errors commonly occur on applications and for which the incontestable clause does NOT apply?
Age
Ownership of a life insurance policy may be temporarily transferred with a(n)
Collateral assignment
In what part of an insurance policy are policy benefits found?
Declarations
Matt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt
Dies instantly from a car accident
All of these are standard exclusions found in a life insurance policy EXCEPT
Disability
What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
Entire Contract
Which of these would limit a company's liability to provide insurance coverage?
Exclusion
Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n)
Guaranteed Insurability Rider
Which of the following protests a policy owner from a misrepresentation caused by an innocent mistake
Incontestable clause
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?
Interest Only
What is the purpose for having an accelerated death benefit on a life insurance policy?
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
Which of these is NOT considered to be a common life insurance nonforfeiture option
Life income annuity
Which of these is NOT considered to be a common life insurance nonforfeiture option?
Life income annuity
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE?
Net death benefit will be reduced if the loan is not repaid
A provision in a whole life policy that allows a policy owner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n)
Nonforfeiture Provision
A whole life policy option where extended term insurance is selected is called a(n)
Nonforfeiture option
A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?
Reduction of premium dividend option
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if
The insured outlived the beneficiary
Under a life insurance policy, what does the insuring clause state?
The insurer's obligation to pay a death benefit upon an approved death claim
Loans obtained by a policyowner against the cash value of a life insurance policy
Would not be treated as taxable income
Of the following dividend options, which of these is taxable?
Accumulation at interest
A provision that allows a policy owner to temporarily give up ownership rights to secure a loan is called a(n)
Collateral assignment
Life insurance policies will normally pay for losses arising from
Commercial Aviation
A waiver of premium rider allows an insured to waive premium payments if the insured is
Completely and permanently disabled
A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT
Fare-paying passenger
An insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period?
Grace Period
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid
Minus indebtedness and without interest
A provision i na while life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy on the same type is called a(n)
Nonforfeiture provision
A provision that allows a policy owner to withdraw a policy's cash value interest free is a(n)
Partial surrender
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of
Past due premiums that have not been paid by the end of the grace period
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of
Past due premiums that have not been paid by the end of the grace period.
What is an insurer required to do when faced with an error made under the Misstatement of Age provision?
Pay age-corrected benefits
A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n)
Payor Rider
Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
Payor benefit
What is an insurance policy's grace period?
Period of time after the premium is due but the policy remains in force
Which situation accurately describes a reduced paid up nonforfeiture option?
Policy has a decreased face amount
Which of the following is a reinstatement condition?
Proof of insurability
The two major actions required for a policy holder to comply with the Reinstatement Clause are
Provide evidence of insurability and pay past due premiums
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST
Provide evidence of insurability to the insurer
All of the following are considered to be nonforfeiture options available to a policy owner EXCEPT
Reduction of Premium
A policy owner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?
Reduction of premium dividend option
Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?
Results Clause
A life insurance policy owner does NOT have the right to
Revoke an absolute assignment
Which of these is NOT a characteristic of the Accelerated Death Benefit option?
The benefit can be offered as a rider at a specific extra cost or may be at no cost
