Xcel solutions chapter 3 - policy provisions
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
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
T check out a $50,000 life insurance policy with an accidental death and dismemberment rider. Five years later, T Commit suicide. How much will the insurer pay
$50,000
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
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?
20-pay life accumulates cash value faster than straight life
An insurer may normally delay the payment of a cash value loan or surrender value for up to
6 months
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental death and dismemberment clause
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called
Accidental death and dismemberment rider
A policy owner May generate taxable income from which the following dividends options
Accumulation at interest
A cost of living rider gives the insured
Additional death benefits
A term life rider offers the insured
Additional life coverage
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
Additional whole life coverage at specified times
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the misstatement of age provision, the insurer will
Adjust the death benefit to a reduced amount
What does the insuring agreement in a Life insurance contract establish
An insurer's basic promise
What action can I policy owner take if an application for a bank loan requires collateral
Assign policy ownership to the bank
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 the 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
What action will an insurer take if an interest payment on a policy loan is not made on time
Automatically add the amount of interest due to the loan balance
The automatic premium loan provision is designed to
Avoid a policy lapse
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
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
Beneficiary's age
A policy loan is made possible by which of these life insurance policy features
Cash value provision
A whole life Insurance policy owner does not have the right to
Change the grace period
Who's life is covered on a life insurance policy that contains a payer benefit clause
Child
Which rider provides coverage for a child under a parent's life insurance policy?
Child term rider
N is covered by term life policy and does not make the required premium payment which was due August 1. N die September 15 what action will the insurer take?
Claim will be denied
How do a life insurance companies handle cases where the insured commits suicide within the contract's stated contestable period?
Claims are denied under the suicide clause of the policy
Which of these actions just taken when a policy on her uses a life insurance policy as collateral for a bank loan
Collateral assignment
The incontestable clause allows the insurer to
Contest a claim during the contestable period
Which statement regarding the Mistakement of age provision is considered to be true
Coverage will be adjusted to reflect the insured's True age if a misstatement of age is discovered
Which of these types of policies may not have the automatic premium loan provision attached to it
Decreasing term
Additional coverage can be added to a whole life policy by adding a
Decreasing term rider
How are surrender charges deducted in a life policy with a rear end loaded provision
Deducted when the policy is discontinued
What provision in a Life insurance policy States that the application is considered part of the contract
Entire contract provision
Which provision prevents an insure from changing the terms of the contract with the policy on low power referring to documents not found was in the process itself
Entire contract provision
Which of these statements about A guaranteed insurability option rider is not true
Evidence of insurability is required when the option is exercised
D is the policy owner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D Remarries, transferring ownership of his policy to his new wife. If D Dies without making any further changes, I home will the policy proceeds to say to?
Ex-Wife
In a life insurance policy which feature states that the policy will not cover certain risk
Exclusion
N is a student pilot with a large life insurance policy. Which of these features will limit the insurers obligation in the event N was killed while flying as a student pilot?
Exclusion
When an insurer issues a policy that refuses to cover certain risk, this is referred to as a
Exclusion
D owns a whole life policy that was purchased 10 years ago. If the premium payment suddenly stop and D takes no additional action, which nonforfeiture option will be insurer likely proceed with?
Extended term
Which of the following nonforfeiture options offers the highest death benefit
Extended term
And insured is past due on his life insurance premium, but Is still within the grace period. What will the beneficiary receive as the insured dies during the gray period
Full face amount minus any past due premiums
The purpose of the _______ period cpause is to avoid A unintentional lapse of a life insurance policy
Grace
A nonforfeiture clause gives the policyowner
Guarantees values even if the policy has lapsed
A long-term care rider In a life insurance policy pays a daily benefit in the event of which of the following
Inability of the insured to perform more than two activities of daily living
All of these statements about the waiver of premium provision are correct except
Insured must be eligible for Social Security disability for claim to be excepted
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon a insureds death is called
Insuring agreement
In a life insurance contract, an insurance company's promise to pay stated benefits is called the
Insuring clause
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
All of the settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest only
B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
Interest only
The accidental death and dismemberment provision in a life insurance policy would pay additional death benefits if the insured
Is blinded in an accident
Dividends paid from A life insurance policy are
Issued by the insurer
K's whole life Insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of statements are correct about the policies reinstatement except
K will forfeit The right to use the automatic loan provision upon reinstatement
Which of these NOT an example nonforfeiture option?
Life income
The accelerated death benefit provision in a life insurance policy is also known as a
Living benefit
And insured 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 policy owner
Modify provision in the insurance contract
Which of the following statements is correct about accelerated death benefits
Must have a terminal illness to qualify
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy
Owners rights
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
K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?
Paid-up additional insurance
All of the following statements are true regarding a policies grace. Except
Past due premiums are waived
Which statement is true in regards to a policy loan
Past-due interest on a policy loan is added to the total debt
M had a 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
B recently died and was insured with a life insurance policy for over five years. during the claims process, the insured discovered that B had understated his age by five years at the time of application. In the situation, the insurer will
Pay the amount that the premium would have purchased at the correct age
Which life insurance ride are typically appears on the juvenile life insurance policy
Payor benefit rider
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled?
Payor clause
A provision in a life insurance policy that pays the policy owner an amount that does not surpass the guarantee cash value is called the
Policy Loan provision
M has an insurance policy that also has a outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
Policy proceeds
The _______ has the right to change a life insurance policy's beneficiary
Policyowner
The ____________ is authorized to assign A life insurance policy as collateral for a loan
Policyowner
What benefit on a payor clause on a juvenile life policy provide
Premiums are waived if the payor becomes disabled
Which of these nonforfeiture options continue a buildup of cash value
Reduced paid up
Which of the following is an example of a nonforfeiture option
Reduced paid up option
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
Reinstatement
Which of these provisions require proof of insurability after A policy has lapsed
Reinstatement
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
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 ass include on the policy
Return of premium ride
what is the suicide provision designed to do
Safeguard the insurer from a applicant who is contemplating suicide
Typically a life insurance death benefit is paid by lump sum payment. A ______ option is a method of distributing a life insurance policies death benefit other than Buy a lump sum payment
Settlement
Which of the following statements about accumulated interest earned on dividends from an insurance policy is true
Taxed as ordinary income
A ______ rider May be used to include coverage for children under their parents life insurance policy
Term
Which of these life insurance riders allows to applicant to have access coverage
Term rider
D was actively serving in the Marines when he was killed in an automobile accident while I leave. His hundred thousand dollar whole life policy contains a work exclusion clause. How much will D's beneficiary receive
The full face of amount
The consideration clause in a life insurance policy indicates that a policy owners consideration consist of a completed application and
The initial premium
The advantage of reinstating an original life policy is
The premiums are based on a lower age
The free-look provision begins
Upon a receipt of the policy by the policy owner
A life insurance policy owner would like to take out A policy loan against the cash value in his whole life policy. The interest rate applied to his loan may vary over time. This is referred to as a ________ rate loan.
Variable
Which of these types of life insurance allows the policy owner to have level premiums and to also choose from a selection of investment options?
Variable Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable universal life
When a misrepresentation on a life insurance policy application is discovered what action may an insurance company take
Void the policy only if it is discovered during the contestable period and proven to be material
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached
Waiver of premium
When is the face amount of a whole life policy paid
When the insured dies or at the policies maturity date which ever happens first
What does the ownership clause in a life insurance policy state?
Who the policy owner is and what rights the policy owner is entitled to
A return of premium Life insurance policy is
Whole life and Increasing term
The consideration clause in a Life insurance contract contains what pertinent information
amount of premium payments and when they are due
Variable whole life insurance can be described as
both an insurance and securities product
All of these statements concerning settlement options are true except
only the beneficiary may except