03 Provisions

Question 1

What required provision protects against unintentional policy lapse?

Answer 1

Grace period.

Question 2

With the reduction of premium dividend option, how is the dividend used?

Answer 2

The dividend is applied to the next year’s premium (it reduces the next year premium).

Question 3

What provision in a life insurance policy extend coverage beyond the premium due date?

Answer 3

Grace period.

Question 4

What settlement options are available in life insurance policies?

Answer 4

Lump sum/cash, fixed period, Fixed amount, life income, interest only.

Question 5

To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

Answer 5

A copy of the original insurance application.

Question 6

Under what nonforfeiture option does the company pay the policy’s surrender value and have no further obligations to the policy owner?

Answer 6

Cash surrender.

Question 7

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Answer 7

Policy premium in a reinstated policy will be set according to the insured’s original age.

Question 8

What nonforfeiture option is automatically selected by the company if not chosen by the policy owner?

Answer 8

Extended term.

Question 9

If a settlement option is not chosen by the policy owner or the beneficiary, what options will be used by the insurer?

Answer 9

Lump sum payment.

Question 10

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policy owner and insurer?

Answer 10

Entire contract.

Question 11

What is the purpose of a pre-look period?

Answer 11

To allow the insured to return the policy with a full refund.

Question 12

And insurer has discovered a representation on a life insurance policy application regarding the insured’s age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Answer 12

Pay a reduced death benefit.

Question 13

Who controls changes in premium payments, fees values, and loans in the life insurance policy?

Answer 13

Policy owner.

Question 14

Is the beneficiary required to have insurable interest in the insured?

Answer 14

No. Beneficiaries do not have insurable interest in the insured.

Question 15

What are policy dividends?

Answer 15

Return of unused premiums.

Question 16

In the fixed period Settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?

Answer 16

The longer the period selected, the smaller each installment will be.

Question 17

What type of beneficiary can be changed at any point by the policy owner?

Answer 17

Revocable.

Question 18

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third-party?

Answer 18

Absolute assignment.

Question 19

What happens to the policies cash value under an extended term nonforfeiture option?

Answer 19

The cast value is converted to the same face amount is in the whole life policy.

Question 20

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

Answer 20

The death benefit will be adjusted to the amount that the insured could obtain for her correct age.

Question 21

What provision allows the policy owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

Answer 21

Reinstatement.

Question 22

What are the dividend options in life insurance policies?

Answer 22

Cash, reduced premium, accumulation at interest, paid up additions, paid up option, one year term, and acceleration of endowment.

Question 23

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Answer 23

Waiver of premium.

Question 24

What happens to the proceeds of a life insurance policy if there is no named beneficiary?

Answer 24

The proceeds are paid to the insured’s estate.

Question 25

What does the term double indemnity mean?

Answer 25

The insurer will pay a benefit of twice the face amount.

Question 26

What is the purpose of automatic premium loan provision?

Answer 26

To prevent the unintentional lapse of a policy because of nonpayment of the premium.

Question 27

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

Answer 27

Collateral assignment.

Question 28

What dividend option can increase the death benefit of the existing like policy?

Answer 28

Paid up additions.

Question 29

What is the name for life insurance policy rider that provides coverage on the insured family members?

Answer 29

Other insured rider.

Question 30

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner does not amend the beneficiary designation, what will happen to the policy’s death benefit?

Answer 30

It will be paid to the insured’s estate.

Question 31

What type of beneficiary is next in line after the primary beneficiary?

Answer 31

Contingent beneficiary.

Question 32

An insurer has discovered representation on the life insurance policy application regarding the insured age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Answer 32

Pay a reduced death benefit.

Question 33

What life insurance policy provision prevents an insurer from disputing Or denying a claim due to misstatements on the application after a certain period of time?

Answer 33

Incontestability.

Question 34

What dividend option is automatically selected by the company if not chosen by the policy owner?

Answer 34

Paid up additions.

Question 35

Who has the right to the cash value of life insurance policy?

Answer 35

Policy owner.

Question 36

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Answer 36

Primary beneficiary.

Question 37

What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured’s death?

Answer 37

Settlement options.

Question 38

What are the most common exclusions in life insurance policies?

Answer 38

War and military service, hazardous occupation, and aviation.

Question 39

What nonforfeiture option provides coverage for the longest period of time?

Answer 39

Reduced paid up.

Question 40

When will a contingent beneficiary receive death benefits from a life insurance policy?

Answer 40

When the primary beneficiary days before the insured.

Question 41

What is the purpose of settlement options in life insurance policies?

Answer 41

To determine how the death benefit will be paid to the beneficiary.

Question 42

With the interest only settlement option, what happens to the policies death benefit?

Answer 42

Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary.

Question 43

What are the three nonforfeiture options in life insurance policies?

Answer 43

Cash surrender, reduced paid up, and extended term.

Question 44

When can insurance company use suicide as a defense against paying a death claim?

Answer 44

When a suicide is committed within a specified period of time after the policy is purchased (usually two years).

Question 45

A policy owner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?

Answer 45

The amount of the loan will be subtracted from the death benefit.