4.2 Exam Flash Cards
What happens to a policies cash value under an extended-term nonforfeiture option
the cash value is converted to the same face amount as in the whole life policy
(Table of Guaranteed Values)
What nonforfeiture option is automatically selected by the company if not chosen by the policy owner
extended term
beneficiary next in line after the primary
contingent
what three nonforfeiture options in life insurance policies?
cash surrender
reduced paid up
extended term
what are policy dividends
return of unused premiums
the term used to describe methods of payments of the death benefit to the beneficiary upon the insureds death
settlement options
what required provision protects against unintentional policy lapse?
grace period
what type of assignment is used to secure the payment of a debt with an existing life insurance policy?
collateral assignment
what settlement options are available in life insurance policies?
lump sum/cash fixed period fixed amount life income interest only
what life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?
waiver of premium
what is the purpose of settlement options in life insurance policies
to determine how the death benefit will be paid to the beneficiary
what are the most common exclusions in life insurance policies?
war and military service, hazardous occupation, aviation
what happens to the proceeds of a life insurance policy if there is no named beneficiary
proceeds paid to the insured’s estate
what type of beneficiary can be charged at any point by the policy owner
revocable
the sole beneficiary of a life insurance policy dies before the insured. If the policy owner does not amend the beneficiary designation and does not have a secondary what will happen to the policy’s benefit.
it will be paid to the insured’s estate
when can an insurance company use suicide as a defense against paying a death claim
when suicide is committed within a specified period of time after the policy is purchased (usually 2 years)
What provision in a life insurance policy extends coverage beyond the premium due date?
grace period
what are the dividend options in life insurance policies?
paid-up additions (default) cash reduced premium accumulation at interest one year term
what dividend option can increase the death benefit of the existing life policy
paid-up additions
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?
incontestability provision
when will a contingent beneficiary receive death benefits from a life insurance policy?
when the primary beneficiary dies before the insured
with the reduction of premium dividend option, how is dividend used?
the dividend is applied to the next year’s premium (it reduces the next year’s premium)
what dividend option is automatically selected by the company if not chosen by the policy owner?
paid-up additions
an 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?
pay a reduced death benefit
what beneficiary designation has first claim to the death proceeds of a life insurance policy?
the primary beneficiary
who does the common disaster clause protect
the contingent beneficiary
if a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?
lump-sum payment
in the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?
the longer the period selected, the smaller each installment will be
to meet the requirement of the entire contract policy provision, an insurance policy must contain what?
a copy of the original insurance application
policy and a copy of the application, along with any riders or amendments
what nonforfeiture option provides coverage for the longest period of time?
reduced paid-up
under what nonforfeiture option does the company pay the policy’s surrender value and have no further obligation to the policy owner?
cash surrender
a policyowner 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?
amount of the loan will be subtracted from the death benefit
with the interest-only settlement option, what happens to the policy’s death benefit?
policy proceeds are retained by the insurance company, only the interest is paid to the beneficiary
what life insurance policy provision states that both the policy and a copy of the application form the contract between the policy owner and the insurer?
entire contract
what provision allows the policy owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability
reinstatement
what is the name for a life insurance policy rider that provides coverage on the insured’s family members?
other-insured rider
an applicant for life insurance misstated her age on the policy application (sure they did). How will this affect the death benefit?
death benefit will be adjusted to the amount that the insured could obtain for her correct age.
what is the advantage of reinstating a life policy as opposed to applying for a new one?
policy premium in a reinstated policy will be set according to the insured’s original age.
who controls changes in premium payments, face values, and loans in a life insurance policy?
policy owner
who has the right to the cash value of a life insurance policy.
policy owner
what does the term double indemnity mean
- insurer will pay a benefit twice the face amount
- used in accidental death riders
what is the purpose of a free-look period?
allow the insured to refund policy with a full refund.
is the beneficiary required to have insurable interest in the insured?
No. Beneficiaries do not have insurable interest in the insured.
what is the purpose of the automatic premium loan provision?
to prevent the unintentional lapse of a policy because of nonpayment of the premium
which of the two types of policy assignments requires the transfer of all ownership right in the policy to a third party?
absolute assignment
