CH3

Question 1

What do Provisions define?

Answer 1

It defines the characteristics of an insurance contract

Question 2

What do Options offer?

Answer 2

They offer insurers and insureds ways to invest or distribute a sum of money available in a life policy

Question 2

What are Riders?

Answer 2

An addition to a policy to modify provisions that already exist

Question 2

When does the free-look period start?

Answer 2

starts when the policyowner receives the policy

Question 3

T or F

The policyowner has the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer.

Answer 3

T

Question 4

What does Absolute Assignment involve?

Answer 4

It involves transferring all rights of ownership to another person or entity. This is a permanent transfer of all the policy rights.

Question 5

What are the two types of policy assignments?

Answer 5

Absolute Assignment and Collateral Assignment

Question 6

What does Collateral Assignment involve?

Answer 6

It involves a partial and temporary assignment of some of the policy rights.

Question 7

What are the name designations when the insured chooses to “group” the beneficiaries?

Answer 7

per capita and per stirpes

Question 7

What happens if the beneficiary is a minor?

Answer 7

A minor will either be paid to the minor’s guardian, or paid to the trustee of the minor

Question 8

What is per capita?

Answer 8

It evenly distributes benefits among the living named beneficiaries.

Question 8

What is a contingent beneficiary?

Answer 8

A beneficiary that has second claim to the death benefit. This only happens if the primary beneficiary is dead.

Question 8

What do irrevocable designations need in order to be able to be changed?

Answer 8

A written consent of the beneficiary

Question 8

What happens if there are no beneficiaries in a policy or if both beneficiaries are dead?

Answer 8

The policy proceeds go to the insured’s estate.

Question 8

What is The Common Disaster Clause option? and who does it protect?

Answer 8

when added to the policy, it protects the contingent beneficiary so he/she can receive the benefits.

Question 9

What is the Grace period?

Answer 9

is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses

Question 9

What are premium modes? what happens if the policyowner selects another option other than annual?

Answer 9

The frequency that the policyowner pays the policy premium.

If the insured selects a premium mode other than annual, there will be an additional charge

Question 9

What does The Uniform Simultaneous Death Law stipulate?

Answer 9

It stipulates that if the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the primary beneficiary died first.

Question 9

What is the maximum time limit for a policy reinstatement?

Answer 9

3 years after it lapses

Question 9

T or F

If the applicant’s age or gender was misstated on the application, in the event of a claim, the insurer is allowed to adjust the benefits to an amount that the premium at the correct age or gender would have purchased. The proceeds calculations should be based on the insurer’s rate at the date of policy issue.

Answer 9

T

Question 10

What is incontestability used for?

Answer 10

This prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years even if the policyowner lied on the application.

Question 11

T or F

Policy loans are available in policies that do not have cash value.

Answer 11

F

Policy loans are ONLY available in policies that have cash value (whole life).

Question 11

What does the Automatic Premium Loans option prevent? is it only added to cash value policies? does it have an extra cost?

Answer 11

The loan prevents the unintentional lapse of a policy due to nonpayment of the premium.

Yes

No

Question 11

What are some common exclusions for life insurance policy?

Answer 11

aviation, hazardous occupation, war and military service.

Question 11

What does a status clause exclude on a military person?

Answer 11

Excludes death benefit of all active-duty soldiers.

Question 11

What does a results clause exclude on a military person?

Answer 11

Excludes death benefit to all killed as a result of an act of war

Question 11

What is the waiver of premium rider? Can premium payments return to normality? How long do insurers wait before waiving the first premium payment?

Answer 11

It waives the premium for the policy if the insured becomes totally disabled. Yes, only if the insured is recovered from the disability. 6 months

Question 12

What does the waiver of monthly deductions rider do? does it cover the full cost of the premium?

Answer 12

It pays all monthly deductions while the insured is disabled, after a 6-month waiting period No, it only covers the monthly deductions

Question 13

What do Accelerated death benefits allow?

Answer 13

It allows the early payment of part of death benefit to the insured for qualifying medical expenses

Question 13

What does the disability income rider do?

Answer 13

in the event of disability, the insurer will waive the policy premiums and pay a monthly income to the insured

Question 14

What are other riders' name?

Answer 14

- spouse term rider - children's term rider - family term rider

Question 14

What happens if the insured withdraws any amount from the policy?

Answer 14

After the insured's death, the beneficiary will receive the death benefit but only after the insurer subtracting any withdraws and interest lost.

Question 14

What does the payor benefit rider do?

Answer 14

It is primarily used with juvenile policies (insurance written on the life of a minor). If the payor (parent) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21

Question 14

What does return of premium rider do?

Answer 14

It provides the beneficiary with the total death benefit plus all premiums paid up to that point

Question 15

What does the guaranteed insurability rider do?

Answer 15

it allows the insured to purchase additional coverage at specific future dates or events (such as marriage or birth of a child), without evidence of insurability, for an additional premium.

Question 15

What's a benefit of Children’s term rider?

Answer 15

You can add many children and maintain the same premium

Question 15

What does accidental death and dismemberment rider (AD&D) do?

Answer 15

It pays the face amount for accidental death, and pays a capital sum, for accidental dismemberment.

Question 16

When are Nonforfeiture options triggered?

Answer 16

Nonforfeiture options are triggered by policy surrender or lapse.

Question 16

What happens if the extended-term option is chosen?

Answer 16

The insurer uses the policy cash value to convert from permanent to a term policy

Question 17

What are dividends in life insurance?

Answer 17

Dividends are a return of excess premiums; therefore, not taxable when paid to the policyowner.

Question 18

T or F Under life-income (straight life) settlement option, the recipient cannot outlive the benefit payments.?

Answer 18

T

Question 18

What does the Paid-up Option help with?

Answer 18

It helps the premium payments to be paid completely before age 100