Chapter 3: Life Policy Riders, Provisions, Options, and Exclusions

Question 1

______ define the characteristics of an insurance contract and are fairly universal from one policy to the next.

Answer 1

Provisions

Question 2

______ are added to a policy to modify provisions that already exist.

Answer 2

Riders

Question 3

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

Answer 3

Options

Question 4

The standard policy provisions adopted by the ______ create uniformity among life insurance policies.

Answer 4

National Association of Insurance Commissioners (NAIC)

Question 5

The entire contract provision stipulates that the ______ and a copy of the ______, along with any ______ or ______, constitute the entire contract.

Answer 5

1. Policy
2. Application
3. Riders
4. Amendments

Question 6

Entire Contract = ______ + copy of ______ + any ______ or ______.

Answer 6

1. Policy
2. Application
3. Riders
4. Amendments

Question 7

The ______ (or ______) sets forth the basic agreement between the insurer and the insured, stating:

1. Insurer’s promise to pay the death benefit upon the insured’s death.
2. Who the parties to the contract are.
3. Premium to be paid.
4. How long coverage is in force.
5. Amount of death benefit.

Answer 7

1. Insuring Clause
2. Insuring Agreement

—Provision

Question 8

The ______ allows the policyowner a specified number of days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The ______ starts when the policyowner receives the policy, not when the insurer issues the policy.

Answer 8

1. Free Look Provision
2. Free-Look Period

—Provision

Question 9

Both parties to a contract must provide some value, or ______, in order for the contract to be valid. The ______ states that the value offered by the insured is the premium and statements made in the application. The ______ given by the insurer is the promise to pay in accordance with the terms of the contract.

Answer 9

1. Consideration
2. Consideration Provision
3. Consideration

—Provision

Question 10

Only the policyowner has the ______ under the policy, and not the insured or the beneficiary. Among the *______ are naming and changing the beneficiary, receiving the policy’s living benefits, selecting a benefit payment option, and assigning the policy.

Answer 10

Ownership Rights

—Provision

Question 11

The ______ of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer. However, the owner must notify the ______ in writing of the assignment.

Answer 11

1. Policyowner

2. Insurer

Question 12

Transfer of the life insurance policy does not change the ______ or amount of ______; it only changes who has the policy ownership rights.

Answer 12

1. Insured

2. Coverage

Question 13

The ______ specifies the policyowner’s right to assign (transfer rights of ownership) the policy. The policyowner must advise the insurer in writing.

Answer 13

Assignment Provision

Question 14

______ involves transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights. The new policyowner does not need to have an insurable interest in the insured.

Answer 14

Absolute Assignment

Question 15

______ involves a transfer of partial rights to another person and is usually done in order to secure a loan or some other transaction. Once the temporary debt or loan is repaid, the assigned rights are returned to the policyowner.

Answer 15

Collateral Assignment

Question 16

______ is the complete and permanent transfer or ownership rights; ______ is the partial and temporary transfer of rights.

Answer 16

1. Absolute Assignment

2. Collateral Assignment

Question 17

The ______ is the person or interest to which the policy proceeds will be paid upon the death of the insured. It may be a person, class of persons (sometimes used with children of the insured), the insured’s estate, or an institution or other entity such as a foundation, charity, corporation, or trustee of a trust.

Answer 17

Beneficiary

Question 18

The beneficiary does not need to have a(n) ______ in the insured.

Answer 18

Insurable Interest

Question 19

Benefits designated to a(n) ______ will either be paid to the guardian, paid to the trustee if the trust is the named beneficiary, or paid as directed by a court.

Answer 19

Minor

Question 20

The ______ has first claim to the policy proceeds following the death of the insured.

Answer 20

Primary Beneficiary

Question 21

The ______ (also referred to as ______ or ______ beneficiary) has second claim in the event that the primary beneficiary dies before the insured.

Answer 21

1. Contingent Beneficiary
2. Secondary
3. Tertiary

Question 22

If none of the beneficiaries is alive at the time of the insured’s death, or if no beneficiary has been named, the insured’s ______ will automatically receive the proceeds of a life insurance policy.

Answer 22

Estate

Question 23

If NO beneficiary is named, policy proceeds go to the insured’s ______.

Answer 23

Estate

Question 24

Beneficiary designations may be either ______ or ______.

Answer 24

1. Revocable

2. Irrevocable

Question 25

The policyowner, without the consent or knowledge of the beneficiary, may change a(n) ______ designation at any time.

Answer 25

Revocable

Question 26

A(n) ______ designation may not be changed without the written consent of the beneficiary. These beneficiaries have a vested interest in the policy; therefore, the policyowner may not exercise certain rights without consent, such as:

1. Changing the beneficiary.
2. Borrowing against the cash value.
3. Assigning the policy to another person.

Answer 26

Irrevocable

Question 27

The ______ 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 ______.

Answer 27

1. Uniform Simultaneous Death Law

2. First

Question 28

The ______, when added to a policy, provides that if the insured and the primary beneficiary died in a common disaster (even if the beneficiary outlived the insured by a specified number of days, usually ______), it is presumed that the primary beneficiary died first, so the proceeds will be paid to either the contingent beneficiary or the insured’s estate, if no contingent beneficiary is designated.

Answer 28

1. Common Disaster Clause

2. 14 to 30 Days

Question 29

Common disaster clause protects the ______.

Answer 29

Contingent Beneficiary

Question 30

The ______ is the manner or frequency that the policyowner pays the policy premium. Most policies allow for annual, semi-annual, quarterly, or monthly payments.

Answer 30

Premium Mode

Question 31

If the insured selects a premium mode other than ______, there will be an additional charge to offset the loss of earnings.

Answer 31

Annual

Question 32

If the insured dies during a period of time for which the premium has been paid, the insurer must ______ any unearned premium along with the policy proceeds.

Answer 32

Refund

Question 33

The ______ is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days, or one month).

Answer 33

Grace Period

Question 34

______ protects policyholders from losing insurance coverage if they are late on a premium payment.

Answer 34

Grace Periods

Question 35

Most life insurances have a(n) ______, which means that the premium remains the same throughout the duration of the contract. ______ policies allow the policyowner to increase or decrease the premium during the policy period.

Answer 35

1. Level Premium

2. Flexible Premium

Question 36

The ______ provision allows a lapsed policy to be put back in force. The maximum time limit is usually ______ after the policy has lapsed; he or she will have to provide evidence of insurability and pay back premiums plus interest.

Answer 36

1. Reinstatement

2. 3 Years

Question 37

A policy that has been ______ cannot be reinstated.

Answer 37

Surrendered

Question 38

The ______ clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for ______, even if there has been a material misstatement of facts or concealment of a material fact.

Answer 38

1. Incontestability

2. 2 Years

Question 39

Misstatement of ______ or ______ on the application will result in adjustment of premiums or benefits.

Answer 39

1. Age

2. Gender

Question 40

The ______ option is found only in policies that contain cash value and allows the policyowner to borrow an amount equal to the available cash value.

Answer 40

Policy Loan

—Provision

Question 41

Policies will not lapse with an outstanding policy loan unless the amount of the loan and accrued interest exceeds the available cash value. However, the insurer must provide ______ to the policyowner that the policy is going to lapse. Insurance companies may defer a policy loan request for up to ______, unless the reason for the loan is to pay the policy premium.

Answer 41

1. 30 Days’ Written Notice

2. 6 Months

Question 42

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

Answer 42

Cash Value

Question 43

The ______ provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents unintentional lapse of a policy due to nonpayment of the premium.

Answer 43

Automatic Premium Loan

Question 44

While the insurer may defer requests for other loans for a period of up to ______, loan requests for payment of ______ must be honored immediately.

Answer 44

1. 6 Months

2. Due Premiums

Question 45

______ are types of risks the policy will not cover. The most common found in life insurance policies are ______, ______, and ______.

Answer 45

1. Exclusions
2. Aviation
3. Hazardous Occupation
4. War and Military Service

Question 46

______: Most life insurance will cover an insured as a fare-paying passenger or a pilot on a regularly scheduled airline, but will exclude coverage for noncommercial pilots, or require an additional premium for coverage.

Answer 46

Aviation

—Exclusion Provision

Question 47

If the insured is engaged in a hazardous ______ or participates in hazardous ______ (such as skydiving or auto racing), death that results from these activities may be excluded from coverage. A higher premium may be charged instead.

Answer 47

1. Occupation
2. Hobbies

—Exclusion Provision

Question 48

The ______ excludes all causes of death while the insured is on active duty in the military.

Answer 48

Status Clause

Question 49

The ______ only excludes the death benefit if the insured is killed as a result of an act of war (declared or undeclared).

Answer 49

Results Clause

Question 50

The ______ provision in life insurance policies protects the insurers from individuals who purchase life insurance with the intention of committing suicide. If the insured commits suicide within ______ following the policy effective date (issue date), the insurer’s liability is limited to a refund of premium.

Answer 50

1. Suicide

2. 2 Years

Question 51

______ are written modifications attached to a policy that provide benefits not found in the original policy. They help tailor a policy to the specific needs of the insured.

Answer 51

Riders

Question 52

The ______ rider waives the premium for the policy if the insured becomes totally disabled. Coverage remains in force until the insured is able to return to work. If the insured is never able to return to work, the premiums will continue to be waived.

Answer 52

Waiver of Premium

Question 53

Most insurers impose a(n) ______ waiting period from the time of disability until the first premium is waived. The waiver of premium rider usually expires when the insured reaches age ______.

Answer 53

1. 6-Month

2. 65

Question 54

______ rider waives the premium for a total disability after a waiting period.

Answer 54

Waiver of Premium

—Disability Rider

Question 55

In order for the insured to qualify for the waiver of premium benefit, he or she must meet the policy’s definition of ______. This is generally defined as the inability to perform the duties of his/her own occupation for the first 2 years and then any gainful employment for which the insured is reasonably suited by education, training, and experience.

Answer 55

Total Disability

Question 56

The ______ rider pays all monthly deductions while the insured is disabled, after a(n) ______ waiting period. This rider only pays the monthly deductions, and not the full premium necessary to accumulate cash values.

Answer 56

1. Waiver of Monthly Deductions

2. 6-Month

Question 57

______ include the actual cost of insurance charges, expense charges, and costs or charges for any benefits added to the policy by rider, endorsement, or amendment, and which are specified in the policy to be deducted from the account value.

Answer 57

Monthly Deductions

Question 58

The ______ rider is primarily used with juvenile policies (any life insurance written on the life of a minor); otherwise, it functions like the waiver of premium rider. If the payor (usually a parent or guardian) becomes disabled for at least ______ or dies, the insurer will waive the premiums until the minor reaches a certain age.

Answer 58

1. Payor Benefit

2. 6 Months

Question 59

The ______ rider provides coverage for one or more family member other than the insured. The rider is usually level term insurance, attached to the base policy covering the insured and also known as a(n) ______ rider.

Answer 59

1. Other Insured

2. Family

Question 60

The ______ rider allows the spouse to be added to the coverage for a limited period of time and for a specified amount (it usually expires when the spouse reaches age ______).

Answer 60

1. Spouse Term

2. 65

Question 61

The ______ rider allows children of the insured (natural, adopted, or stepchildren) to be added to coverage for a limited period of time for a specified amount. This coverage is also term insurance and usually expires when the minor reaches a certain age (______ or ______).

Answer 61

1. Children’s Term

2. 18 or 21

Question 62

______ rider: one premium for ALL children. The premium does not change on the inclusion of additional children; it is based on an average number of children.

Answer 62

Children’s Term

—Riders Covering Additional Insured

Question 63

The ______ rider incorporates the spouse term rider along with the children’s term rider in a single rider. When added to a whole life policy, this rider provides level term life insurance benefits covering the spouse and all of the children in the family.

Answer 63

Family Term

Family Term = Spouse Term + Children’s Term

—Riders Covering Additional Insured

Question 64

______ riders can be used to insure somebody who is not a member of the insured’s family. The ______ rider or ______ rider does not permit an additional insured, but instead allows for the change of insureds, subject to insurability.

Answer 64

1. Nonfamily Insured
2. Substitute Insured
3. Change of Insured

Question 65

The ______ rider pays some multiple of the face amount if the death is the result of an accident as defined in the policy. Death must usually occur within ______ of such an accident. The benefit is normally two times (______) the face amount. Some policies pay triple the face amount (______) for accidental death.

Answer 65

1. Accidental Death
2. 90 Days
3. Double Indemnity
4. Triple Indemnity

Question 66

The ______ rider (______) pays the principal (face amount) for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment.

Answer 66

Accidental Death and Dismemberment (AD&D)

Question 67

The ______ rider allows the insured to purchase additional coverage at specified future dates (usually every ______) or events (such as marriage or birth of a child), without evidence of insurability, for an additional premium. This rider usually expires at the insured’s age ______.

Answer 67

1. Guaranteed Insurability
2. 3 Years
3. 40

—Riders Affecting the Death Benefit Amount

Question 68

The ______ rider is implemented by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to the beneficiary. This rider usually expires at a specified age such as age ______.

Answer 68

1. Return of Premium

2. 60

Question 69

______ riders allow for an additional amount of temporary insurance to be provided on the insured, without the need to issue another policy. They are usually attached to a whole life policy to provide greater protection at a reduced cost.

Answer 69

Term

Question 70

______ allow the early payment of a portion of the death benefit if the insured has any of the following conditions:

1. A terminal illness.
2. A medical condition that requires an extraordinary medical intervention (such as an organ transplant) for the insured to survive.
3. A medical condition that without extensive treatment drastically limits the insured’s lifetime.
4. Inability to perform activities of daily living (ADLs)
5. Permanent institutionalization or confinement to a long-term care facility.
6. Any other conditions approved by the Department of Insurance.

Answer 70

Accelerated Death Benefits

—Riders Affecting the Death Benefit Amount

Question 71

The ______ rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within ______. The purpose is to provide the insured with the necessary funds to take care of necessary medical and nursing home expenses that incur as a result of the terminal illness.

Answer 71

1. Living Needs
2. 2 Years

—Riders Affecting the Death Benefit Amount

Question 72

______ = early payment of part of death benefit to the insured from the insurer for qualifying medical expenses.

Answer 72

Accelerated Benefit

Question 73

______ coverage, which is often purchased as a separate policy, can also be marketed as a rider to a life insurance policy. These riders provide for the payment of part of the death benefit (called accelerated benefits) in order to take care of the insured’s health care expenses, which are incurred in a nursing or convalescent home.

Answer 73

Long-Term Care (LTC)

—Riders Affecting the Death Benefit Amount

Question 74

Payable Death Benefit = ______ Amount - Amount ______ - Earnings Lost By Insurer In ______

Answer 74

1. Face
2. Withdrawn
3. Interest

Question 75

The policy’s face amount is $100,000; however, due to a terminal illness, the insured had to withdraw $30,000 from the policy 3 years before his death. Since this amount was withdrawn, the insurance company lost $300 worth of interest. Upon the insured’s death, how much will the beneficiary receive from the death benefit?

Answer 75

$69,700

$100,000 (face amount) - $30,000 (accelerated benefit) - $300 (lost interest) = $69,700

Question 76

Which general type of rider do these fall under?

Waiver of Premium
Waiver of Monthly Deduction
Payor Benefit
Disability Income
Accelerated (Living) Benefit

Answer 76

Disability Riders

Question 77

Which general type of rider do these fall under?

Spouse
Children
Family
Nonfamily

Answer 77

Riders Covering Additional Insured

Question 78

Which general type of rider do these fall under?

Accelerated Death Benefit
Accidental Death or AD&D
Guaranteed Insurability
Return of Premium
Term Riders

Answer 78

Riders Affecting Death Benefit

Question 79

Policyowners have decisions to make about:

______ Options: How the cash value in the policy should be protected.
______ Options: How the return of excess premium (dividends) should be invested.
______ Options: How benefit payments will be made.

Answer 79

1. Nonforfeiture
2. Dividend
3. Settlement

Question 80

Because permanent life insurance policies have cash values, certain guarantees are built into the policy that cannot be ______ by the policyowner. These guarantees (known as ______) are required by state law to be included in the policy. The policyowner chooses one of the following ______ options: cash surrender value, reduced paid-up insurance, or extended term.

Answer 80

1. Forfeited
2. Nonforfeiture
3. Nonforfeiture

Question 81

______ options are triggered by policy surrender or lapse.

Answer 81

Nonforfeiture

Question 82

For the ______ nonforfeiture option, the policyowner simply surrenders the policy for the current ______ at a time when coverage is no longer needed or affordable. A(n) ______ is a fee charged to the insured when a life policy or annuity is surrendered for its ______.

Answer 82

1. Cash Surrender Value
2. Cash Value
3. Surrender Charge
4. Cash Value

Question 83

For the ______ nonforfeiture option, the policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a(n) ______ from that of the former policy.

Answer 83

1. Reduced Paid-Up Insurance

2. Reduced Face Amount

Question 84

Under the ______ nonforfeiture option, the insurer uses the policy cash value to convert to term insurance for the same ______ as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.

Answer 84

1. Extended-Term

2. Face Amount

Question 85

______ is the automatic nonforfeiture option if another is not chosen: same face amount, shorter term of coverage.

Answer 85

Extended Term

Question 86

______ are a return of excess premiums, and for that reason they are not taxable to the policyowner. Insurance companies cannot guarantee *______.

Answer 86

Dividends

Question 87

The first dividend could be paid as early as the______, but must occur no later than the end of the ______. From then on dividends are usually paid on a(n) ______ basis.

Answer 87

1. First Policy Anniversary
2. Third Policy Year
3. Annual

Question 88

Dividends can be paid as ______, where the insurer simply sends the policyowner a check for the amount of the dividend as it is declared, usually annually.

Answer 88

Cash

Question 89

Dividends can be paid as a(n) ______, where the insurer uses the dividend to reduce the next year’s premium.

Answer 89

Reduction of Premiums

—Dividend Options

Question 90

Dividends can be kept by the insurance company in an account where they ______. Although the dividends themselves are not taxable, the ______ on the dividends is taxable to the policyowner.

Answer 90

1. Accumulates Interest
2. Interest

—Dividend Options

Question 91

Dividends can be used to purchase a(n) ______ in addition to the face amount of the permanent policy. Each of these will increase the ______ of the original policy by whatever amount the dividend will buy, as well as accumulate cash value and pay dividends.

Answer 91

1. Single Premium Policy

2. Death Benefit

Question 92

If the policyowner does not choose the dividend option, the insurer will automatically use ______ to increase the death benefit of the original policy by the amount the dividend will buy.

Answer 92

Paid-Up Additions

Question 93

Under the ______ option, the insurer uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early.

Answer 93

Paid-Up

Question 94

The insurance company can use the dividend to purchase additional insurance in the form of ______ that increases the overall policy death benefit. The policyowner’s choice is to either use the dividend as a single premium on as much *______ as it will buy, or to purchase ______ equal to the policy’s cash value for as long as it will last.

Answer 94

1. One-Year Term Insurance
2. One-Year Term Insurance
3. Term Insurance

Question 95

______ are the methods used to pay the death benefits to a beneficiary upon the insured’s death, or to pay the endowment benefit if the insured lives to the endowment date.

Answer 95

Settlement Options

Question 96

Settlement options are triggered by the insured’s ______ or age ______.

Answer 96

1. Death

2. 100

Question 97

Upon the death of the insured, or at the point of endowment, the contract is designed to pay the proceeds in cash, called a(n) ______, unless the recipient chooses a different mode of settlement.

Answer 97

Lump Sum

Question 98

If no selection is made, the proceeds are automatically paid to the beneficiary in a(n) ______.

Answer 98

Single Cash Payment (Lump Sum)

Question 99

The ______ option, also known as straight life, provides the recipient with an income that he or she cannot outlive. Installment payments are guaranteed for as long as the recipient lives, irrespective of the date of death. The amount of each installment paid is based on the ______ life expectancy and the amount of principal.

Answer 99

1. Life-Income
2. Recipient’s

—Settlement Option

Question 100

Under ______ (______) settlement option, the recipient cannot outlive the benefit payments.

Answer 100

1. Life-Income

2. Straight Life

Question 101

Under ______ option, the recipient is provided with the “best of both worlds” in terms of a lifetime income and a guaranteed installment period.

Answer 101

Life Income With Period Certain

—Settlement Option

Question 102

The ______ option guarantees an income for two more recipients for as long as they live.

Answer 102

Life Income Joint and Survivor

Question 103

With the ______ option, the insurance company retains the policy proceeds and pays interest (at a guaranteed rate) on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, or annually). This option is considered to be a temporary option until some later point when the proceeds are paid out in another settlement option.

Answer 103

Interest-Only

Question 104

Under the ______ option (also called ______), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period.

Answer 104

1. Fixed-Period Installments

2. Period Certain

Question 105

The ______ option pays a fixed, specified amount in the installments until the proceeds (principal and interest) are exhausted.

Answer 105

Fixed-Amount Installments

Question 106

Which general option type do these options fall under?

Reduced Paid-up
Extended Term (Automatic)
Cash

Answer 106

Nonforfeiture Options

Question 107

Which general option type do these options fall under?

Cash
Reduction of Premium
Accumulation at Interest
Paid-up Additions (automatic)
Paid-up Insurance
One-year Term

Answer 107

Dividend Options

Question 108

Which general option type do these options fall under?

Cash (automatic)
Life Income
Interest Only
Fixed Period
Fixed Amount

Answer 108

Settlement Options

Question 109

______ state the rights and obligations under the contract, ______ modify provisions, and ______ specify ways to distribute policy proceeds.

Answer 109

1. Provisions
2. Riders
3. Options

Question 110

The ______ includes the policy, a copy of the application, and anything else attached at issue, such as any riders.

Answer 110

Entire Contract

Question 111

The purpose of the ______ provision is to protect the insured from the insurer making changes to the policy after issuance.

Answer 111

Entire Contract

Question 112

The ______ is the insurer’s legally enforceable promise to pay.

Answer 112

Insuring Clause

Question 113

A policyowner may exercise the ______ on a newly issued policy without giving any reason.

Answer 113

Free-Look Provision

Question 114

The ______ starts upon policy delivery. If the policy is mailed to the policyowner by the company, it starts on the date of mailing (known as constructive delivery).

Answer 114

Free-Look Period

Question 115

The ______ section of a life policy states who has the right to change the beneficiary, who can take a loan, and who can take cash surrender.

Answer 115

Owner’s Rights

—Provision

Question 116

Upon ______, both the incontestability and suicide clauses start over.

Answer 116

Reinstatement

—Provision

Question 117

If an insured lies on an application for life insurance, the insurer may contest the policy within ______ (in most states). After that time has passed, the policy is considered to be ______.

Answer 117

1. 2 Years

2. Incontestable

Question 118

When an insured makes an absolute assignment, they are the ______. The party which the *______ assigns the policy to is known as the ______.

Answer 118

1. Assignor

2. Assignee

Question 119

The misstatement of ______ runs for the duration of the policy. Discovery of a misstated ______ results in adjustment of the benefit amount, not cancellation of the policy.

Answer 119

1. Age Provision

2. Age

Question 120

Insurance companies have ______ to defer a request for a loan or cash surrender, although they usually do not exercise this right.

Answer 120

6 Months

Question 121

An insured’s ______ is the sole collateral for a policy loan.

Answer 121

Policy

Question 122

______ may be taken during the grace period.

Answer 122

Policy Loans

Question 123

Failure to repay a loan will have a permanent effect on ______.

Answer 123

Cash Value Accumulation

Question 124

Proceeds of a life policy left to a beneficiary may not be attached by ______. If there is no beneficiary, proceeds will go into the estate, which may be attached by *______.

Answer 124

Creditors

Question 125

A(n) ______ beneficiary has a vested interest in the policy, and the policy cannot be changed without his or her consent.

Answer 125

Irrevocable

Question 126

A(n) ______ beneficiary may be changed at any time by the policyowner.

Answer 126

Revocable

Question 127

Under the ______ provision, it is assumed that the insured died last.

Answer 127

Common Disaster

Question 128

The beneficiary does not have to be of the ______ (18 or 21, depending upon the state) in order to receive policy proceeds; however, proceeds cannot be directly paid to a(n) ______ since they cannot sign the release.

Answer 128

1. Age of Majority

2. Minor Child

Question 129

The ______ rider allows additional insurance to be purchased without a physical at specified dates.

Answer 129

Guaranteed Insurability

—Riders Affecting the Death Benefit Amount

Question 130

The ______ rider would expire when the child reaches age 18 or 21, depending upon the state or when the payor recovers from his or her disability.

Answer 130

Payor Benefit

—Disability Rider

Question 131

A(n) ______ and/or ______ rider may be attached to either a term or whole life insurance policy.

Answer 131

1. Accidental Death

2. Accidental Death and Dismemberment

Question 132

A(n) ______ rider allows the insured to take money out of a policy’s cash value to pay for qualifying nursing home care or home health care expenses.

Answer 132

Long-Term Care

Question 133

Any amount used for approved long-term care expenses reduces the policy’s ______.

Answer 133

Death Benefit

Question 134

When an insured pays extra to include the ______ rider, if the insured should live to the end of the policy term, the premium is returned to the insured tax-free.

Answer 134

Return of Premium

—Riders Affecting the Death Benefit Amount

Question 135

The ______ rider will pay out part of the proceeds prior to death. The proceeds are not taxable.

Answer 135

Accelerated Benefits

—Riders Affecting the Death Benefit Amount

Question 136

If a policy with a cash value lapses for nonpayment, the insured has ______ from the premium due date to select a nonforfeiture option. ______ is the automatic nonforfeiture option chosen by the insurer if the insured does not specify otherwise.

Answer 136

1. 60 Days

2. Extended Term

Question 137

The ______ nonforfeiture option may be taken any time there is a cash value.

Answer 137

Paid-Up

Question 138

The owners of a mutual insurance company are the ______. ______ received by the owner of a mutual policy are not taxable.

Answer 138

1. Policyholders

2. Dividends

Question 139

______ received by the owner of stock in a stock company are taxable as ordinary income; *______ are never taxed as capital gains.

Answer 139

Dividends

Question 140

If a beneficiary selects the ______ option, the taxable interest payments will vary, but the beneficiary may withdraw the principal at any time.

Answer 140

Interest

Question 141

A(n) ______ payout does not guarantee payments for the life of the beneficiary but only a certain amount of time.

Answer 141

Fixed Period