Chapter 5 Flashcards
Define the term consideration.
An exchange of values between two parties.
What percentage of premium must be returned to the policy owner if a policy is returned during the free look period?
100% of the premiums paid
What clause allows an insurer to pay a portion of the death benefit to an individual who paid for funeral expenses?
The Facility of Payment Clause
If an insureds ago is misstated, what will eventually happen to any future claim?
The benefit will be adjusted to reflect the misstated age.
What does per capita beneficiary depiction mean?
It means per person or per head
Would it be better to reinstated an existing policy or attempt to purchase a new policy?
Reinstated the original policy since premium is based on insureds age at issuance and may result in lower premiums.
___________ is the transfer of policy rights to another party.
Assignment
Any policy modifications must be endorsed by the _________ and __________ to the policy.
Insurer; attached
A __________ is usually established when benefits are payable to a minor.
Trust
Which provision allows an insurer to charge a service fee for the collection of premium?
The Payment of Premium provision
What is another name for the transfer of ownership?
Assignment
Death by suicide is not covered during the first ______ years of policy issue.
2
A grace period is designed to prevent the __________ lapse of a policy.
Unintentional
What is another name for the free look provision?
The 10 day Right to Examine
What would a parent use to change ownership of a child’s policy?
An absolute assignment
Which beneficiary designation means per family line or lineage?
The per stripes beneficiary designation
The minimum length of a free look period is ______ days.
10
T/F: Everyone attempting to reinstated a policy within 3 years of its lapse date will be accepted.
F
T/F: the entire contract provision is a mandatory provision.
T
T/F: Any immediate family member may take a loan out against a persons insurance policy.
F; only the policy owner has the right to take a loan out against a policy.
What is the name for an insurers consideration to the applicant?
The warranty
When must the optional APL provision be selected?
At the time of application
What happens to a policy if the premium is not paid during the grace period?
It will lapse for nonpayment of premium
T/F: A term-to-term policy conversion with the same company does not require evidence of insurability.
T
What provision required an adjustment in benefits if the insureds age has been improperly recorded?
The Misstatement of Age provision
First-in-line beneficiaries are also known as _________, second-in-line as __________, and third-in-line as ____________.
Primary; Contingent; Tertiary
Policy loan interest is due each year on the ___________ anniversary date.
Policy
A woman listed as a man on an application will probably receive a ________ benefit at death.
Higher
Which beneficiary depiction may not be changed without permission from the beneficiary?
An irrevocable beneficiary depiction
List two examples of an owners right.
The right to change beneficiary or premium payment mode.
Explain the Simultaneous Death Act (Common Disaster).
The assumption that the primary beneficiary died prior to the insured when both die in a common accident
The maximum loan value is equal to the _______ minus any projected __________.
Cash value; interest
Taking a cash value policy loan __________ create a taxable event.
Does not
What clause is a summary of the entire contract and is usually found in the first or face page of the contract?
The Insuring Clause
What are the 4 common modes of premium payment?
Annual, semi annual, quarterly, monthly
An insurer must respond to an applicant for reinstatement within ____ days of receiving the paperwork.
45
Which payment mode would be the least expensive over the course of a year?
The annual payment mode
Is an insured afforded coverage during the grace period?
Yes
Does a beneficiary have any owners rights?
No
If death occurs with an outstanding policy loan, what is subtracted from the death benefit?
The remaining amount of the loan plus an accrued interest
Within a contract, where does an insurer make its promise to pay benefits?
In the Insuring Clause
T/F: A whole life to term conversion with the same company does not require evidence of insurability.
F; conversion from whole life to term will always require evidence of insurability
Only an ______________ of an _________ is provided the authority to make or waive a policy provision.
Approved officer; insurer
Which type of policy allows for cash value loans — term or whole life?
Whole life
The ___________ war exclusion only excludes benefits of death is the direct result of battle.
Results
How are monthly premiums generally paid?
An electronic fund transfer through a persons bank
Understating age on a life application will mean a _________ death benefit will be paid.
Lower
What is the most common life insurance policy exclusion?
War
Beginning on the policy delivery date, the free look provision must be provided for no less than ______ days.
10
A policy is said to be __________ after the contract has been issued for _____ or more years.
Incontestable; 2
What right does the APL option provide to the insurer?
The right to borrow from the cash value to pay overdue premium
Who two items constitute an applicants consideration?
Application information and initial premium
If no beneficiary is listed, policy benefits will be paid to the insureds __________.
Estate
What type of assignment is used to secure a loan?
A collateral assignment
Identify the acronym: APL
Automatic Premium Loan
A _______________ is a trust listed in a persons will.
Testamentary
Is interest paid on a policy loan tax deductible?
No
The transfer of all policy rights to another party is referred to as _______________.
Absolute assignment
Who selects how often a policy premium is paid?
The policy owner
Name some commons policy exclusions.
War, private aviation, suicide (first 2 years), dangerous hobbies or occupations, and criminal acts
Benefit proceeds left to an insureds estate will be decided by a _________ court.
Probate
Suicide is covered once the policy has been issued for _____ years.
2
List some examples of policyowner rights.
Name/change a beneficiary, select premium mode, receive dividends, take loans against the contract, and assign benefits
A fixed interest rate of no more than ____% may be assessed on a policy loan.
8
___________________ is the transfer of some, but not all, policy rights to another party.
Collateral assignment
Explain the concept of absolute assignment.
The transfer of all policy rights to another
Which type of trust is created during the life of the insured?
An inter vivos trust
To whom is the interest earned on assets retained by an insurer taxed?
To the beneficiary
Do beneficiaries have contractual rights to a contract?
No
How long does an insurer have to contest the validity of a claim based on false application information?
For two years following the issuance of the policy
T/F: Beneficiary listings may be changed by the insurer using a change of beneficiary form.
F; the policy owner, not the insurer, may change the beneficiary
Is a grace period a required provision?
Yes
When would the APL option be activated?
Following the expiration of the grace period
How long is a grace period?
No less than 31 days
What is the APL option designed to prevent?
The unintentional lapse of a policy
