Chapter 5

Question 1

What is Absolute Assignment?

Answer 1

It is a policy assignment where the assignee receives full control over the policy and its benefits. The owner retains rights in excess of the debt despite the absolute assignment.

Question 2

What does the Accidental Death Benefit (Multiple Indemnity) Rider do?

Answer 2

It pays an additional sum to the beneficiary if the insured dies due to a covered accident, typically a multiple of the policy face amount.

Question 3

What is the purpose of the Accelerated Benefits Rider?

Answer 3

It allows the insured to receive a portion of the death benefit before death if diagnosed with a terminal illness.

Question 4

What is the Accumulate Interest Option?

Answer 4

This dividend option allows the policy owner to leave dividends with the insurer to accumulate interest, which is taxable.

Question 5

What does the Assignment Clause allow?

Answer 5

It allows for the right to transfer policy rights to another person or entity.

Question 6

What is the Automatic Premium Loan Provision?

Answer 6

It allows the insurer to deduct overdue premiums from the insured’s cash value if a payment is missed.

Question 7

What is the Cash Option?

Answer 7

This dividend option allows policy owners to cash out the dividends they receive.

Question 8

What is the Cash Surrender Option?

Answer 8

It allows the policy owner to receive the policy’s cash value, resulting in loss of coverage.

Question 9

What is Collateral Assignment?

Answer 9

It is an assignment of a policy to a creditor as security for a debt, with proceeds paid to the creditor first.

Question 10

What does the Consideration Clause state?

Answer 10

It states that a policy owner must pay a premium in exchange for the insurer’s promise to pay benefits.

Question 11

What are Dependent Riders?

Answer 11

They allow dependents to be added as additional insureds, typically for spouses and children.

Question 12

What are Dividend Options?

Answer 12

These are options available to a policy owner when receiving dividend payments from an insurance policy.

Question 13

What does the Entire Contract Provision state?

Answer 13

It states that the insurance policy, including any riders and the application, comprises the entire contract.

Question 14

What are Exclusions in an insurance policy?

Answer 14

They are features that state the policy will not cover certain risks.

Question 15

What is the Extended Term Option?

Answer 15

It permits the policy owner to use the cash value to buy level, extended term insurance for a specified period.

Question 16

What is the Free-Look Period?

Answer 16

It allows the policy owner a certain number of days to examine the policy and return it for a refund.

Question 17

What is the Grace Period?

Answer 17

It is a period after the premium due date during which the policy remains in force without penalty.

Question 18

What does the Guaranteed Insurability Rider allow?

Answer 18

It permits the policy owner to buy additional permanent life insurance coverage without proof of insurability.

Question 19

What is the Incontestable Provision?

Answer 19

It states that the insurer cannot challenge the validity of the policy after it has been in force for a specific period.

Question 20

What is the Insuring Clause?

Answer 20

It is the insurer’s basic promise to pay specified benefits to a designated person in the event of a covered loss.

Question 21

What does the Misstatement of Age or Sex Provision allow?

Answer 21

It allows the insurer to adjust policy benefits if the insured’s age or sex is misstated on the application.

Question 22

What are Non-Forfeiture Options?

Answer 22

These are options for cash value if a policy is terminated, allowing the policy owner to surrender the policy.

Question 23

What is the One-Year Term Option?

Answer 23

It allows the policy owner to exchange the dividend for additional coverage in the form of a one-year term policy.

Question 24

What is the Paid-Up Additions Option?

Answer 24

It allows the policy owner to exchange the dividend for an additional single payment whole life policy.

Question 25

What does the Payor Provision do?

Answer 25

It waives future premiums for a juvenile life insurance policy if the person responsible for payments dies or becomes disabled.

Question 26

What are Policy Loan Provisions?

Answer 26

They apply to policies with cash value, allowing loans against the cash value without exceeding it.

Question 27

What is the Reduced Paid-Up Option?

Answer 27

It allows the policy owner to reduce the policy’s benefit amount and cease making premium payments.

Question 28

What is the Reduced Premiums Option?

Answer 28

It allows the policy owner to return the dividend payment to the insurer for a reduction in the following year’s premiums.

Question 29

What does the Reinstatement Provision allow?

Answer 29

It allows an insured to put a lapsed policy back in force by providing proof of insurability and paying past-due premiums.

Question 30

What is the Return of Premium Rider?

Answer 30

It pays back the total premiums paid if the insured dies within a specified period or returns premiums if the insured is still alive.

Question 31

What does the Suicide Clause state?

Answer 31

It voids the policy and no benefit will be paid if the insured commits suicide within two years from issuance.

Question 32

What does the Waiver of Premium Rider do?

Answer 32

It allows the policy owner to waive premium payments during a disability, keeping the policy in force.