D. Life Insurance Policy Provisions, Options And Rider Flashcards
Although producers must sign the application they are not a party to the contract. It is the responsibility of the producer to explain the policy provisions, riders, and exclusions to the applicant.
True or False
True
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.
owner’s rights
Owners of life insurance policies may temporarily assign their life insurance policy to a bank as collateral for a loan, which is known as a _______ __________.
collateral assignment
The _____ is the sole collateral for a policy loan. Policy loans are not _________.
Policy/taxable
The owner of a life insurance policy may transfer his or her ownership to another person by making an ________ __________.
absolute assignment
The entire ________ includes the policy and anything else attached at issue, such as the application.
contract
________ may not make changes to a policy.
Producers
Policy modifications must be in writing and signed by a _______ _________.
Company Officer
Under the life insurance ______ ______, a policy owner who returns their policy 5 days after delivery will receive a full refund since the free look is commonly 10 days.
Free Look
A ______________ may exercise the free look provision without giving any reason.
Policy owner
The free look period (usually 10 days) starts upon policy delivery. If the policy is mailed to the applicant by the company, the free look starts on the date of mailing. This is called ________ _______.
Constructive Delivery
_________ _________ insurance has a grace period of 30 days.
Ordinary Life
A life insurance policy provision that allows coverage to continue even if the premium is not paid on time is known as the ________ _______.
Grace Period
If a __________ __________ dies within the grace period of his or her employer provided group life policy without converting, the full death benefit will be paid to the beneficiary.
Terminated employee
When an ________ ________ in the grace period without paying the premium due, the face amount will be paid to the beneficiary, less the overdue premium.
Insured dies
If an insured whose policy has lapsed wants it back, the insured can apply for __________.
Reinstatement
Upon policy reinstatement, the __________ and __________ clauses start.
incontestability and suicide
A life insurance policy that has been surrendered for cash may not be __________.
Reinstated
Life insurance policies are incontestable after they have been in force for __________.
2 years
__________ __________ __________ are contestable for material misrepresentation for the first 2 years
New Life Insurance
Under the __________ _______ ________ __________, if an insurer discovers that an insured has misstated his or her age on the policy application, the insurer will adjust the premiums and and benefits according to the correct age of the insured.
misstatement of age provision
The _____ _______ ______ ______ runs for the duration of the policy.
misstatement of age provision
Under the ______ _____ _____ _____, if the insured understates his or her age, it is the face amount that is reduced.
misstatement of age clause
Proceeds of a life insurance policy, left with an insurer, for the benefit of a beneficiary, may _____ be attached by creditors.
Not
Proceeds __________ be directly paid to a minor child since a minor can’t sign a release.
Cannot
If the insured dies in an accident, the insurer may order an __________ to determine that death was not the result of a suicide.
Autopsy
In most states, suicide is covered after 2 years, if an insured commits suicide within a specified period of time after policy issue (usually the first 2 years), no benefit is payable, but all premiums are refunded to the beneficiary. Check your state regulations section for the time limits in your state.
True or False
True
True or False
If an insured buys a life insurance policy and dies one month later, the insurer must not pay the claim.
False
The insurer pays the claim.
When a policy owner lists a group of people as beneficiaries, it is known as a __________ __________.
Class designation.
True or False
Life insurance proceeds create an immediate estate for the beneficiary.
True
True or False
The beneficiary does not have to be of the age of majority (18 or 21, depending upon the state) in order to receive policy proceeds; however, proceeds can be directly paid to a minor child since they can sign the release.
False
Proceeds cannot be directly paid to a minor child since they cannot sign the release.
If the insured names an individual as they’re your irrevocable beneficiary, the insured cannot change this destination without the beneficiary’s consent.
Truer or false
True
A __________ __________ may be changed at any time by the policy owner.
revocable beneficiary
A revocable beneficiary has no vested right under a __________ __________.
Life Policy
An __________ __________ has a vested interest in the policy.
irrevocable beneficiary
A __________ __________ will receive the policy proceeds of the primary beneficiary dies before the insured.
contingent beneficiary
Under the __________ __________ provision, it is assumed that the insured died last.
common disaster
If the policy proceeds are paid out in a lump sum, the ___________ __________ will not apply.
spendthrift clause
True or False
Failure to repay a loan will have a permanent effect on cash value accumulation.
True
True or False
The annual interest on a life insurance loan is not added to the amount of the loan as it accrues.
False
Life insurance loans is added
True or False
If an outstanding policy loan, plus interest, exceeds the cash value of the policy, the policy will lapse.
True
True or False
A loan may not be taken from a whole life policy as soon as it develops a cash value.
False
It may
The __________ __________ loan rider can be added to a whole life policy, but not to a term or credit life policy.
automatic premium
True or False
Partial surrenders are usually allowed in annuities, universal life and variable life policies.
True
__________ _____ __________ is a rider that will pay the premium on behalf of a disabled insured, after a short waiting period, until the insured either recovers or dies.
Waiver of premium
True or False
The waiver of premium rider does pay a cash benefit to the insured.
False
Rider does not pay
If a parent paying the premium on a child’s life insurance policy dies, the provision that allows the premium to be waived is known as __________ __________ , NOT waiver of premium.
payor benefit
True or False
If the payor benefit rider is attached to the policy, an insured will not have to worried about premiums being paid if the policy owner dies or becomes disabled.
True
The accelerated benefits rider will pay proceeds prior to death for those with a ________ __________.
terminal illness
True or False
The change of insured rider may not be utilized by an employer who wants to transfer a key person life insurance policy from one key person to another.
False
It may
On a __________ _________ rider added to a parent’s policy to cover the life of a child, the child’s coverage terminates when the child reaches age 18, unless the child converts the rider to permanent coverage.
Term life
When adding a children’s term rider to a life insurance policy, all of the insured’s children are covered for a single, __________ __________ charge, no matter how many.
Flat premium
A __________ __________ may be added to a parent’s life policy in order to insure a child.
Level term
A combination policy that automatically covers all family members, including new born children (after a short waiting period) at no extra premium charge is called a __________ __________.
Family policy
The guaranteed insurability rider is also known as the __________ __________ benefit.
guaranteed purchase
The guaranteed insurability rider allows the insured to increase coverage periodically without a __________ __________.
Physical exam
True or False
If a person purchases a whole life policy and adds a return of premium rider, they will have level coverage from the whole life policy, and increasing coverage from the rider.
True
The return of the premium rider and the return of a cash value rider are both types of __________ __________ coverage.
Increasing term
__________ __________ levied by some insurers on annuities and universal life will reduce the amount a policy owner will receive upon cash surrender.
Surrender Charges
The __________ __________ extended term option is a nonforfeiture option.
Extended term option
True or False
If a policy with a cash value lapse for nonpayment, the insured has 30 days from the premium due date to select a nonforfeiture option.
False
60 days
__________ __________ is the automatic nonforfeiture option.
Extended term
When the __________ __________ nonforfeiture option is selected, the amount of coverage in the new policy is reduced from that of the original policy.
Reduced paid-up
True or False
The reduced paid - up nonforfeiture option may not be taken any time there is a cash value.
False
It may
True or False
The reduced paid-up nonforfeiture option will provide coverage for life.
True
True or False
If an insured with a life insurance policy issued by a mutual insurer allows the insurer to keep the dividends but mail the insured a monthly check, the insured has chosen the interest option.
True
On a __________ __________ insurance policy, if the policy owner selects the 1-year term dividend option, the dividend may be used to buy term insurance.
Participating Life
True or False
If the insured/owner of a life policy does not designate a settlement option prior to death, the beneficiary may choose whichever option he or she wants. Most choose cash, which is not taxable.
True
If the interested settlement option is selected, the interest paid is subject to __________.
Taxes
When a beneficiary selects the interest only settlement option, interest payments (which are taxable) will vary, but the beneficiary may withdraw the principal at __________ __________.
Any time
For estate conservation purposes, a beneficiary should select the _________ __________ settlement option.
Interest only
A life insurance beneficiary who elects to take the proceeds payable upon the death of the insured over a period of time has selected the __________ __________ settlement option.
Fixed period
