LI Provisions, Options And Riders Flashcards
What LI provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?
Entire contract
If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?
Lump sum payment
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?
Absolute assignment
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
Collateral assignment
An insurer figures out the insured is actually 10 years older than he stated on the application. What happens to the death benefit?
They will pay a reduced benefit
When can an insurance co use suicide as a defense against paying a death claim?
If it happens within 2 years of buying the policy
What nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
Sole beneficiary dies before the insured. If the owner doesn’t amend the beneficiary designation, what happens to the policies death benefit?
It’s paid to the insureds estate
To meet the requirement of the entire contract policy provision an insurance policy must contain what?
A copy of the original application
Who has the right to the cash value of a life insurance policy?
Policyowner
What are policy dividends?
Return of unused premiums
What provision in a life insurance policy extends the coverage beyond the premium due date?
Grace period
You borrow a portion of cash value from your whole life policy. If you don’t repay the loan, how will that affect the death benefit to the beneficiary?
Loan amount subtracted from the death benefit
Term used to describe methods of payment of the death benefit to the beneficiary upon the insureds death?
Settlement options
What required provision protects against unintentional policy lapse?
Grace period
Beneficiary designation that has first claim to the death proceeds of a life insurance policy?
Primary beneficiary
Provision that allows the policyowner to reactivate a lapsed life ins policy within a specified period of time without proof of insurability
Reinstatement
Life policy rider that allows the company to forgo collecting the premium if the insured becomes disabled
Waiver of premium
Purpose of automatic premium loan provision
To prevent the unintentional lapse of a policy bc of nonpayment of the premium
In the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of installments?
The longer the period selected, the smaller each installment will be
When will a contingent beneficiary receive death benefits from a life insurance policy?
When the primary beneficiary dies before the insured
What nonforfeiture option is selected by the company if not chosen by the policyowner?
Extended term
Who controls changes in premium payments, face values, and loans in a life insurance policy?
Policyowner
With the reduction of premium dividend option, how is the dividend used?
The dividend is applied to the next years premium and reduces it
What type of beneficiary can be changed at any point by the policyowner?
Revocable
With the interest only settlement option, what happens to the policy’s death benefit?
Policy proceeds are retained by the insurance company, only the interest is paid to the beneficiary
What settlement options are available in life insurance policies?
Lump sum/cash, fixed period, fixed amount, life income, interest only
3 nonforfeiture options in LI policies
Cash surrender, reduced paid-up, extended term
