Life Insurance Policies - Provisions, Options And Riders

Question 1

Policy owner’s promise to make premium payments

Answer 1

Consideration clause

Question 2

A period of time after the premium payment is due, usually 30 days

Answer 2

Grace Period Provision

Question 3

Allows a lapsed policy to be put back in force

Answer 3

Reinstatement Provision

Question 4

Waives the premium for the policy if the insured becomes totally disabled

Answer 4

Waiver of Premium Rider

Answer 5

Guaranteed insurability rider

Question 6

Total premiums paid

Answer 6

Cost basis

Question 7

Surrender charges are deducted from the cash value when

Answer 7

The policy is discontinued

Question 8

The policyowner may select a settlement option at the time of application

Answer 8

Spendthrift clause

Question 9

This life insurance policy feature makes a policy loan possible

Answer 9

Cash value provision

Question 10

Which nonforfeiture option offers the highest death benefit?

Answer 10

Extended term

Question 11

Which life insurance rider allows the applicant to have excess coverage?

Answer 11

Term rider

Question 12

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

Answer 12

Claim will be denied

Question 13

K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she choose?

Answer 13

Paid-Up Additional Insurance

Question 14

A Cost of Living rider gives the insured

Answer 14

Additional death benefits

Question 15

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

Answer 15

Ex-wife

Question 16

True or false: Receiving Social Security disability benefits is a requirement to be eligible for the Waiver of Premium

Answer 16

False

Question 17

The advantage of reinstating an original life policy is

Answer 17

The premiums are based on a younger age

Question 18

How are policyowner dividends treated in regards to income tax?

Answer 18

Interest on accumulations is taxed

Question 19

The Accelerated Death Benefit provision in a life insurance policy is also known as

Answer 19

Living benefit

Question 20

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Answer 20

Beneficiary will be paid the Death Benefit (Review Incontestable Clause)

Question 21

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

Answer 21

Extended term

Question 22

A life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is refer to as a(n) _____ rate loan

Answer 22

Variable

Question 23

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

Answer 23

Policy Loan Provision

Question 24

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Answer 24

Deducted when the policy is discontinued

Question 25

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is

Answer 25

AD&D

Question 26

Which Nonforfeiture Option continues a build-up of cash value?

Answer 26

Reduced Paid-up (21)