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LAH Course > Life Insurance Policy Options and Benefit Riders > Flashcards

Life Insurance Policy Options and Benefit Riders Flashcards

1
Q

Dividends are paid to policyholders of a ________ company.

A

mutual

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2
Q

True or False: A time limit exists to purchase additional life protection without required evidence of insurability.

A

True.

The Guaranteed Insurability (GI) rider usually limits this to age 40 or 50.

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3
Q

What dividend option provides an additional benefit for a limited period of time?

A

The One-Year Term option

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4
Q

Which settlement option indicates the beneficiary is most concerned with receiving income for a specific period of time?

A

Fixed Period

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5
Q

Accelerated benefits often require the insured to be ______________, with a life expectancy of ___ to ___ months.

A

Accelerated benefits often require the insured to be TERMINALLY, with a life expectancy of 12 to 24 months.

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6
Q

What is another name for the accelerated benefits rider?

A

The Living Needs rider.

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7
Q

If disabled, the waiver of premiums still allows for _____________ growth.

A

cash value

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8
Q

Name the three nonforfeiture benefits.

A

Surrender for cash, extended level term, and reduced paid-up permanent insurance

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9
Q

Identify the acronym: VSP

A

Viatical Settlement Provider

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10
Q

If someone has any paid-up permanent additions, what is payable upon death?

A

The paid-up permanent additions, in addition to the death benefit on the original policy

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11
Q

Who negotiates a VSP purchase?

A

A Viatical Settlement Broker

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12
Q

What is probably the simplest and most common settlement option used?

A

Cash or lump-sum payment

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13
Q

What are the advantages of selling a contract to a VSP?

A

A larger living benefit and being free from federal taxes

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14
Q

What is the limitation to an accidental death rider?

A

It only pays for accidental death

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15
Q

This dividend option is used to gradually increase the overall death benefit as a possible inflation offset.

A

The Paid-Up Permanent Additions Option

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16
Q

True or False: If an insurer is to retain the death benefit, an interest rate will be paid on these assets.

A

True

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17
Q

What is the tax treatment upon policy surrender?

A

Upon policy surrender, the cash value that exceeds total premiums paid would be considered taxable.

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18
Q

What is another name for the death benefit on an AD&D policy?

A

The principal sum or amount

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19
Q

Someone who has a very short life expectancy can expect a larger or smaller purchase price when selling to a VSP?

A

Larger

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20
Q

True or False: Waiver means a voluntary abandonment of an existing right.

A

True

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21
Q

What type of insurance is used to provide dependent coverage using a family term rider?

A

Level term insurance

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22
Q

What is the Surrender for Cash benefit?

A

A nonforfeiture option whereby the owner surrenders the policy for its cash value

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23
Q

Identify the acronym: AD

A

Accidental Death and Dismemberment

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24
Q

What rider uses an increasing term policy rider to pay an additional DB equal to the base policy’s existing cash value?

A

The Return of Cash Value rider

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25
Q

What nonforfeiture option continues to provide an identical death benefit upon policy surrender?

A

The Extended Level Term option

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26
Q

What is the name of the individual who sells her policy to a VSP?

A

A viator

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27
Q

Dividends are considered a return of __________ premium, and are not _________ when returned to policyowners.

A

Dividends are considered a return of OVERPAID premium, and are not TAXABLE when returned to policyowners.

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28
Q

Is the Waiver of Premium rider optional or mandatory?

A

Optional. The Waiver of Premium rider must be added at time of application by paying an additional premium.

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29
Q

Once the VSP buys a contract, it is responsible for future ___________________.

A

premium payments.

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30
Q

Name the six dividend options.

A

Cash, reduce premiums, accumulate at interest, paid-up permanent additions, paid-up option, and one-year term

31
Q

What is the name of the company that purchases existing life insurance policies from an existing policyowner?

A

Viatical Settlement Provider

32
Q

What additional rider increases the life insurance death benefit by an amount equal to the total policy premiums paid?

A

The Return of Premium rider

33
Q

What dividend option provides the greatest additional amount of death benefit protection for a limited period?

A

The One-Year Term option

34
Q

What settlement option uses all or a portion of the death benefit to provide an income for life?

A

The Life Income option

35
Q

Describe the Paid-Up Permanent Insurance option.

A

This option provides for a smaller permanent life insurance policy requiring no further premiums.

36
Q

Dividends paid on life insurance policies are received __________ and are never _____________.

A

Dividends paid on life insurance policies are received TAX-FREE and are never GUARANTEED.

37
Q

What is a Stranger-Originated Life Insurance (STOLI) policy?

A

A policy that is purchased by a third party with no insurable interest in the insured

38
Q

Which settlement option allows interest to be paid on all of the retained death benefit?

A

The interest only option

39
Q

If _________________, the proceeds received from a VSP sale are received tax-free.

A

terminally

40
Q

What nonforfeiture option continues to provide permanent insurance protection in a smaller face amount?

A

The Paid-Up Permanent Insurance option

41
Q

What nonforfeiture option continues to provide an identical amount of insurance protection for a limited period?

A

The Extended Level Term option

42
Q

If a person is disabled, life insurance premiums are waived once the insured is totally disabled for ___ months.

A

6

43
Q

Upon disability, a life insurer may waive the premium obligation after ___ months of disability.

A

6

44
Q

Policies sold to a VSP are said to have gone through ______________.

A

vacation.

45
Q

What is the result of a life settlement?

A

A policy owner sells his existing life insurance policy to a third party

46
Q

An accelerated benefit may provide for ______________ if the insured is confined to a nursing home.

A

An accelerated benefit may provide for long-term care if the insured is confined to a nursing home.

47
Q

When does the settlement option become available to the beneficiary?

A

Upon the death of the insured

48
Q

True or False: Double or triple indemnity may be used to describe the AD&D death benefit.

A

True

49
Q

Insurance policy dividends are received __________, while interest earned on dividends is _________.

A

Insurance policy dividends are received TAX-FREE, while interest earned on dividends is TAXABLE.

50
Q

True or False: A portion of the benefit provided by either fixed amount or fixed period will be taxable interest.

A

True

51
Q

What rider is added to a policy and will provide a term insurance death benefit on the spouse or children?

A

A Dependent rider

52
Q

Which settlement option indicates the beneficiary is most concerned with receiving a specific monthly dollar amount?

A

Fixed Amount

53
Q

Premium rates for additional insurance purchased under the GI rider are based on an insured’s ________ or _______ age.

A

attained or actual age.

54
Q

The payor rider is added to a _________ policy for an additional _________.

A

The payor rider is added to a CHILD’S policy for an additional PREMIUM.

55
Q

Are death benefits taxable when received by the beneficiary?

A

No. Death benefits are not taxable.

56
Q

What name is synonymous for the Waiver of Premium rider in a UL policy?

A

The Cost of Insurance rider

57
Q

What rider increases the death benefit to offset an increase in the CPI?

A

The Cost of Living Adjustment (COLA) rider

58
Q

Benefits received from an accelerated benefit are not taxable if the insured is ________________.

A

terminally ill.

59
Q

True or False: Interest earned on dividends left with the insurer to accumulate is not taxable.

A

False

60
Q

The AD&D rider is generally _____________ because it only protects against ____________________.

A

The AD&D rider is generally INEXPENSIVE because it only protects against ACCIDENTAL LOSSES.

61
Q

A family term rider is added to a policy issued to the family ______________.

A

breadwinner.

62
Q

When a policy is sold to a VSP, who becomes the new policyowner?

A

The VSP is the new policyowner and beneficiary.

63
Q

What does the guaranteed insurability rider allow?

A

It allows additional coverage to be purchased without the insured having to prove they are insurable.

64
Q

What type of assignment is used when selling a policy to a VSP?

A

Absolute assignment

65
Q

In a Universal Life Insurance policy, what is the waiver of premium provision called?

A

The waiver of cost provision

66
Q

Settlement options may be selected by _______________, but altered by a ______________ upon death of the __________.

A

Settlement options may be selected by POLICYOWNERS, but altered by a BENEFICIARY upon death of the INSURED.

67
Q

The sale of a policy to a VSP may affect a person’s eligibility for ________ assistance.

A

public

68
Q

Which option is more flexible–fixed period or fixed amount?

A

Fixed amount

69
Q

What are the cash value options available to policyowners upon policy surrender?

A

Non-forfeiture options

70
Q

In a life settlement, which party remains the same after the actual transfer of ownership occurs?

A

The insured party remains the same

71
Q

equiring an additional premium, riders added to a life insurance policy must be purchased ___________________________.

A

at the time of application.

72
Q

For the principal benefit to be paid under an AD&D policy, death must occur within ____ days following the accident.

A

90

73
Q

Benefits received through the accelerated benefits rider will ________ the future death benefit.

A

reduce

74
Q

If the premium payor dies, premiums on a child’s policy may be waived until the child reaches age ____.

A

21

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