Life Insurance Policy Options and Benefit Riders Flashcards
Dividends are paid to policyholders of a ________ company.
mutual
True or False: A time limit exists to purchase additional life protection without required evidence of insurability.
True.
The Guaranteed Insurability (GI) rider usually limits this to age 40 or 50.
What dividend option provides an additional benefit for a limited period of time?
The One-Year Term option
Which settlement option indicates the beneficiary is most concerned with receiving income for a specific period of time?
Fixed Period
Accelerated benefits often require the insured to be ______________, with a life expectancy of ___ to ___ months.
Accelerated benefits often require the insured to be TERMINALLY, with a life expectancy of 12 to 24 months.
What is another name for the accelerated benefits rider?
The Living Needs rider.
If disabled, the waiver of premiums still allows for _____________ growth.
cash value
Name the three nonforfeiture benefits.
Surrender for cash, extended level term, and reduced paid-up permanent insurance
Identify the acronym: VSP
Viatical Settlement Provider
If someone has any paid-up permanent additions, what is payable upon death?
The paid-up permanent additions, in addition to the death benefit on the original policy
Who negotiates a VSP purchase?
A Viatical Settlement Broker
What is probably the simplest and most common settlement option used?
Cash or lump-sum payment
What are the advantages of selling a contract to a VSP?
A larger living benefit and being free from federal taxes
What is the limitation to an accidental death rider?
It only pays for accidental death
This dividend option is used to gradually increase the overall death benefit as a possible inflation offset.
The Paid-Up Permanent Additions Option
True or False: If an insurer is to retain the death benefit, an interest rate will be paid on these assets.
True
What is the tax treatment upon policy surrender?
Upon policy surrender, the cash value that exceeds total premiums paid would be considered taxable.
What is another name for the death benefit on an AD&D policy?
The principal sum or amount
Someone who has a very short life expectancy can expect a larger or smaller purchase price when selling to a VSP?
Larger
True or False: Waiver means a voluntary abandonment of an existing right.
True
What type of insurance is used to provide dependent coverage using a family term rider?
Level term insurance
What is the Surrender for Cash benefit?
A nonforfeiture option whereby the owner surrenders the policy for its cash value
Identify the acronym: AD
Accidental Death and Dismemberment
What rider uses an increasing term policy rider to pay an additional DB equal to the base policy’s existing cash value?
The Return of Cash Value rider
What nonforfeiture option continues to provide an identical death benefit upon policy surrender?
The Extended Level Term option
What is the name of the individual who sells her policy to a VSP?
A viator
Dividends are considered a return of __________ premium, and are not _________ when returned to policyowners.
Dividends are considered a return of OVERPAID premium, and are not TAXABLE when returned to policyowners.
Is the Waiver of Premium rider optional or mandatory?
Optional. The Waiver of Premium rider must be added at time of application by paying an additional premium.
Once the VSP buys a contract, it is responsible for future ___________________.
premium payments.
Name the six dividend options.
Cash, reduce premiums, accumulate at interest, paid-up permanent additions, paid-up option, and one-year term
What is the name of the company that purchases existing life insurance policies from an existing policyowner?
Viatical Settlement Provider
What additional rider increases the life insurance death benefit by an amount equal to the total policy premiums paid?
The Return of Premium rider
What dividend option provides the greatest additional amount of death benefit protection for a limited period?
The One-Year Term option
What settlement option uses all or a portion of the death benefit to provide an income for life?
The Life Income option
Describe the Paid-Up Permanent Insurance option.
This option provides for a smaller permanent life insurance policy requiring no further premiums.
Dividends paid on life insurance policies are received __________ and are never _____________.
Dividends paid on life insurance policies are received TAX-FREE and are never GUARANTEED.
What is a Stranger-Originated Life Insurance (STOLI) policy?
A policy that is purchased by a third party with no insurable interest in the insured
Which settlement option allows interest to be paid on all of the retained death benefit?
The interest only option
If _________________, the proceeds received from a VSP sale are received tax-free.
terminally
What nonforfeiture option continues to provide permanent insurance protection in a smaller face amount?
The Paid-Up Permanent Insurance option
What nonforfeiture option continues to provide an identical amount of insurance protection for a limited period?
The Extended Level Term option
If a person is disabled, life insurance premiums are waived once the insured is totally disabled for ___ months.
6
Upon disability, a life insurer may waive the premium obligation after ___ months of disability.
6
Policies sold to a VSP are said to have gone through ______________.
vacation.
What is the result of a life settlement?
A policy owner sells his existing life insurance policy to a third party
An accelerated benefit may provide for ______________ if the insured is confined to a nursing home.
An accelerated benefit may provide for long-term care if the insured is confined to a nursing home.
When does the settlement option become available to the beneficiary?
Upon the death of the insured
True or False: Double or triple indemnity may be used to describe the AD&D death benefit.
True
Insurance policy dividends are received __________, while interest earned on dividends is _________.
Insurance policy dividends are received TAX-FREE, while interest earned on dividends is TAXABLE.
True or False: A portion of the benefit provided by either fixed amount or fixed period will be taxable interest.
True
What rider is added to a policy and will provide a term insurance death benefit on the spouse or children?
A Dependent rider
Which settlement option indicates the beneficiary is most concerned with receiving a specific monthly dollar amount?
Fixed Amount
Premium rates for additional insurance purchased under the GI rider are based on an insured’s ________ or _______ age.
attained or actual age.
The payor rider is added to a _________ policy for an additional _________.
The payor rider is added to a CHILD’S policy for an additional PREMIUM.
Are death benefits taxable when received by the beneficiary?
No. Death benefits are not taxable.
What name is synonymous for the Waiver of Premium rider in a UL policy?
The Cost of Insurance rider
What rider increases the death benefit to offset an increase in the CPI?
The Cost of Living Adjustment (COLA) rider
Benefits received from an accelerated benefit are not taxable if the insured is ________________.
terminally ill.
True or False: Interest earned on dividends left with the insurer to accumulate is not taxable.
False
The AD&D rider is generally _____________ because it only protects against ____________________.
The AD&D rider is generally INEXPENSIVE because it only protects against ACCIDENTAL LOSSES.
A family term rider is added to a policy issued to the family ______________.
breadwinner.
When a policy is sold to a VSP, who becomes the new policyowner?
The VSP is the new policyowner and beneficiary.
What does the guaranteed insurability rider allow?
It allows additional coverage to be purchased without the insured having to prove they are insurable.
What type of assignment is used when selling a policy to a VSP?
Absolute assignment
In a Universal Life Insurance policy, what is the waiver of premium provision called?
The waiver of cost provision
Settlement options may be selected by _______________, but altered by a ______________ upon death of the __________.
Settlement options may be selected by POLICYOWNERS, but altered by a BENEFICIARY upon death of the INSURED.
The sale of a policy to a VSP may affect a person’s eligibility for ________ assistance.
public
Which option is more flexible–fixed period or fixed amount?
Fixed amount
What are the cash value options available to policyowners upon policy surrender?
Non-forfeiture options
In a life settlement, which party remains the same after the actual transfer of ownership occurs?
The insured party remains the same
equiring an additional premium, riders added to a life insurance policy must be purchased ___________________________.
at the time of application.
For the principal benefit to be paid under an AD&D policy, death must occur within ____ days following the accident.
90
Benefits received through the accelerated benefits rider will ________ the future death benefit.
reduce
If the premium payor dies, premiums on a child’s policy may be waived until the child reaches age ____.
21