LIFE INSURANCE POLICY OPTIONS AND BENEFIT RIDERS Flashcards
what type of assignment is used when selling a policy to a VSP?
absolute assignment
Premium rates for aditional insurance purchased under the GI rider are based on insured’s ___ or ___ age.
attained or actual age
name the six dividend options
cash, reduce premiums, accumulate at interest, paid-up permanent additions, paid-up option, and one-year term
once the VSP buys a contract, it is responsible for future ____
premium payments
The sale of a policy to a VSP may affect a person’s eligibility for ____ assistance.
public assistance
What does the guaranteed insurability rider allow?
It allows additional coverage to be purchased without the insured having to prove they are insurable.
Who negotiates a VSP purchase?
A viatical settlement broker
which settlement option indicates the beneficiary is most concerted with receiving income for a specific period of time?
Fixed period
What settlement option uses all or a portion of the death benefit to provide an income for life?
the life income option
dividends are considered a return of ____ premium, and are not _____ when return to policyowners.
overpaid premium, not taxable
T or F: Interest earned on dividends left with the insurer to accumulate is not taxable
false
what is the limitation to an accidental death rider?
it only pays for accidental death
what dividend option provides the greatest additional amount of death benefit protection for a limited period?
the one-year term option
when a policy is sold to a VSP, who becomes the new policyowner?
the VSP is the new policyowner and beneficiary
if disabled, the waiver of premiums still allows for ___ growth
cash value
what is the tax treatment upon policy surrender?
upon policy surrender, the cash value that exceeds total premiums paid would be considered taxable
when does the settlement option become available to the beneficiary?
upon the death of the insured
what are the cash value options available to policyowners upon policy surrender?
non-forfeiture options
what is another name for the death benefit on a AD&D policy?
the principle sum or amount
dividends paid on life insurance policies are received ___ and are never ___
tax-free, never guaranteed
what is the surrender for cash benefit?
a nonforfeiture option whereby the owner surrenders the policy for its cash value
name the three nonforfeiture benefits
surrender for cash, extended level term, and reduced paid-up permanent insurance
the payor rider is added to a ____ policy for an additional ____
the payor rider is added to a childs policy for an additional premium
requiring an additional premium, riders added to a life insurance policy must be purchased ____
at the time of application
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
an accelerated benefit may provide for ___ if the insured is confined to a nursing home
long-term care
In a universal life insurance policy, what is the waiver of premium provision called?
the waiver of cost provision
upon disability, a life insurer may waive the premium obligation after ___ months of disability
6 months
describe the paid-up permanent insurance option
this option provides for a smaller permanent life insurance policy requiring no further premiums
what are the advantages of selling a contract to a VSP?
a larger living benefit and being free from federal taxes
what is probably the simplest and most common settlement option used?
cash or lump-sum payment
what is the result of a life settlement?
a policy owner sells his existing life insurance policy to a third party
T or F: double or triple indemnity may be used to describe the AD&D death benefit
true
T or F: in an insurer is to retain the death benefit, an interest rate will be paid on these assets.
true
what is a stranger-originated life insurance policy? (STOLI)
a policy that is purchased by a third party with no insurable interest in the insured.
Which settlement option indicates the beneficiary is most concerned with receiving a specific monthly dollar amount?
fixed amount
what dividend option provides an additional benefit for a limited period of time?
the one-year term option
settlement options may be selected by ___ but altered by a ___ upon death of the ____
selected by the policyowners, altered by a beneficiary upon the death of the insured.
what rider increases the death benefit to offset an increase in the CPI?
the cost of living adjustment (COLA) rider
in a life settlement, which party remains the same after the actual transfer of ownership occurs?
the insured party remains the same
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 is another name of the accelerated benefits rider?
the living needs rider
if a person is disabled, life insurance premiums are waived once the insured is totally disabled for ___ months.
6 months
accelerated benefits often require the insured to be ____ with a life expectancy of ___ to ___ months
terminally ill, 12 to 24 months
T or F: A portion of the benefit provided by either fixed amount or fixed period will be taxable interest.
true
benefits received through the accelerated benefits rider will ____ the future death benefit.
reduce
is the waiver of premium rider optional or mandatory?
optional. the waiver of premium rider must be added at the time of application by paying an additional premium.
someone who has a very short life expectancy can expect a larger or smaller purchase price when selling to a VSP?
larger
T or F: 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
which settlement option allows interest to be paid on all the retained death benefit?
the interest only option
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 is the name of the individual who sells her policy to a VSP?
a viator
Are death benefits taxable when received by the beneficiary?
no, death benefits are not taxable
if ___ the proceeds received from a VSP sale are received tax-free
terminally ill
what nonforfeiture option continues to provide an identical death benefit upon policy surrender?
the extended leven term option
which option is more flexible– fixed period or fixed amount?
fixed amount
what nonforfeiture option continues to provide permanent insurance protection in a smaller face amount?
the paid-up permanent insurance option
the dividend option is used to gradually increase the overall death benefit as a possible inflation offset
the paid-up permanent additions option
identify the acronym: AD
accidental death & Dismemberment
a family term rider is added to a policy issued to the family ____
breadwinner
Insurance policy dividends are received ___, while interest earned on dividends is ______
tax-free, taxable
what rider is added to a policy and will provide a term insurance death benefit on the spouse or children?
a dependent rider
what type of insurance is used to provide dependent coverage using a family term rider?
level term insurance
identify the acronym: VSP
viatical settlement provider
dividends are paid to policyholders of a ___ company
mutual
the AD&D rider is generally ____ because it only protects against _____
inexpensive, accidental losses
policies sold to a VSP are said to have gone through _____
viatication
if the premium payor dies, premiums on a child’s policy may be waived until the child reaches age ___
21
what is the name of the company that purchases existing life insurance policies from an existing policyowner?
viatical settlement provider
what a nonforfeiture option continues to provide an identical amount of insurance protection for a limited period?
the extended level term option
for the principal benefit to be paid under an AD&D policy, death must occur within ____ days following the accident.
90 days
benefits received form an accelerated benefit are not taxable if the insured is ____
terminally ill
T or F: Waiver means a voluntary abandonment of an existing right
true
what name is synonymous for the waiver of premium rider in a UL policy?
cost of insurance rider
