Life Insurance Policy Provisions Flashcards
Is a grace period a required provision?
Yes
A woman listed as a man on an application will probably receive a ________ benefit at death.
higher
What percentage of premium must be returned to the policyowner if a policy is returned during the free-look period?
100% of the premiums paid
Who selects how often a policy premium is paid?
The policyowner
Which beneficiary designation means per family line or lineage?
The per stirpes beneficiary designation
Taking a cash value policy loan __________ create a taxable event
does not
__________ is the transfer of policy rights to another party.
Assignment
What is the most common life insurance policy exclusion?
War
Policy loan interest is due each year on the ________ anniversary date.
policy
List some examples of policyowner rights.
Name/change a beneficiary, select premium mode, receive dividends, take loans against the contract, and assign benefits
First-in-line beneficiaries are also known as _______, second-in-line as __________, and third-in-line as ________.
First-in-line beneficiaries are also known as PRIMARY, second-in-line as CONTINGENT, and third-in-line as TERTIARY.
Explain the Simultaneous Death Act (Common Disaster).
The assumption that the primary beneficiary died prior to the insured when both die in a common accident.
A grace period is designed to prevent the ________________ lapse of a policy.
unintentional
What right does the APL option provide to the insurer?
The right to borrow from the cash value to pay overdue premium
Is interest paid on a policy loan tax-deductible?
No
The maximum loan value is equal to the ____________ minus any projected __________.
The maximum loan value is equal to the CASH VALUE minus any projected INTEREST.
If no beneficiary is listed, policy benefits will be paid to the insured’s _________.
estate
What would a parent use to change ownership of a child’s policy?
An absolute assignment
What type of assignment is used to secure a loan?
A collateral assignment
What is another name for the transfer of ownership?
Assignment
Only an ________________ of an _______ is provided the authority to make or waive a policy provision.
Only an APPROVED of an INSURER is provided the authority to make or waive a policy provision.
A fixed interest rate of no more than ___% may be assessed on a policy loan.
8%
True or False: Everyone attempting to reinstate a policy within 3 years of its lapse date will be accepted.
False
Suicide is covered once the policy has been issued for ____ years.
2 years
Beginning on the policy delivery date, the free look provision must be provided for no less than ____ days.
10 days
Explain the concept of absolute assignment.
The transfer of all policy rights to another
What clause allows an insurer to pay a portion of the death benefit to an individual who paid for funeral expenses?
The Facility of Payment Clause
A _____________ is a trust listed in a person’s will.
testamentary
What is the APL option designed to prevent?
The unintentional lapse of a policy
Which provision allows an insurer to charge a service fee for the collection of premium?
The Payment of Premium provision
Which payment mode would be the least expensive over the course of a year?
The annual payment mode
What clause is a summary of the entire contract and is usually found on the first or face page of the contract?
The Insuring clause
True or False: Any immediate family member may take a loan out against a person’s insurance policy.
False. Only the policyowner has the right to take a loan out against a policy.
When would the APL option be activated?
Following the expiration of the grace period
What happens to a policy if the premium is not paid during the grace period?
It will lapse for nonpayment of premium.
A _______ is usually established when benefits are payable to a minor.
A trust is usually established when benefits are payable to a minor.
_____________________ is the transfer of some, but not all, policy rights to another party.
Collateral assignment
What are the four common modes of premium payment?
Annual, semiannual, quarterly, and monthly
True or False: A whole life to term conversion with the same company does not require evidence of insurability.
False.
Conversion from whole life to term will always require evidence of insurability.
Name some common policy exclusions.
War, private aviation, suicide (first 2 years), dangerous hobbies or occupations, and criminal acts
If an insured’s age is misstated, what will eventually happen to any future claim?
The benefit will be adjusted to reflect the misstated age.
Understating age on a life application will mean a _______ death benefit will be paid.
lower
What does per capita beneficiary depiction mean?
It means per person or per head
Death by suicide is not covered during the first ___ years of policy issue.
2 years
Which beneficiary depiction may not be changed without permission from the beneficiary?
An irrevocable beneficiary depiction
The _________ war exclusion only excludes benefits if death is the direct result of battle.
results
Any policy modifications must be endorsed by the _________ and __________ to the policy.
Any policy modifications must be endorsed by the INSURER and ATTACHED to the policy.
List two examples of an owner’s right.
The right to change beneficiary or premium payment mode
True or False: Beneficiary listings may be changed by the insurer using a change of beneficiary form.
False.
The policyowner, not the insurer, may change the beneficiary.
nefit proceeds left to an insured’s estate will be decided by a _________ court.
probate
Within a contract, where does an insurer make its promise to pay benefits?
In the Insuring Clause
What is another name for the free-look provision?
The 10-Day Right to Examine
How long is a grace period?
No less than 31 days
Which type of policy type allows for cash value loans–term or whole life?
Whole life
Which type of trust is created during the life of the insured?
An inter vivos trust
True or False: The entire contract provision is a mandatory provision.
True
dentify the acronym: APL
Automatic Premium Loan
If death occurs with an outstanding policy loan, what is subtracted from the death benefit?
The remaining amount of the loan plus any accrued interest
What two items constitute an applicant’s consideration?
Application information and initial premium
Do beneficiaries have contractual rights to a contract?
No
Does a beneficiary have any owner’s rights?
No
Define the term consideration.
An exchange of values between two parties
The transfer of all policy rights to another party is referred to as ___________________.
absolute assignment.
What provision requires an adjustment in benefits if the insured’s age has been improperly recorded?
The Misstatement of Age provision
When must the optional APL provision be selected?
At the time of application
True or False: A term-to-term policy conversion with the same company does not require evidence of insurability.
True
An insurer must respond to an applicant for reinstatement within ___ days of receiving the paperwork.
45 days
Is an insured afforded coverage during the grace period?
Yes
A policy is said to be _____________ after the contract has been issued for ___ or more years.
A policy is said to be INCONTESTABLE after the contract has been issued for 2 or more years.
The minimum length of a free-look period is ____ days.
The minimum length of a free-look period is 10 days.
How are monthly premiums generally paid?
Mark For Review71 of 75An electronic fund transfer through a person’s bank
How long does an insurer have to contest the validity of a claim based on false application information?
For two years following the issuance of the policy
What is the name for an insurer’s consideration to the applicant?
The warranty
Would it be better to reinstate an existing policy or attempt to purchase a new policy?
Reinstate the original policy since premium is based on insured’s age at issuance and may result in lower premiums.
To whom is the interest earned on assets retained by an insurer taxed?
To the beneficiary
