Life Insurance Policy Provisions Flashcards
In a life insurance policy, which dividend option allows the policyholder to apply dividends toward their premium payments, potentially suspending payment in the dividend to or greater than the premium?
A. Paid up Additions
B. Accumulation of Interest
C. Reduction of Premiums
D. One-Year Term
Reduction of Premium
The Reduction of Premium dividend option enable policyholders to apply dividends towards the premium payments, potentially suspending the payment if the dividend equals or exceeds the premium amoun.t
As a life insurance agent, what is the primary benefit you can offer a client when they reinstate their policy instead of obtaining a new one?
A. Maintains original issue age
B. No insurability proof needed
C. Application not required
D. Cancels outstanding loans
Maintains original issue age.
The main advantage of reinstating a policy rather than obtaining a new one is that it allows the insured to maintain their original issue age, which prevents their premium from increasing based on their age at the time of reinstatement.
As a life insurance agent, which rider allows your client to buy additional disability income protection on specific future dates with premiums based on their age at the time of purchase?
A. Guaranteed insurability
B. Payor Clause
C. Additional monthly benefit rider
D. Disability income rider
Guaranteed Insurability
Guaranteed insurability is the option that enables insured individuals to purchase additional disability income protection at specified future dates, with the premium rate based on their attained age at the time of purchase.
Under which circumstances can an insurer contest a life insurance policy even after the 2-year incontestability period has passed?
A. Pre-existing conditions
B Insurance code changes
C. Fraudulent misstatements
D. Health changes
Fraudulent misstatements
The incontestability provisions protects the insured after 2-years, but fraudulent misstatements are exempt from this protection, allowing insurers to contest policies even after the 2-year period.
You are an insurance agent, and a 35-year old autoworker with a family comes to you for advice. They have been laid off and expect to be without work for 6-12 months during which they cannot afford to pay premiums on the Whole Life policy. They intend to reinstate the policy once they return to work. Which non-forfeiture option would be most suitable for their situation?
A. Extended Term
B. Reduced Paid-Up
C. Premium Reduction
D. Cash Surrender
Extended Term
The most appropriate non-forfeiture option for someone who plans to reinstatement when the policyowner’s financial situation improves.
As a life insurance broker, you’re helping a client who wants to ensure their policy remains in effect until age 100 without further premium payments. Which non-forfeiture option should you recommend?
A. Reduced Paid-Up Insurance
B. Paid-Up Additions
C. Reduction of Premium
D. Extended Term Insurance
Reduced Paid-Up Insurance
The Reduced Paid-Up non-forfeiture option is the one that allows coverage to continue until age 100 without further premium payments.
As a life insurance agent, which type of policy allows your clients to access non-forfeiture benefits such as Reduced Paid-Up Insurance?
A. Dividend-paying policies
B. Mutual company policies
C. Cash value developing policies
D. Participating policies
Cash value developing policies.
Non-forfeiture benefits , such as Reduced Paid-Up Insurance, are available in policies that develop cash value, allowing policyholders to receive a portion of the policy’s value if they stop paying premiums or if the policy is terminated before the insured person passes away.
As an agent, how do Paid-Up Additions impact a life insurance policy’s cash value and death benefit?
A. Both increase
B. Both decrease
C. Cash value decreases, death benefit increases
D. Cash value increases, death benefit decreases
Both increase
The Paid-Up Additions option allows policyholders to use dividends to purchase additional coverage based on their attained age, increasing the death benefit and cash value of their life insurance policy.
As an agent, you are helping a client who can no longer pay premiums but wants to maintain their original death benefit. Which non-forfeiture option would you recommend?
A. Extended Term
B. Reduced Paid-Up
C. Modified Endowment
D. None of the above
Extended Term
The Extended Term non-forfeiture option provides the same benefit as the original policy, allowing policyholders to maintain their coverage even if they can no longer pay premiums.
As a broker, you are selling a Whole Life policy to a client named Harry. Which of the following options would you not be required to explain to Harry due to it irrelevance in a Whole Life policy?
A. Accumulation at Interest
B. 10 Day Free Look
C. Extended Term
D. Reduced Paid-Up
Accumulation at Interest
You are not obligated to explain Accumulation at interest to Harry because Whole Life policies typically do not pay dividends, and Accumulation at Interest is a dividend option.
As a broker, you are discussing non-forfeiture option with a client whose life insurance policy has lapsed due nonpayment of premium. Which two options should you recommend for possible policy reinstatement?
A. Extended Term only
B. Reduced Paid-up only
C. Extended Term and Reduced Paid-Up
D. Cash Surrender and Extended Term
Extended Term and Reduced Paid-Up
The two non-forfeiture options that allow for the reinstatement of a lapsed life insurance policy are Extended Term and Reduced Paid-Up.
As a life insurance agent, a policyholder approaches you about reinstating their lapsed policy. Under the reinstatement provision, what is the maximum time for reinstating a life insurance policy after it has lapsed?
A. 1 year
B. 2 years
C. 3 years
D. 5 years
3 years
The maximum time limit for reinstating a life insurance policy after it has lapsed is 3 years, during which the policyholder must provide evidence of insurability and pay all past due premiums, along with any interest or fees.
In a life insurance policy, what is the default option for non-forfeiture when a policyholder stops paying premiums?
A. Cash Surrender
B. Reduced Paid-Up
C. Accumulate at Interest
D. Extended Term
Extended Term
The automatic non-forfeiture option in life insurance is the Extended Term option, which provides a temporary term life insurance policy based on the policy’s cash value.
Which statement about Whole Life policy reinstatement is incorrect?
A. Back premium and interest payment needed.
B. Cash Non-forfeiture option prevents reinstatement
C. Reduced Paid Up option allows lesser face amount reinstatement.
D. Proof of insurability always required.
Reduced Paid Up option allows lesser face amount reinstatement
To correctly answer this question, it is crucial to know the utilizing the Reduced Paid-Up Non-forfeiture option does not result in a reinstated Whole Life policy of a lesser face amount than the original policy. Additionally, understanding the requirements and options for reinstating a policy, such as back premium payments, interest, policy loan payoffs, and proof of insurability, is essential.
As a policyholder seeking to reinstate a lapsed Whole Life policy, which of the following steps is NOT required?
A. Paying a reinstatement fee
B. Paying past due premiums
C. Paying interest on past due premiums
D. Proving insurability
Paying a reinstatement fee
To reinstate a lapsed Whole Life policy, a policyholder must pay past due premiums, pay interest on the past due premiums, and prove insurability. A reinstatement fee is not a required step in this process.
