Life Insurance Policy Provisions, Riders And Options

Question 1

What is the purpose of a free-look period?

Answer 1

To allow the insured to return the policy with a full refund

Question 2

What happens to a policy’s cash value under an extended term nonforfeiture option?

Answer 2

The cash value is converted to the same face amount as in the whole life policy

Question 3

What are the 3 nonforfeiture option in life insurance policies?

Answer 3

1 cash surrender

2 reduced paid up

3 extended term

Question 4

When can an insurance company use suicide as a defense against paying a death claim?

Answer 4

When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

Question 5

If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?

Answer 5

Lump sum payment

Question 6

Who does the common disaster clause protect?

Answer 6

The contingent beneficiary

Question 7

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Answer 7

Primary beneficiary

Question 8

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Answer 8

Waiver or premium

Question 9

What happens to the proceeds of a life insurance policy if there is no named beneficiary?

Answer 9

The proceeds are paid to the insured’s estate

Question 10

What is the purpose of settlement options in life insurance policies?

Answer 10

To determine how the death benefit will be paid to the beneficiary

Question 11

What are policy dividends?

Answer 11

Return of unused premiums

Question 12

What settlement options are available in life insurance policies?5

Answer 12

1Lump sum cash
2 fixed period
3 fixed amount
4 life income
5 interest only

Question 13

What ar the dividend options in life insurance policies?7

Answer 13

1 cash
2 reduced premium
3 accumulation at interest
4 paid up additions
5 paid up option
6 one year term
7 acceleration of endowment

Question 14

In the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?

Answer 14

The longer the period selected, the smaller each installment will be

Question 15

What dividend option is automatically selected by the company if not chosen by the policy owner?

Answer 15

Paid up additions

Question 16

An insurer has discovered a representation on a life insurance policy application regarding the insured’s age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Answer 16

Pay a reduced death benefit

Question 17

What require provision protects against unintentional policy lapse?

Answer 17

Grace period

Question 18

What is the purpose of a free look period?

Answer 18

To allow the insured to return the policy with a full refund

Question 19

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Answer 19

Incontestability

Question 20

With the reduction of premium dividend option, how is the dividend used?

Answer 20

The dividend is applied to next year’s premium (it reduces the next year’s premium)

Question 21

With the interest only settlement option, what happens to the policy’s death benefit?

Answer 21

Policy proceeds are retained by the insurance company

Only the interest is paid to the beneficiary

Question 22

What are the most common exclusions in life insurance policies?3

Answer 22

1 War and military service
2 hazardous occupation
3 aviation

Question 23

A policyowner borrowed a portion of cash value from his whole life policy. If the Loan Is not repaid, how will that affect the death benefit to the beneficiary?

Answer 23

The amount of the loan will be subtracted from the death benefit

Question 24

What dividend option can increase the death benefit of the existing life policy?

Answer 24

Paid up additions

Question 25

What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured’s death?

Answer 25

Settlement options

Question 26

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

Answer 26

The death benefit will be adjusted to the amount that the insured could obtain for her correct age.

Question 27

What type of assignment is used to secure the payment of debt with an existing life insurance policy?

Answer 27

Collateral assignment

Question 28

What type of beneficiary is next in line after the primary beneficiary?

Answer 28

Contingent beneficiary

Question 29

When will a contingent beneficiary receive death benefits from a life insurance policy?

Answer 29

When the primary beneficiary dies before the insured

Question 30

What does the term double indemnity mean?

Answer 30

The insurer will pay a benefit of twice the face amount

Question 31

What nonforfeiture option is automatically selected by the company if not chosen by the policy owner?

Answer 31

Extended term

Question 32

What is the name for a life insurance policy rider that provides coverage on the insured’s family members?

Answer 32

Other insured rider

Question 33

What type of beneficiary can be changed at any point by the policy owner?

Answer 33

Revocable

Question 34

What is the purpose of the Automatic Premium Loan provision?

Answer 34

To prevent the unintentional lapse of a policy because of nonpayment of the premium

Question 35

What nonforfeiture option provides coverage for the longest period of time?

Answer 35

Reduced paid up

Question 36

Under what nonforfeiture option does the company pay the policy’s surrender value and have no further obligations to the policy owner?

Answer 36

Cash surrender

Question 37

Is the beneficiary required to have insurable interest in the insured?

Answer 37

No beneficiaries do not have insurable interest in the insured

Question 38

What provision in a life insurance policy extends coverage beyond the premium due date?

Answer 38

Grace period

Question 39

To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

Answer 39

A copy of the original insurance application

Question 40

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policy owner and the insurer?

Answer 40

Entire contract

Question 41

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Answer 41

Absolute assignment

Question 42

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner does not amend the beneficiary designation, what will happen to the policy’s death benefit?

Answer 42

It will be paid to the insured’s estate

Question 43

What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

Answer 43

Reinstatement

Question 44

Who has the right to the cash value of a life insurance policy?

Answer 44

Policy owner

Question 45

Who controls changes in premium payments, face values and loans in a life insurance policy?

Answer 45

Policyowner

Question 46

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Answer 46

Policy premium in a instated policy will be set according to insured’s original age.