Life Policy Provisions, Riders, and Options

Question 1

The entire contract provision stipulates that the policy and a copy of the application, along with any riders or _____, constitute the entire contract

Answer 1

amendments

Question 2

The _____ sets forth the basic agreements between the insurer and the insured. States insurer’s promise to pay the death benefit, located on policy face page, defines parties to the contract, premium to be paid, how long coverage is in force, and amount of death benefit

Answer 2

insuring clause

Question 3

The _______ provision allows the policy owner ____ days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium.

Answer 3

10 days

Question 4

The free-look period starts when the policyowner ______ the policy (policy delivery), not when the insurer issues the policy.

Answer 4

receives

Question 5

Both parties to a contract must provide some value, or ________, in order for the contract to be valid.

Answer 5

Consideration

Question 6

The parties to the insurance contract are the insurer, the policyowner, the _____ and the beneficiary

Answer 6

insured

Question 7

The policyowner and the insured may be the same person or

Answer 7

different persons

Question 8

The ______ has the responsibility of paying the policy premiums, and is also the person who must have an insurable interest in the insured at the time of the application for the insurance

Answer 8

policyowner

Question 9

When the owner and the insured are not the same person, the insurance arrangement is referred to as the

Answer 9

third-party ownership

Question 10

The policyowner of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without the ___________. However owner must notify insurer in writing of the assignment

Answer 10

consent of the insurer

Question 11

Transfer of the life insurance ____________ the insured or amount of coverage; it only changes who has the policy ownership rights

Answer 11

does not change

Question 12

The _______ ________ specifies the policyowner’s right to assign (transfer rights of ownership) the policy.

Answer 12

assignment provision

Question 13

2 types of policy assignment

Answer 13

Absolute Assignment

Collateral Assignment

Question 14

_____ _______ involves transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights.

Answer 14

Absolute Assignment

Question 15

______ ______ involves transfer of partial rights to another person. It is usually done in order to secure a loan or some other transaction

Answer 15

Collateral Assignment

Question 16

The ______ does not have to have an insurable interest in the insured

Answer 16

beneficiary

Question 17

Does policyowner have to name a beneficiary in order for the policy to be valid?

Answer 17

NO

Question 18

Benefits designated to a _____ will either be paid to the minor’s guardian, or paid to the trustee of the minor if the trust is the named beneficiary, or paid as directed by a court.

Answer 18

minor

Question 19

The ____________ has first claim to the policy proceeds following the death of the insured. Policyowner may name more than one _______

Answer 19

Primary beneficiary

Question 20

The ________ has second claim in the event that the primary beneficiary dies before the insured. Do not receive anything if primary beneficiary is still living at the time of the insured’s death

Answer 20

contingent beneficiary

Question 21

If none of the beneficiaries is alive at the time of the insured’s death, or if no beneficiary is named, the insured’s ____ will automatically receive the proceeds of the life insurance policy.

Answer 21

estate

Question 22

Beneficiary designations may be either

Answer 22

revocable or irrevocable

Question 23

The policyowner, without the consent or knowledge of the beneficiary, may change a ________ at any time

Answer 23

revocable designation

Question 24

An ________ may not be changed without the written consent of the beneficiary. They have a vested interest in the policy and policyowner can not borrow cash without beneficiary’s agreement

Answer 24

irrevocable designation

Question 25

If the insured and the primary beneficiary die at approximately the same time from a common disaster with no clear evidence as to who died first, a problem may arise in identifying which party is eligible for the death benefit. The _________ has been adopted to address this problem, and to protect the policyowner’s original intent, as well as to protect the contingent beneficiary.

Answer 25

Uniform Simultaneous Death Law

Question 26

Uniform Simultaneous Death Law stipulates that if the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the __________ died first

Answer 26

primary beneficiary

Question 27

The ________, when added to a policy provides that if the insured and the primary beneficiary died in a common disaster ) even if the beneficiary outlived the insured by a specified number of days), it is presumed that the primary beneficiary died first, so the proceeds will be paid to either the contingent beneficiary or to the insured’s estate, if no contingent beneficiary is designated

Answer 27

Common Disaster Clause

Question 28

The _____ is the manner or frequency that the policyowner pays the policy premium

Answer 28

premium mode

Question 29

Most policies allow for annual, semi-annual, quarterly, or

Answer 29

monthly payments

Question 30

If the insured dies during a period of time for which the premium has been paid, the insurer must refund any _________ along with the policy proceeds

Answer 30

unearned premium

Question 31

The _______ is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapse (usually 30 or 31 days).

Answer 31

grace period

Question 32

_______ policies allow the policyowner to increase or decrease the premium during the policy period

Answer 32

Flexible premium

Question 33

The ________ provision allows a lapsed policy to be put back in force.

Answer 33

reinstatement

Question 34

The maximum time limit for reinstatement is usually ______ after the policy has lapsed

Answer 34

3 years

Question 35

A policy that has been _____ cannot be reinstated

Answer 35

surrendered

Question 36

The _________ clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years, even if there has been a material misstatement of facts or concealment of a material fact

Answer 36

incontestability

Question 37

The ______ option is fond only in policies that contain cash value

Answer 37

policy loan

Question 38

Universal life policies allow the _________ (partial surrender) of the policy cash value. Limit as to how much and how often. Interest earned on withdrawn cash value may be taxed

Answer 38

partial withdrawal

Question 39

______ are the types of risks the policy will not cover. Ex. Aviation, Hazardous Occupations, and Military Service

Answer 39

Exclusions

Question 40

______ are written modifications attached to a policy that provide benefits not found in the original policy. Sometimes require additional premium

Answer 40

Riders

Question 41

The ________ rider waives the premium for the policy if the insured becomes totally disabled. Insured must meet the policy’s definition of total disability

Answer 41

waiver of premium

Question 42

Total disability refers to the insured’s inability to perform the duties of his/her own occupation for the first ______

Answer 42

2 years

Question 43

The ___________ rider is found in Universal life insurance. In the event of disability of the insured, this rider waives the cost of the insurance and other expenses, but does not waive the cost of premiums necessary to accumulate cash values

Answer 43

waiver of cost of insurance

Question 44

The __________ rider is in the event of disability the insurer will waive the policy premiums and pay a monthly income to the insured.

Answer 44

Waiver of premium with Disability Income

Question 45

The _____ rider is primarily used with juvenile policies. It functions like the waiver of premium rider. If payor becomes disabled for at least 6 months or dies, the insurer will waive the premiums until minor reaches 21

Answer 45

Payor benefit

Question 46

The ________ rider provides coverage for one or more family members other than the insured. Also known as a family rider

Answer 46

other insured rider

Question 47

The ______ allows children of the insured (natural, adopted or step) to be added to coverage for a limited period of time for a specified amount. One premium for ALL children

Answer 47

children’s term rider

Question 48

The _______ incorporates the spouse term rider along with the children’s term rider in a single rider.

Answer 48

family term rider

Question 49

The ________ rider insures someone who is not a member of the insureds family. Commonly used with Key Person. Rider permits policyowner to change the insured to another key employee

Answer 49

Nonfamily term rider

Question 50

The ________ rider pays some multiple of the face amount if death is the result of an accident is defined in the policy. Death must usually occur within 90 days of such accident. The benefit is normally two times (double indemnity) the face amount or triple

Answer 50

accidental death rider

Question 51

The ___________ pays the principal for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment.

Answer 51

accidental death and dismemberment rider

Question 52

The ______ rider allows the insured to purchase additional coverage at specified future dates (usually every 3 years) or events (such as marriage or birth of child) without evidence of insurability, for an additional premium

Answer 52

guaranteed insurability

Question 53

The _______ rider is implemented by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to the beneficiary.

Answer 53

return of premium

Question 54

___ riders allow for an additional amount of temporary insurance to be provided on the insured, without the need to issue another policy

Answer 54

Term

Question 55

The ______ rider addresses the inflation factor by automatically increasing the amount the amount of insurance without evidence of insurability from the insured

Answer 55

cost of living rider

Question 56

Accelerated death benefits allow the _____ of a portion of the death benefit if the insured has any of the following conditions:

Terminal illness
Medical condition that require extraordinary medical intervention

Maximum benefit is typically a percentage of the face amount of insurance. May be dollar limit

Answer 56

early payment

Question 57

The ______ rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years. Purpose of this rider is to provide the insured with the necessary funds to take care of medical and nursing home expenses

Answer 57

Living needs

Question 58

Payable Death benefit = Face amount (-) amount withdrawn (-)

Answer 58

Earnings lost by insurer in interest

Question 59

Because permanent life insurance policies have cash values, certain guarantees are built into the policy that cannot be forfeited by the policyowner. These guarantees known as ___________ are required by state law to be included in the policy

Answer 59

nonforfeiture values

Question 60

Reduced Paid-up Insurance

Answer 60

Under this option, the policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a reduced face amount from that of that former policy. The new reduced policy builds its own cash value and will remain in force until death or maturity

Question 61

Under the Extended Term option, the insurer uses the policy cash value to convert to term insurance for the _______ as the former permanent policy. If the policyowner has neglected to select one of these nonforfeiture options, the insurer will automatically implement the extended-term option in the event of termination

Answer 61

same face amount

Question 62

_____ are a return of excess premiums, and for that reason they are not taxable to the policyowner. Insurance companies cannot guarantee ____

Answer 62

Dividends

Question 63

Policyowners have the option of taking their dividends in one of several different ways:

Answer 63

1) Cash
2) Reduction of Premium
3) Accumulation at Interest
4) Paid-up Additions

Question 64

Reduction of Premium

Answer 64

Insurer uses the dividend to reduce the next year’s premium

Question 65

Accumulation at Interest

Answer 65

The insurance company keeps the dividend in an account where it accumulates interest.

Question 66

Are interest on dividends taxable?

Answer 66

YES

Question 67

Paid-up Option

Answer 67

Insurer first accumulates the dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early.

Question 68

One-year term option

Answer 68

The insurance company uses the dividend to purchase additional insurance in the form of one-year term insurance that increases the overall death benefit

Question 69

_______ options are the methods used to pay the death benefits to a beneficiary upon the insured’s death, or to pay the endowment benefit if the insured lives to the endowment date.

Answer 69

Settlement

Question 70

Settlement options are triggered by the insured’s _____ or age 100

Answer 70

death

Question 71

Upon the death of the insured, or at the point of endowment, the contract is designed to pay the proceeds in cash, called a ______ unless the recipient chooses different mode of settlement

Answer 71

lump sum

Question 72

The ________, also known as straight life, provides the recipient with an income that he or she cannot outlive. Amount of installment is paid based on the recipient’s life expectancy and the amount of principal

Answer 72

life-income option

Question 73

Under ___________, the recipient is provided with the “best of both worlds” in terms of a lifetime income and a guaranteed installment period. Not only are the payments guaranteed for the lifetime of the recipient, but there is also a specified period that is guaranteed.

Answer 73

life income with period certain option

Question 74

The ________ option guaranteed an income for two or more recipients for as long as they live. Most commonly the reduced option is written as “joint and 1/2 survivor” or “joint and 2/3 survivor”

Answer 74

life income joint and survivor

Question 75

The ______ option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient at regular intervals. Considered temporary option since the proceeds are retained by the insurer until some later point when the proceeds are paid out in a lump sum

Answer 75

Interest-only

Question 76

Under the _______ option, a specified period of years is selected, and equal installment are paid to the recipient

Answer 76

fixed-period installment

Question 77

The _______ option pays a fixed, specified amount in installments until the proceeds are exhausted. Recipient selects a specified fixed dollar amount to be paid until the proceeds are gone

Answer 77

fixed-amount installments

Question 78

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

Answer 78

The surviving beneficiary will continue receiving 2/3 of the benefits paid when both beneficiaries were alive

Question 79

An insured receives an annual life insurance check. What term best describes this arrangement?

Answer 79

Cash option

Question 80

What type of insurance would be used for a Return of Premium rider

Answer 80

Increasing term

Question 81

Which rider is often used in business life insurance policies when the policyowner needs to change the insured under the policy

Answer 81

Substitute insured rider

Question 82

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Answer 82

Becomes terminally ill

Question 83

Under an extended term nonforfeiture option, the policy cash value is converted to

Answer 83

the same face amount as in the whole life policy

Question 84

which nonforfeiture option provides coverage for the longest period of time

Answer 84

reduced paid up

Question 85

what happens when a policy is surrendered for its cash value

Answer 85

coverage ends and the policy cannot be reinstated

Question 86

this type of settlement option which pays throughout the lifetime of two or more beneficiaries is called

Answer 86

Joint and survivor

Question 87

Which type of insurance would be used for a return of premium rider

Answer 87

increasing term

Question 88

Benefit of choosing extended term as a nonforfeiture option

Answer 88

it has the highest amount of insurance protection

Question 89

what nonforfeiture option has the highest amount of insurance protection

Answer 89

extended term

Question 90

according to the entire contract provision, a policy must contain

Answer 90

a copy of the original application for insurance

Question 91

items stipulated in the contract that the insurer will not provide coverage for are found in the

Answer 91

exclusion clause

Question 92

a policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due what provision

Answer 92

Automatic premium loan

Question 93

under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner

Answer 93

cash surrender

Question 94

which premium payment modes will incur the lowest overall payment

Answer 94

Annual

Question 95

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

Answer 95

Guaranteed insurability rider