Life Policy Provisions, Riders and Options Flashcards
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?
Incontestability
What is the purpose of a free-look period?
To allow the insured to return the policy with a full refund
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?
The amount of loan I’ll be subtracted from the death benefit
What life policy rider allows the company to forgo collections the premium if the insured becomes disabled?
Waiver of premium
What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?
Entire contract
In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?
The longer period selected, the smaller each installment will be
What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured’s death?
Settlement options
What dividend option is automatically selected by the company if not chosen by the policyowner?
Paid-up additions
What is the name for a life insurance policy rider that provides coverage on the insured’s family members?
Other-insured rider
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?
Pay a reduced death benefit
What does the term double indemnity mean?
The insurer will pay a benefit of twice the face amount
When can an insurance company use suicide as a defense against paying a death claim?
When suicide is committed within a specified period of time after the policy is purchased (usually 2 years)
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?
Pay a reduced death benefit
What settlement options are available in life insurance policies?
Lump-sum/cash, fixed period, fixed amount, life income, interest only
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy’s death benefit?
It will be paid to the insured’s estate
What beneficiary designation has first claim to the death proceeds of a life insurance policy?
Primary beneficiary
What nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
What type of beneficiary is next in line after the primary beneficiary?
Contingent beneficiary
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?
Absolute assignment
What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?
Extended term
What provision in a life insurance policy extends coverage beyond the premium due date?
Grace period
What are the three nonforfeiture options in life insurance policies?
Cash surrender, reduced paid-up, and extended term
When will a contingent beneficiary receive death benefits from a life insurance policy?
When the primary beneficiary dies before the insured
What happens to the proceeds of a life insurance policy if there is no named beneficiary?
The proceeds are paid to the insured’s estate
