Life Policy Provisions, Riders And Options Flashcards
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
Interest only option
(the insurance company retains the policy proceeds and pays interest to the beneficiary at regular intervals)
All of the following are true regarding insurance policy loans EXCEPT:
A) policy loans can be made on policies that do not accumulate cash value.
B) the amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies.
C) the policy will terminate if the loan plus interest equals or exceeds the cash value of the policy.
D) policy owners can borrow up to the full amount of their whole life policy’s cash value.
A) policy loans can be made on policies that do not accumulate cash value.
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
Life income with period certain
(If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.)
All of the following are true regarding the accumulation of interest EXCEPT:
A) the interest is credited at a rate specified by the policy.
B) the policyholder has the right to withdraw the accumulations at any time.
C) the interest is not taxable since it remains inside the insurance policy.
D) the annual dividend is retained by the company.
C) the interest is not taxable since it remains inside the insurance policy.
(The interest credited under this option is TAXABLE, whether or not the policy owner receives it)
Which of the following statements is TRUE about a policy assignment?
A) it authorizes an agent to modify the policy
B) it transfers right of ownership from the owner to another person.
C) it is the same as a beneficiary designation.
D) it permits the beneficiary to designate the person to receive the benefits.
B) it transfers right of ownership from the owner to another person.
What dividend option is automatically selected by the company if not chosen by the policy owner?
Paid up additions
What are the 3 nonforfeiture options in life insurance policies?
Cash surrender, reduced paid up, and extended term
What are the 3 most common exclusions in life insurance policies?
Noncommercial aviation, hazardous occupation, war and military service
What are the dividend options in life insurance policies?
Cash
Reduced premium
Accumulation at interest
Paid up additions
Paid up option
One year term
Acceleration of endowment
A Return of Premium term life policy is written as what type of term coverage?
A) increasing
B) decreasing
C) renewable
D) level
A) increasing
The ROP is an increasing term that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
A) Term rider
B) Accidental death and dismemberment rider
C) Guaranteed insurability rider
D) Change of insured rider
A) Term rider
Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner
All of the following are nonforfeiture options EXCEPT:
A) reduced paid up
B) interest only
C) cash surrender
D) extended term
B) interest only
Interest only is a settlement option
An insured owns a $50,000 whole life policy. At age 47, the insured decided to cancel his policy and exercise the extended term option for the policy’s cash value, which is currently $20,000 what would be the face amount of the new term policy?
A) $20,000
B) $25,000
C) $50,000
D) the face amount will be determined by the insurer.
C) $50,000
The paid up addition option uses the dividend:
A) to purchase a 1 year term insurance in the amount of the cash value.
B) to reduce next years premium.
C) to accumulate additional savings for retirement.
D) to purchase a smaller amount of the same type of insurance as the original policy.
D) to purchase a smaller amount of the same type of insurance as the original policy.
