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Insurance Exam > Policy Provisions, Riders, Options > Flashcards

Policy Provisions, Riders, Options Flashcards

1
Q

a persons essential activities that include bathing, dressing, eating, transferring, toileting, continence

A

Activities of daily living (ADL)

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2
Q

transfer of rights of policy ownership

A

assignment

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3
Q

something of value that each party gives to the other

A

consideration

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4
Q

reimbursement in the event of a loss

A

Indemnity

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5
Q

payment of entire benefit in one sum

A

lump sum

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6
Q

organization composed of insurance commissioners from all states and jurisdictions formed to resolve insurance regulatory issues

A

NAIC

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7
Q

The face value of the policy : original amount invested before the earnings

A

Principal

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8
Q

What constitutes an Entire Contract?

A

Policy, application, and any riders or amendments

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9
Q

Sets forth the basic agreement between the insurer and the insured

A

insuring clause

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10
Q

Allows the policy owner 10 days from the receipt to look over the policy and if disatisfied for any reason, return for a full refund

A

free look

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11
Q

When does the free look period begin?

A

when the policy owner receives the policy / policy delivery

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12
Q

transferring all rights of ownership to another person

A

absolute assignment

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13
Q

involves a transfer of partial rights to another person

A

collateral assignment

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14
Q

has first claim to the policy proceeds following the death of the insured

A

primary beneficiary

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15
Q

has second claim in the event that the primary beneficiary dies before the insured

A

contingent beneficiary

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16
Q

policy owner can make beneficiary changes without the consent or knowledge of beneficiary

A

revocable

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17
Q

policy owner cannot make beneficiary changes without the written consent of the beneficiary

A

irrevocable

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18
Q

assumes the primary beneficiary dies first in a disaster

A

Uniform Simultaneous Death Law under Common Disaster Clause

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19
Q

manner or frequency that the policy owner pays the policy premium

A

premium mode

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20
Q

If the insured dies during a time which the premium has been paid, the insurer must ….

A

refund any unearned premium

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21
Q

period of time after the premium due date that the policy owner has to pay the premium before the policy lapses

A

grace period (30-31) days

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22
Q

provision that allows a lapsed policy to be put back in force

A

reinstatement

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23
Q

Maximum time limit for reinstatement

A

3 years

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24
Q

A policy cannot be reinstated if it was …

A

surrendered

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25
Q

prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years

A

incontestability

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26
Q

states that the policy owner is entitled to borrow an amount equal to the available cash value

A

policy loan

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27
Q

policy loan option is found only in what policies?

A

Policies that contain cash value

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28
Q

The insurers must provide the policyowner with how much notice before the lapse of a policy?

A

30 days written notice

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29
Q

How long can an insurer defer requests for other loans?

A

up to 6 months

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30
Q

types of risks that the policy will not cover

A

exclusions

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31
Q

excludes all causes of death while insured is on active duty in the military

A

status clause

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32
Q

only excludes the death benefit if the insured is killed as a result of an act of war

A

results clause

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33
Q

within how many years inside a policy will the insurance agency only give back premiums and not pay death benefit for suicide ?

A

2 years

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34
Q

written modifications attached to a policy that provide benefits not found in the original policy

A

policy riders

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35
Q

rider waves the premium for the policy if the insured becomes totally disabled

A

waiver of premium

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36
Q

Most insurers impose a —– waiting period from the time of diability until the first premium is waived. If still disabled, they will then be …

A

6 month, refunded

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37
Q

rider pays all monthly deductions while the insured is disabled, after a 6 month waiting period

A

waiver of monthly deductions

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38
Q

Waiver of monthly deductions rider is usually found in what policies ?

A

universal life and variable universal life

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39
Q

rider is primarily used with juvenile policies - if the payor gets disabled, they will waive the premiums until the minor turns 21

A

payor benefit

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40
Q

provides coverage for one or more family members other than the insured

A

other insured rider

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41
Q

allows the spouse to be added to coverage for a specific amount of time

A

spouse term rider

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42
Q

allows children of the insured to be added to coverage for a limited amount of time

A

childrens term rider

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43
Q

incorporates the spouse term rider along with the childrens term rider in one benefit

A

family term rider

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44
Q

insuring someone who is not part of the insureds family (like with employees)

A

nonfamily insureds

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45
Q

pays some multiple of the face amount if death is the result of an accident as defined by the policy

A

accidental death rider

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46
Q

face amount

A

principle

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47
Q

pays the principal for accidental death

A

accidental death and dismemberment rider

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48
Q

percentage of amount

A

capital sum

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49
Q

rider allows the insured to purchase additional coverage at specified future dates (usually every 3 years) or events without proof of insurability for an additional premium

A

guaranteed insurability

50
Q

rider is implemented by using increasing term insurance . when added to a whole life policy, it provides that death at a certain age will grant benefits to beneficiary and the return of all premiums to them

A

return of premium

51
Q

allow for an additional amount of temporary insurance to be provided to the the insured without a need for another policy

A

term rider

52
Q

Allow the early payment of a portion of the death benefits if the insured has certain conditions

A

accelerated death benefits

53
Q

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 two years

A

living needs rider

54
Q

provide for the payment of part of the death benefit (called accelerated benefits) in order to take care of the insureds health care expenses

A

long term care rider

55
Q

certain guarantees built into the policy that cannot be forfeited by the policy owner

A

non forfeiture options

56
Q

fee charges to the insured when a life policy or annuity is surrendered for its cash value

A

surrender charge

57
Q

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 the former policy

A

reduced paid up insurance

58
Q

insurer uses policy cash value to convert to term insurance for the same face amount as the former permanent policy

A

extended term

59
Q

paid only on participating policies

A

dividends

60
Q

higher premium charged as a safety margin will result in what being returned

A

dividend

61
Q

4 ways the dividends can be returned

A

cash, reduction of premium, accumulation of interest, paid up additions

62
Q

using this option with dividends , the policy owner is able to pay up the policy early

A

paid up option

63
Q

methods used to pay the death benefits to the beneficiary after the insureds death

A

settlement options

64
Q

upon the death of the insured, or at the point of endowment , the contract is designed to pay the proceeds in cash called what?

A

lump sum

65
Q

also known as straight life, provides the recipient with an income that he or she cannot outlive

A

life income options

66
Q

What are life income options based on?

A

the recipients life expectancy and the amount of principle

67
Q

recipient is provided with the “best of both worlds” in terms of a lifetime income and a guaranteed installment period

A

life income with period certain option

68
Q

guarantees an income for two or more recipients for as long as they live

A

life income joint and survivor

69
Q

insurance company retains the policy proceeds and pays interest on the proceeds to the recipient at regular intervals

A

interest only option

70
Q

a specified period of year is selected, and equal installments are paid to the recipient

A

fixed period installment options (period certain)

71
Q

pays a fixed, specified amount in installments until the proceeds are exhausted

A

fixed amount installments option

72
Q

the ownership provision does not entitle the policy owner to

A

set premium rates

73
Q

an insured has chosen joint and 2/3 survivor as the settlement option . What does this mean for the beneficiary?

A

the surviving beneficiary will continue to receive 2/3 fo the benefit paid when both beneficiaries were alive

74
Q

Which is true about the cash surrender non forfeiture option?

A

Funds exceeding the premium paid are taxable as ordinary income

75
Q

the insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insureds death, he chose th income settlement option . the amount of payments will not be determined by …

A

the insureds age of death

76
Q

the policy owner 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 principle will be paid to their children when they reach a certain age. Which settlement option should the policy owner choose?

A

interest only option

77
Q

the paid up option uses the dividend

A

to purchase a smaller amount of the same type of insurance as the original policy

78
Q

what type of insurance would be used for a return of premium rider ?

A

increasing term

79
Q

which of the following is not typically excluded from life policies

A

death due to plane crash for a fare paying passenger

80
Q

which of the following is true about the premium on the childrens rider in a life insurance policy

A

it remains the same no matter how many children are added to the policy

81
Q

all of the following are nonforfeiture options except

A

interest only

82
Q

when attached to a permanent life insurance policy, allows the policy owner 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

83
Q

the paid up option uses the dividend to

A

purchase a smaller amount of the same type of insurance as the original policy

84
Q

4 rules for contributions to traditional IRA plans

A

tax deductable based on income, must be in cash to be deductable, excess is taxed 6%, tax deferred earnings are not taxed

85
Q

from an IRA is subject to income taxation in the year the withdrawal is made

A

distribution

86
Q

tax free distribution of cash from one retirement plan to another

A

rollover

87
Q

how many days do you have to perform a rollover and what % must be held if it doesnt go straight to the trustee?

A

60 days and 20%

88
Q

rollover is made directly from first plan to the trustee or administrator of the new IRA plan

A

direct rollover

89
Q

refers to a tax free transfer of funds from one retirement program to a traditional IRA or a transfer of interest in a traditional IRA from one trustee directly to another

A

transfer or direct transfer

90
Q

make it possible for self employeed persons to be covered under an IRS qualified retirement plan

A

HR-10 or Keogh plans

91
Q

type of qualified plan suited for the small employer or for the self-employed

A

simplified employee pension plan

92
Q

available to small businesses that employ no more than 100 employees who receive at least $5000 in compensation from the employer during the previous year

A

SIMPLE

93
Q

qualified plans where a portion of the companys profit is contributed to the plan and shared with employees

A

profit sharing plans

94
Q

Qualified retirement plan that allows employees to take a reduction in their current salaries by deferring amounts into a retirement plan

A

401K

95
Q

Qualified plan available to employees o certain nonprofit organizations under the Section 501(C)(3) of the Internal Revenue Code, and to the employees of public school systems

A

403(b) plan or tax sheltered annuity

96
Q

provides the necessary funds for the survivors of the insured to be able to maintain their lifestyle in the event of the insureds death

A

survivor protection

97
Q

when life insurance is used to accumulate specific amounts of monies for specific needs with guarantees that the money will be available when needed

A

cash accumulation

98
Q

policies cash values can be borrowed against at any time and used or immediate needs

A

liquidity

99
Q

The purchase of life insurance creates what?

A

immediate estate

100
Q

the most common use of life insurance by businesses

A

employee benefit

101
Q

the person who knows everything about the business is the insured

A

key person insurance

102
Q

legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled

A

buy-sell agreement or business continuation agreement

103
Q

Four types of buy sell agreements

A

cross purchase, entity purchase, stock purchase, stock redemption

104
Q

arrangement where the employer offers to give the employee a wage increase in the amount of the premium on a new life insurance policy on the employee

A

Executive bonus

105
Q

If the money is take in a lump sum it is _____ and if taken in installments it is _____

A

tax free and taxed

106
Q

3 ways policy loans can be paid back

A

by the owner, at the surrender of policy and taken out of cash amount, at the death of insured and taken out of benefit

107
Q

when the beneficiary receives payments consisting of both principal and interest, the interest portion of the payments received is taxable as income

A

settlement options

108
Q

Any life insurance policy that fails a 7 pay test is classified as

A

Modified Endowment contract

109
Q

the cummulative premiums paid during the first 7 years of the policy exceed the total amount of net level premiums that would be required to pay the policy up using guaranteed mortality costs and interest

A

modified endowment contract

110
Q

fully insured refers to someone who has earned ___ quarters of coverage (how many years)

A

40 and 10

111
Q

What is not true about tax-qualified annuities?

A

Employer contributions are not tax deductible

112
Q

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

A

any form of life insurance

113
Q

What is not a use of business life insurance

A

funding against general company financial loss

114
Q

What is true regarding taxation of accelerated benefits under a life insurance policy

A

they are tax free to terminally ill insured

115
Q

executive bonus policies are owned by who?

A

the employee

116
Q

What is the same in qualified and nonqualified plans

A

taxation on accumulation

117
Q

premiums paid by the employer in a business life insurance policy are

A

tax deductible by the employer

118
Q

exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender

A

settlement option

119
Q

traditional IRA contributions are

A

tax deductable

120
Q

An individual has been diagnosed with Alzheimers disease. He is injured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

A

A portion of the benefit up to a limit is tax free… the rest is taxable income

121
Q

In a direct rollover, how is the money transferred from one plan to another one

A

from trustee to trustee

Insurance Exam (10 decks)

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