Provisions, Options and Riders

Question 1

In a life insurance policy, which feature states that the policy will not cover certain risks?

Answer 1

Exclusion

~ The feature of a life insurance policy stating that the policy will not cover certain risks is called an exclusion

Question 2

What does the insuring agreement in a Life insurance contract establish?

Answer 2

An insurer’s basic promise

~ The insuring agreement in a Life insurance contract establishes the basic promise of the insurance company

Question 3

B owns a Whole Life policy with guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

Answer 3

Additional Whole Life coverage at specified times

Question 4

Which of the following statements is CORRECT about accelerated death benefits?
<> This provision is usually provided with an increase in premium
<> Those on Social Security disability automatically qualify for this benefit
<> Must have a terminal illness to qualify
<> The full face amount is available as an accelerated benefit

Answer 4

Must have a terminal illness to qualify

Question 5

Variable Whole Life Insurance can be described as:
<> an insurance product only
<> both an insurance and securities product
<> The insurance company assumes the investment rick
<> a securities product only

Answer 5

Both an insurance and securities product

Question 6

What action can a policy owner take if an application for a bank loan requires collateral?
<> Utilize accelerated benefits provision
<> Assign policy ownership to the bank
<> Borrow against policy cash value and use as a down payment
<> Name bank as beneficiary

Answer 6

Assign policy ownership to the bank

Question 7

Which rider provides coverage for a child under a parent's life insurance policy?
<> Spouse term rider
<> Child term rider
<> Payor benefit rider
<> Base insured rider

Answer 7

Child term rider
~ One of the best methods of adding coverage for a child on a parent’s life insurance policy is to add a child term rider

Question 8

A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following options?
<> Reduced Premiums 
<> Accumulate at interest
<> cash
<> Paid-up Additional insurance

Answer 8

Paid-Up Additional Insurance

Question 9

How do life insurance companies handle cases where the insured commits suicide within the contract’s stated Contestable period?

Answer 9

Claims are denied under the Suicide clause of the policy

Question 10

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Answer 10

Deducted when the policy is discontinued

Question 11

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

Answer 11

$50,000

~ The suicide occurred outside the Suicide clause period (normally 1-2 years) this the face amount will be paid

Question 12

Which statement regarding the Misstatement of Age provision is considered to be true?
<> Requires that a new policy must be applied for if a misstatement of age is found on the current policy
<> Insurer may void the policy if a misstatement of age is discovered
<> Misstatement of Age provision is valid only during the contestable period
<> Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered

Answer 12

Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered

Question 13

D is the policy owner and insured for a $50,000 life insurance policy. The beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

Answer 13

Ex-wife

~ D’s ex-wife is still the beneficiary of this policy, even though policy ownership has changed to his current spouse

Question 14

All of these statements about the Waiver of Premium provision are correct, EXCEPT:
<> Insured must be eligible for Social Security disability for claim to be accepted
<> Waiver of Premium is available on both permanent and term insurance policies
<> Insured must be totally disabled to qualify
<> A waiting period must pass before becoming eligible for benefits

Answer 14

Insured must be eligible for Social Security disability for claim to be accepted
~ Receiving Social Security disability benefits is not a requirement to be eligible for the Waiver of Premium

Question 15

Which of the following Dividend options results in taxable income to the policy owner?
<> Paid-up Additions
<> Reduced Premium 
<> Accumulation at interest
<> cash

Answer 15

Accumulation at interest
<> While policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy

Question 16

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
<> entire contract
<> Accidental death and Dismemberment clause
<> Accelerated Benefits provision
<> consideration clause

Answer 16

Accidental death and Dismemberment clause

Question 17

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay?
<> $50,000
<> No claim will be paid because cause of death was from natural causes
<> $100,000
<> Refund of premiums paid plus interest

Answer 17

$50,000

Question 18

Which life insurance rider typically appears on a Juvenile life insurance policy?

Answer 18

Payor Benefit rider

Question 19

Which of these statements about Guaranteed Insurability Option rider is not true?
<> Coverage can be added at specific ages
<>Evidence of insurability is required when the option is exercised
<> Coverage can be added at specific events such as marriage or having a child
<> Evidence of insurability is not required when the option is exercised

Answer 19

Evidence of insurability is required when the option is exercised

Question 20

The Consideration clause in a life insurance contract contains what pertinent information?
<> Entire contact
<> Summary of benefits
<> Amounts of premium payments and when they are due
<>Offer and acceptance

Answer 20

Amounts of premium payments and when they are due