Chapter 3 Flashcards

Life Policy Provisions, Riders and Options (15 cards)

1
Q

Which provision of a life insurance policy states that the application is part of the contract?

A. Entire Contract
B. Ownership
C. Insuring Clause
D. Assignment

A

A. Entire Contract
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2
Q

A life insurance policy clause that prevent an insurance company from denying payment of a death claim after a specified period of time is known as the

A. Misstatement of age clause
B. Incontestability Clause
C. Reinstatement Clause
D. Legal Action

A

B. Incontestability Clause
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3
Q

When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What action will the insurer take?

A. Deny the claim based on material misrepresentation on the application
B. Pay the face amount of the policy if the death occurred after the incontestable period
C. Pay a reduced death benefit based on the insured’s actual age
D. Pay the full death benefit and sue the insured’s estate for damages

A

C. Pay a reduced death benefit based on the insured’s actual age
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4
Q

Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?

A. Nonforfeiture
B. Endorsement
C. Transfer of Value
D. Assignment

A

D. Assignment
Page 54

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5
Q

Which of the following is true about the free-look period in a life insurance policy?

A. It starts when the application is signed
B. It applies only to term life insurance policies
C. It can be waived by an insurer
D. It starts when the policy is delivered

A

D. It starts when the policy is delivered
Page 53

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6
Q

A spouse receives $5,000 a month until the principal and interest on her husband’s life insurance policy have been paid out. Which settlement option did this beneficiary choose?

A. Life Income
B. Fixed Amount
C. Cash Payment
D. Fixed period

A

B. Fixed Amount
Page 69

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7
Q

Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?

A. Reinstatement provision
B. Nonforfeiture option
C. Grace period provision
D. Consideration clause

A

C. Grace period provision
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8
Q

The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend option has the insured chosen?

A. Cash option
B. Reduced paid-up
C. Reduction of premium
D. Accumulation at interest

A

C. Reduction of premium
Page 67

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9
Q

All of the following are nonforfeiture options in life insurance policies EXCEPT:

A. Automatic Premium Loans
B. Cash Surrender Value
C. Extended Term
D. Reduced paid-up insurance

A

A. Automatic Premium Loans
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10
Q

Which of the following statements is true of both the fixed-period and fixed-amount settlement option?

A. Both guarantee payments for the life of the beneficiary
B. Both guarantee that the principal and interest will be fully paid out
C. The amount of payments is based on the recipient’s life expectancy
D. The size of installments decreases after a certain period of time

A

B. Both guarantee that the principal and interest will be fully paid out
Page 69

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11
Q

Which of the following is NOT a standard exclusion in life insurance policies?

A. Aviation
B. Military Service
C. Hazardous occupation
D. Disability

A

D. Disability
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12
Q

Under what circumstances will the contingent beneficiary receive the death benefit?

A. If designated by the primary beneficiary
B. If contingent beneficiary is the insured’s estate
C. If the primary beneficiary dies before the insured
D. If designated by the insured

A

C. If the primary beneficiary dies before the insured
Page 57

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13
Q

If a life insurance policy has an irrevocable beneficiary designation

A. The beneficiary can only be changed with written permission of the beneficiary
B. The beneficiary can never be changed
C. The beneficiary cannot be changed for at least 2 years
D. The owner can always change the beneficiary at will

A

A. The beneficiary can only be changed with written permission of the beneficiary
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14
Q

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

A. Accelerated benefit
B. Nonforfeiture
C. Waiver of Premium
D. Guaranteed insurability

A

C. Waiver of Premium
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15
Q

All of the following are true regarding the guaranteed insurability rider EXCEPT

A. It allows the insured to purchase additional coverage without proof of insurability
B. It is available automatically, for no extra premium
C. The insured may purchase additional coverage at the attained age
D. It usually expires at the insured’s age 40

A

D. It usually expires at the insured’s age 40
Page 59

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