Chapter 4: Life insurance Policies - Provisions, options and riders

Question 2

which of these types of policies may NOT have the automatic premium loan provision attached to it?

Answer 2

decreasing term

Question 3

which statement regarding the misstatement of age provision is considered to be true?

Answer 3

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

Question 4

a nonforfeiture clause gives the policyowner

Answer 4

guaranteed values even if the policy has lapsed

Question 5

which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Answer 5

Variable universal life

Question 6

dividends paid from a life insurance policy are

Answer 6

issued by the insurer

Question 7

what action will an insurer take if an interest payment on a policy loan is not made on time?

Answer 7

Automatically add the amount of interest due to the loan balance

Question 8

which of the following provisions guarantees that premiums will be waived if a juvenile life policyowner becomes disabled?

Answer 8

Family Maintenance Clause
**Payor clause
Assignment provision
automatic premium loan provision

Question 9

which of these is NOT considered to be a right given to a policyowner?

Answer 9

surrendering the policy’s cash value
**modify a provision in the insurance contract
assignment of ownership
change the beneficiary, if revocable

Question 10

The _________ is authorized to assign a life insurance policy as collateral for a loan

Answer 10

policyowner

Question 11

which life insurance rider typically appears on a juvenile life insurance policy?

Answer 11

Payor benefit rider

Question 12

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

Answer 12

additional whole life coverage at specified times

Question 13

a return of premium life insurance policy is

Answer 13

whole life and increasing term

Question 14

the consideration clause in a life insurance contract contains what pertinent information?

Answer 14

amount of premium payments and when they are due

Question 14

which of these statements about guaranteed insurability option rider is NOT TRUE?

Answer 14

evidence of insurability is required when the option is exercised

Question 15

Which of the following in an example of a nonforfeiture option?

Answer 15

reduced paid up option

Question 16

how are policyowner dividends treated in regards to income tax?

Answer 16

interest on accumulations is taxed

Question 17

N is covered by a term life policy and does not make the required premium payment which was due aug 1. N dies Sep 15. What action will the insurer take?

Answer 17

claim will be denied

Question 18

A ______ rider may be used to include coverage for children under their parents’ life insurance policy

Answer 18

term

Question 19

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

Answer 19

Void the policy only if it is discovered during the contestable period and proven to be material

Question 20

a long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

Answer 20

inability of the insured to perform more than 2 activities of daily living (ADL’s)

Question 21

When does a guaranteed insurability rider allow the insured to buy additional coverage?

Answer 21

at future dates specified in the contract with no evidence of insurability required

Question 22

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called an

Answer 22

accidental death and dismemberment rider (AD&D)

Question 23

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

Answer 23

Claims are denied under the suicide clause of the policy

Question 24

A potential client, age 40, would like to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?

Answer 24

Straight life accumulates faster than limited pay life **20 pay life accumulates cash value faster than straight life 20 pay life and straight life accumulate cash value at the same rate

Question 25

the agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a

Answer 25

insuring agreement

Question 26

a cost of living rider gives the insured

Answer 26

additional death benefits

Question 27

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT

Answer 27

K must reinstate within a stated period K must pay back interest and premiums **K will forfeit the right to use the automatic loan provision upon reinstatement

Question 28

In a life insurance contract, an insurance company's promise to pay stated benefits is called the:

Answer 28

insuring clause

Question 29

S buys a $10,000 whole life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

Answer 29

Return of premium rider

Question 30

the advantage or reinstating an original life policy is

Answer 30

the premiums are based on a younger age

Question 31

additional coverage can be added to a whole life policy by adding an

Answer 31

decreasing term rider