Chapter 9

Question 1

Beneficiary

Answer 1

The person or entity designated to receive the death proceeds of a life insurance policy

Question 2

Standard Policy Provisions Laws

Answer 2

State laws that require life and health insurance policies to include certain provisions but allow insurers to select the actual wording as long as it is at least as favorable to the policy owner as the statutory language.

Question 3

Grace Period

Answer 3

An additional period of time, usually 30 or 31 days, granted in some types of insurance for the policyholder to pay the premium after it has become due. During the grace period, the coverage remains in force.

Question 4

Policy Loan

Answer 4

An advance of money available to a life insurance policy owner from the policy’s cash value

Question 5

Automatic Premium Loan Option

Answer 5

Life insurance policy provision by which a delinquent premium is automatically paid by a policy loan

Question 6

Incontestable Clause

Answer 6

A provision in life and health insurance that specifies that, except for nonpayment of the premium, the insurer will not contest the policy after it has been in force for a specified period (usually 2 years) during the insured’s lifetime.

Question 7

Divisible Surplus

Answer 7

That portion of an insurer’s surplus that is declared as a dividend to be distributed to policyowners and/or stockholders of the insurer

Question 8

Dividend Options

Answer 8

A set of provisions in a participating life insurance policy that describe how the policy owner can use the dividends, usually to reduce the premium payment, to buy additional paid-up permanent insurance, to accumulate at interest, to buy term insurance, or to make the policy a paid-up policy at an earlier age that originally planned.

Question 9

Fifth Dividend Option

Answer 9

A provision in cash value life insurance wherby dividends can be used to purchase term insurance

Question 10

Entire Contract Provision

Answer 10

In life and health insurance, a provision that specifies that the policy and the attached application constitute the entire agreement between the parties.

Question 11

Reinstatement Provision

Answer 11

In life insurance, a clause giving the owner of a lapsed policy the right to reacquire the coverage under certain conditions

Question 12

Representation

Answer 12

A statement in an insurance application that is substantially true to the best of the applicant’s knowledge and belief.

Question 13

Misstatement of Age or Gender Clause

Answer 13

A life insurance policy provision that specifies that if the insured’s age or gender has been misstated, the benefits payable under the policy will be adjusted to what the premium paid would have purchased at the correct age or gender.

Question 14

Nonforfeiture Options

Answer 14

A set of choices available regarding how a life insurance policy owner can use the policy’s cash value. These choices include the options to surrender for cash, buy a reduced amount of paid-up whole life insurance, or buy extended term insurance. For long-term care insurance, an optional benefit provides extended benefits or a cash refund if a policy lapses after it has been in force for a specificied number of years.

Question 15

Settlement Options

Answer 15

Ways in which a life insurance policy’s death proceeds can be taken, typically in cash, under an interest option, under a fixed-period or fixed-amount option, or under a life-income option.

Question 16

Backdating

Answer 16

Issuance of a life insurance policy as if it had been purchased when the insured was younger in order to obtain a lower periodic premium

Question 17

Primary Beneficiary

Answer 17

The person of organization that is to receive the proceeds of a life insurance policy if he, she , or it survives the insured

Question 18

Contingent Beneficiary

Answer 18

The person or entity designated to receive the death proceeds of a life insurance policy if the primary beneficiary predeceases the insured

Question 19

Suicide Provision

Answer 19

An optional life insurance policy provision that specifies that if the insured, whether sane or insane, commits suicide during the first 1 or 2 years of the policy, the insurer will be liable only for a return or premium

Question 20

Ownership Provision

Answer 20

In life insurance, a clause that specifies that the insured is the owner of the policy (unless the application states otherwise) and that the owner can change the beneficiary (unless named irrevocably), assign the policy, and exercise other ownership rights

Question 21

Assignment Provision

Answer 21

A clause that specifies the conditions under which a policyowner can transfer some or all of his or her ownership rights in the policy to another

Question 22

Plan Change Provision

Answer 22

An insurance policy provision that states the parties may agree to change the terms of the contraact

Question 23

Accelerated Benefits Provision

Answer 23

A provision in a life insurance policy that allows death benefits to be paid to the policyowner prior to the insured’s death under certain circumstances such as if the insured is terminally ill

Question 24

Accidental Death

Answer 24

A death that is caused by an unintentional event that is sudden and unexpected

Question 25

Waiver-of-Premium Rider

Answer 25

A rider under which, if the insured becomes totally disable, the insurer will waive the premiums on the policy during the continuance of the disability. It is commonly used in life and health insurance.

Question 26

Guaranteed Purchase (Insurability) Option

Answer 26

A rider to a life insurance policy that gives the insured the right to buy additional insurance in specified amounts at specified times or ages without having to provide evidence of insurability