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Life Insurance > D. Life Insurance Policy Provisions, Options And Rider > Flashcards

D. Life Insurance Policy Provisions, Options And Rider Flashcards

1
Q

Although producers must sign the application they are not a party to the contract. It is the responsibility of the producer to explain the policy provisions, riders, and exclusions to the applicant.

True or False

A

True

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2
Q

The _____ _______ section of a life policy states who has the right to change the beneficiary, who can take a loan, and who can take cash surrender.

A

owner’s rights

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3
Q

Owners of life insurance policies may temporarily assign their life insurance policy to a bank as collateral for a loan, which is known as a _______ __________.

A

collateral assignment

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4
Q

The _____ is the sole collateral for a policy loan. Policy loans are not _________.

A

Policy/taxable

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5
Q

The owner of a life insurance policy may transfer his or her ownership to another person by making an ________ __________.

A

absolute assignment

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6
Q

The entire ________ includes the policy and anything else attached at issue, such as the application.

A

contract

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7
Q

________ may not make changes to a policy.

A

Producers

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8
Q

Policy modifications must be in writing and signed by a _______ _________.

A

Company Officer

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9
Q

Under the life insurance ______ ______, a policy owner who returns their policy 5 days after delivery will receive a full refund since the free look is commonly 10 days.

A

Free Look

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10
Q

A ______________ may exercise the free look provision without giving any reason.

A

Policy owner

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11
Q

The free look period (usually 10 days) starts upon policy delivery. If the policy is mailed to the applicant by the company, the free look starts on the date of mailing. This is called ________ _______.

A

Constructive Delivery

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12
Q

_________ _________ insurance has a grace period of 30 days.

A

Ordinary Life

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13
Q

A life insurance policy provision that allows coverage to continue even if the premium is not paid on time is known as the ________ _______.

A

Grace Period

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14
Q

If a __________ __________ dies within the grace period of his or her employer provided group life policy without converting, the full death benefit will be paid to the beneficiary.

A

Terminated employee

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15
Q

When an ________ ________ in the grace period without paying the premium due, the face amount will be paid to the beneficiary, less the overdue premium.

A

Insured dies

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16
Q

If an insured whose policy has lapsed wants it back, the insured can apply for __________.

A

Reinstatement

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17
Q

Upon policy reinstatement, the __________ and __________ clauses start.

A

incontestability and suicide

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18
Q

A life insurance policy that has been surrendered for cash may not be __________.

A

Reinstated

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19
Q

Life insurance policies are incontestable after they have been in force for __________.

A

2 years

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20
Q

__________ __________ __________ are contestable for material misrepresentation for the first 2 years

A

New Life Insurance

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21
Q

Under the __________ _______ ________ __________, if an insurer discovers that an insured has misstated his or her age on the policy application, the insurer will adjust the premiums and and benefits according to the correct age of the insured.

A

misstatement of age provision

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22
Q

The _____ _______ ______ ______ runs for the duration of the policy.

A

misstatement of age provision

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23
Q

Under the ______ _____ _____ _____, if the insured understates his or her age, it is the face amount that is reduced.

A

misstatement of age clause

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24
Q

Proceeds of a life insurance policy, left with an insurer, for the benefit of a beneficiary, may _____ be attached by creditors.

A

Not

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25
Q

Proceeds __________ be directly paid to a minor child since a minor can’t sign a release.

A

Cannot

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26
Q

If the insured dies in an accident, the insurer may order an __________ to determine that death was not the result of a suicide.

A

Autopsy

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27
Q

In most states, suicide is covered after 2 years, if an insured commits suicide within a specified period of time after policy issue (usually the first 2 years), no benefit is payable, but all premiums are refunded to the beneficiary. Check your state regulations section for the time limits in your state.

True or False

A

True

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28
Q

True or False

If an insured buys a life insurance policy and dies one month later, the insurer must not pay the claim.

A

False

The insurer pays the claim.

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29
Q

When a policy owner lists a group of people as beneficiaries, it is known as a __________ __________.

A

Class designation.

30
Q

True or False

Life insurance proceeds create an immediate estate for the beneficiary.

A

True

31
Q

True or False

The beneficiary does not have to be of the age of majority (18 or 21, depending upon the state) in order to receive policy proceeds; however, proceeds can be directly paid to a minor child since they can sign the release.

A

False

Proceeds cannot be directly paid to a minor child since they cannot sign the release.

32
Q

If the insured names an individual as they’re your irrevocable beneficiary, the insured cannot change this destination without the beneficiary’s consent.

Truer or false

A

True

33
Q

A __________ __________ may be changed at any time by the policy owner.

A

revocable beneficiary

34
Q

A revocable beneficiary has no vested right under a __________ __________.

A

Life Policy

35
Q

An __________ __________ has a vested interest in the policy.

A

irrevocable beneficiary

36
Q

A __________ __________ will receive the policy proceeds of the primary beneficiary dies before the insured.

A

contingent beneficiary

37
Q

Under the __________ __________ provision, it is assumed that the insured died last.

A

common disaster

38
Q

If the policy proceeds are paid out in a lump sum, the ___________ __________ will not apply.

A

spendthrift clause

39
Q

True or False

Failure to repay a loan will have a permanent effect on cash value accumulation.

A

True

40
Q

True or False

The annual interest on a life insurance loan is not added to the amount of the loan as it accrues.

A

False

Life insurance loans is added

41
Q

True or False

If an outstanding policy loan, plus interest, exceeds the cash value of the policy, the policy will lapse.

A

True

42
Q

True or False

A loan may not be taken from a whole life policy as soon as it develops a cash value.

A

False

It may

43
Q

The __________ __________ loan rider can be added to a whole life policy, but not to a term or credit life policy.

A

automatic premium

44
Q

True or False

Partial surrenders are usually allowed in annuities, universal life and variable life policies.

A

True

45
Q

__________ _____ __________ is a rider that will pay the premium on behalf of a disabled insured, after a short waiting period, until the insured either recovers or dies.

A

Waiver of premium

46
Q

True or False

The waiver of premium rider does pay a cash benefit to the insured.

A

False

Rider does not pay

47
Q

If a parent paying the premium on a child’s life insurance policy dies, the provision that allows the premium to be waived is known as __________ __________ , NOT waiver of premium.

A

payor benefit

48
Q

True or False

If the payor benefit rider is attached to the policy, an insured will not have to worried about premiums being paid if the policy owner dies or becomes disabled.

A

True

49
Q

The accelerated benefits rider will pay proceeds prior to death for those with a ________ __________.

A

terminal illness

50
Q

True or False

The change of insured rider may not be utilized by an employer who wants to transfer a key person life insurance policy from one key person to another.

A

False

It may

51
Q

On a __________ _________ rider added to a parent’s policy to cover the life of a child, the child’s coverage terminates when the child reaches age 18, unless the child converts the rider to permanent coverage.

A

Term life

52
Q

When adding a children’s term rider to a life insurance policy, all of the insured’s children are covered for a single, __________ __________ charge, no matter how many.

A

Flat premium

53
Q

A __________ __________ may be added to a parent’s life policy in order to insure a child.

A

Level term

54
Q

A combination policy that automatically covers all family members, including new born children (after a short waiting period) at no extra premium charge is called a __________ __________.

A

Family policy

55
Q

The guaranteed insurability rider is also known as the __________ __________ benefit.

A

guaranteed purchase

56
Q

The guaranteed insurability rider allows the insured to increase coverage periodically without a __________ __________.

A

Physical exam

57
Q

True or False

If a person purchases a whole life policy and adds a return of premium rider, they will have level coverage from the whole life policy, and increasing coverage from the rider.

A

True

58
Q

The return of the premium rider and the return of a cash value rider are both types of __________ __________ coverage.

A

Increasing term

59
Q

__________ __________ levied by some insurers on annuities and universal life will reduce the amount a policy owner will receive upon cash surrender.

A

Surrender Charges

60
Q

The __________ __________ extended term option is a nonforfeiture option.

A

Extended term option

61
Q

True or False

If a policy with a cash value lapse for nonpayment, the insured has 30 days from the premium due date to select a nonforfeiture option.

A

False

60 days

62
Q

__________ __________ is the automatic nonforfeiture option.

A

Extended term

63
Q

When the __________ __________ nonforfeiture option is selected, the amount of coverage in the new policy is reduced from that of the original policy.

A

Reduced paid-up

64
Q

True or False

The reduced paid - up nonforfeiture option may not be taken any time there is a cash value.

A

False

It may

65
Q

True or False

The reduced paid-up nonforfeiture option will provide coverage for life.

A

True

66
Q

True or False

If an insured with a life insurance policy issued by a mutual insurer allows the insurer to keep the dividends but mail the insured a monthly check, the insured has chosen the interest option.

A

True

67
Q

On a __________ __________ insurance policy, if the policy owner selects the 1-year term dividend option, the dividend may be used to buy term insurance.

A

Participating Life

68
Q

True or False

If the insured/owner of a life policy does not designate a settlement option prior to death, the beneficiary may choose whichever option he or she wants. Most choose cash, which is not taxable.

A

True

69
Q

If the interested settlement option is selected, the interest paid is subject to __________.

A

Taxes

70
Q

When a beneficiary selects the interest only settlement option, interest payments (which are taxable) will vary, but the beneficiary may withdraw the principal at __________ __________.

A

Any time

71
Q

For estate conservation purposes, a beneficiary should select the _________ __________ settlement option.

A

Interest only

72
Q

A life insurance beneficiary who elects to take the proceeds payable upon the death of the insured over a period of time has selected the __________ __________ settlement option.

A

Fixed period

Life Insurance (2 decks)

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