Keywords: Life Insurance Policy Provisions, Options, and Riders

Question 1

___________________ is a policy assignment under which the assignee (person to whom the policy is assigned) receives full control over the policy and full rights to its benefits. Generally, when a policy is assigned to secure a debt, the owner retains all rights in the policy in excess of the debt, even though the assignment is absolute in form.

Answer 1

Absolute assignment

Question 2

The _______________________________ pays an additional sum to the beneficiary if the insured dies due to a covered accident. The amount paid is a multiple of the policy face amount, such as double or triple the original benefit. Accident death life insurance provides the cheapest way to add a lot of coverage for a limited period.

Answer 2

accidental death benefit rider

Question 3

The ______________________________ allows the insured to receive a portion of the death benefit before death if the insured has a terminal illness and is expected to die within 1-2 years. Whatever amount is withdrawn in an accelerated death benefit will decrease the death benefit when death occurs.

Answer 3

Accelerated Benefit Rider

Question 4

The ________________________________ dividend option allows the policy owner to leave dividends with the insurer to accumulate interest. In turn, the policy owner will be required to pay taxes on any interest (profit) generated by the dividend.

Answer 4

“accumulate interest”

Question 5

The ___________ clause allows the right to transfer policy rights to another person or entity.

Answer 5

assignment

Question 6

The _______________________________ provision allows the insurance company to deduct the overdue premium from an insured’s cash value by the end of the grace period if a payment is missed on a life policy. The insurance company can AUTOMATICALLY take out a LOAN for you against your CASH VALUE to cover your PREMIUM if they don’t receive payment when due.

Answer 6

automatic policy loan

Question 7

The __________________ option allows the policy owner to cash out the dividends they receive.

Answer 7

“cash” dividend

Question 8

The _________________________________ option allows the policy owner to receive the policy’s cash value. The policy owner no longer has coverage at this point. Usually, the maximum length of time a life insurance company may legally defer paying the cash value of a surrendered policy is six months (Delayed Payment provision).

Answer 8

“cash surrender” nonforfeiture

Question 9

____________________ is an assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of policy proceeds for the amount owed. Any proceeds above the amount due at the insured’s time of death will be paid to a beneficiary designated by the policy owner.

Answer 9

Collateral assignment

Question 10

The ________________________________ states a policy owner must pay a premium in exchange for the insurer’s promise to pay benefits. A policy owner’s consideration consists of completing the application and paying the initial premium. The amount and frequency of premium payments are contained in the consideration clause. “Please CONSIDER me for insurance. Here is my COMPLETED APPLICATION, INITIAL PREMIUM, and how much, how often I agree to pay. Please consider me.”

Answer 10

consideration clause

Question 11

Dependents may be added to as additional (other) insureds through the use of a dependent rider. Other insured riders are typically used for spouses and children.

Answer 11

dependent rider

Question 12

are the options a policy owner has when receiving dividend payments from an insurance policy.

Answer 12

Dividend Options

Question 13

The ________________________________ (or clause) states the insurance policy itself, any riders and endorsements/amendments, and the application comprises the entire contract between all parties.

Answer 13

entire contract provisions

Question 14

_____________ are features of an insurance policy stating that the policy will not cover certain risks.

Answer 14

Exclusions

Question 15

the ________________ nonforfeiture option permits the policy owner to use the policy’s cash value to buy level, extended term insurance for a specified period. No further premium payments are made. The coverage provided with the extended-term nonforfeiture option is equal to the net death benefit of the lapsed policy.

Answer 15

“extended-term”

Question 16

The _____________ period states the policy owner is permitted a certain number of days once the policy is delivered to look over the policy and return it for a refund of all premiums paid.

Answer 16

free look

Question 17

The ______ period is a period after the due date of a premium during which the policy remains in force without penalty.

Answer 17

grace

Question 18

The _______________________________ rider permits the policy owner to buy additional permanent life insurance coverage at predetermined intervals without submitting proof of insurability. It also includes specific events like marriage and births, without requiring proof of insurability. Usually, the benefit is allowed every three years, up to the original face amount of the policy.

Answer 18

Guaranteed insurability

Question 19

The ______________ provision states that the insurance company may not challenge the validity of the policy once the policy has been in force for a period of time, typically two years. Over the years, case law has established precedence that the Incontestable Clause applies to cases of fraud.

Answer 19

incontestable

Question 20

The ___________________________________ is the insurer’s basic promise to pay specified benefits to a designated person in the event of a covered loss. States the scope and limits of coverage, “We ensure to INSURE you for…”

Answer 20

insuring agreement

Question 21

The _____________________________________ Provision allows the insurer to adjust the policy benefits if the insured’s age or sex is misstated on the policy application. The misstatement of age provision allows the insurer to adjust the benefits payable if the age of the insured was misstated when the application for the policy was made.

Answer 21

Misstatement of Age or Sex

Question 22

______________________ are the options you have for your cash value if you terminate a policy that has a cash value. You are closing your account (surrendering your policy); what do you want us to do with your cash (so you don’t forfeit it)? When a policy owner decides he does not want his insurance policy anymore, he has the option to surrender his policy.

Answer 22

Nonforfeiture options

Question 23

The ________________________ dividend option allows the policy owner to exchange the dividend for additional coverage in the form of a one-year term policy.

Answer 23

“one year term”

Question 24

The ________________________ dividend option allows the policy owner to exchange the dividend for an additional single payment whole life policy.

Answer 24

“paid-up addition”

Question 25

The _________________ waives future premiums for a juvenile life insurance policy if the person responsible for paying the premiums dies or becomes disabled.

Answer 25

payor provision

Question 26

The ________________________________ apply to policies that have cash value also have policy loan and withdrawal provisions. These policies must begin to build cash value after a certain number of years.

Answer 26

policy load provisions

Question 27

The _________________ nonforfeiture option allows the policy owner to reduce the policy’s benefit amount and, in turn, cease making premium payments.

Answer 27

“reduced paid-up”

Question 28

The _________________ dividend option allows the policy owner to return the dividend payment to the insurer in exchange for a reduction in the following year’s premium payments.

Answer 28

“reduced premium”

Question 29

_______________ is putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required. It Permits the policy owner to reinstate a policy that has lapsed as long as the policy owner can provide proof of insurability and pays all back premiums, outstanding loans, and interest.

Answer 29

Reinstatement

Question 30

The ______________________________ pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a specific period specified in the policy. It may also return premiums to the insured at the end of a specified period.

Answer 30

return of premium rider

Question 31

The ______________ states that the policy will be voided, and no benefit will be paid if the insured commits suicide within two years from policy issuance. The primary purpose of a suicide provision is to protect the insurer from applicants contemplating suicide.

Answer 31

suicide clause