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ExamFX > Life Policy Provisions, Riders, and Options > Flashcards

Life Policy Provisions, Riders, and Options Flashcards

1
Q

The entire contract provision stipulates that the policy and a copy of the application, along with any riders or _____, constitute the entire contract

A

amendments

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2
Q

The _____ sets forth the basic agreements between the insurer and the insured. States insurer’s promise to pay the death benefit, located on policy face page, defines parties to the contract, premium to be paid, how long coverage is in force, and amount of death benefit

A

insuring clause

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3
Q

The _______ provision allows the policy owner ____ days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium.

A

10 days

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4
Q

The free-look period starts when the policyowner ______ the policy (policy delivery), not when the insurer issues the policy.

A

receives

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5
Q

Both parties to a contract must provide some value, or ________, in order for the contract to be valid.

A

Consideration

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6
Q

The parties to the insurance contract are the insurer, the policyowner, the _____ and the beneficiary

A

insured

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7
Q

The policyowner and the insured may be the same person or

A

different persons

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8
Q

The ______ has the responsibility of paying the policy premiums, and is also the person who must have an insurable interest in the insured at the time of the application for the insurance

A

policyowner

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9
Q

When the owner and the insured are not the same person, the insurance arrangement is referred to as the

A

third-party ownership

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10
Q

The policyowner of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without the ___________. However owner must notify insurer in writing of the assignment

A

consent of the insurer

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11
Q

Transfer of the life insurance ____________ the insured or amount of coverage; it only changes who has the policy ownership rights

A

does not change

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12
Q

The _______ ________ specifies the policyowner’s right to assign (transfer rights of ownership) the policy.

A

assignment provision

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13
Q

2 types of policy assignment

A

Absolute Assignment

Collateral Assignment

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14
Q

_____ _______ involves transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights.

A

Absolute Assignment

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15
Q

______ ______ involves transfer of partial rights to another person. It is usually done in order to secure a loan or some other transaction

A

Collateral Assignment

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16
Q

The ______ does not have to have an insurable interest in the insured

A

beneficiary

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17
Q

Does policyowner have to name a beneficiary in order for the policy to be valid?

A

NO

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18
Q

Benefits designated to a _____ will either be paid to the minor’s guardian, or paid to the trustee of the minor if the trust is the named beneficiary, or paid as directed by a court.

A

minor

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19
Q

The ____________ has first claim to the policy proceeds following the death of the insured. Policyowner may name more than one _______

A

Primary beneficiary

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20
Q

The ________ has second claim in the event that the primary beneficiary dies before the insured. Do not receive anything if primary beneficiary is still living at the time of the insured’s death

A

contingent beneficiary

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21
Q

If none of the beneficiaries is alive at the time of the insured’s death, or if no beneficiary is named, the insured’s ____ will automatically receive the proceeds of the life insurance policy.

A

estate

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22
Q

Beneficiary designations may be either

A

revocable or irrevocable

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23
Q

The policyowner, without the consent or knowledge of the beneficiary, may change a ________ at any time

A

revocable designation

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24
Q

An ________ may not be changed without the written consent of the beneficiary. They have a vested interest in the policy and policyowner can not borrow cash without beneficiary’s agreement

A

irrevocable designation

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25
Q

If the insured and the primary beneficiary die at approximately the same time from a common disaster with no clear evidence as to who died first, a problem may arise in identifying which party is eligible for the death benefit. The _________ has been adopted to address this problem, and to protect the policyowner’s original intent, as well as to protect the contingent beneficiary.

A

Uniform Simultaneous Death Law

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26
Q

Uniform Simultaneous Death Law stipulates that if the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the __________ died first

A

primary beneficiary

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27
Q

The ________, when added to a policy provides that if the insured and the primary beneficiary died in a common disaster ) even if the beneficiary outlived the insured by a specified number of days), it is presumed that the primary beneficiary died first, so the proceeds will be paid to either the contingent beneficiary or to the insured’s estate, if no contingent beneficiary is designated

A

Common Disaster Clause

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28
Q

The _____ is the manner or frequency that the policyowner pays the policy premium

A

premium mode

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29
Q

Most policies allow for annual, semi-annual, quarterly, or

A

monthly payments

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30
Q

If the insured dies during a period of time for which the premium has been paid, the insurer must refund any _________ along with the policy proceeds

A

unearned premium

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31
Q

The _______ is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapse (usually 30 or 31 days).

A

grace period

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32
Q

_______ policies allow the policyowner to increase or decrease the premium during the policy period

A

Flexible premium

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33
Q

The ________ provision allows a lapsed policy to be put back in force.

A

reinstatement

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34
Q

The maximum time limit for reinstatement is usually ______ after the policy has lapsed

A

3 years

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35
Q

A policy that has been _____ cannot be reinstated

A

surrendered

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36
Q

The _________ clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years, even if there has been a material misstatement of facts or concealment of a material fact

A

incontestability

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37
Q

The ______ option is fond only in policies that contain cash value

A

policy loan

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38
Q

Universal life policies allow the _________ (partial surrender) of the policy cash value. Limit as to how much and how often. Interest earned on withdrawn cash value may be taxed

A

partial withdrawal

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39
Q

______ are the types of risks the policy will not cover. Ex. Aviation, Hazardous Occupations, and Military Service

A

Exclusions

40
Q

______ are written modifications attached to a policy that provide benefits not found in the original policy. Sometimes require additional premium

A

Riders

41
Q

The ________ rider waives the premium for the policy if the insured becomes totally disabled. Insured must meet the policy’s definition of total disability

A

waiver of premium

42
Q

Total disability refers to the insured’s inability to perform the duties of his/her own occupation for the first ______

A

2 years

43
Q

The ___________ rider is found in Universal life insurance. In the event of disability of the insured, this rider waives the cost of the insurance and other expenses, but does not waive the cost of premiums necessary to accumulate cash values

A

waiver of cost of insurance

44
Q

The __________ rider is in the event of disability the insurer will waive the policy premiums and pay a monthly income to the insured.

A

Waiver of premium with Disability Income

45
Q

The _____ rider is primarily used with juvenile policies. It functions like the waiver of premium rider. If payor becomes disabled for at least 6 months or dies, the insurer will waive the premiums until minor reaches 21

A

Payor benefit

46
Q

The ________ rider provides coverage for one or more family members other than the insured. Also known as a family rider

A

other insured rider

47
Q

The ______ allows children of the insured (natural, adopted or step) to be added to coverage for a limited period of time for a specified amount. One premium for ALL children

A

children’s term rider

48
Q

The _______ incorporates the spouse term rider along with the children’s term rider in a single rider.

A

family term rider

49
Q

The ________ rider insures someone who is not a member of the insureds family. Commonly used with Key Person. Rider permits policyowner to change the insured to another key employee

A

Nonfamily term rider

50
Q

The ________ rider pays some multiple of the face amount if death is the result of an accident is defined in the policy. Death must usually occur within 90 days of such accident. The benefit is normally two times (double indemnity) the face amount or triple

A

accidental death rider

51
Q

The ___________ pays the principal for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment.

A

accidental death and dismemberment rider

52
Q

The ______ rider allows the insured to purchase additional coverage at specified future dates (usually every 3 years) or events (such as marriage or birth of child) without evidence of insurability, for an additional premium

A

guaranteed insurability

53
Q

The _______ rider is implemented by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to the beneficiary.

A

return of premium

54
Q

___ riders allow for an additional amount of temporary insurance to be provided on the insured, without the need to issue another policy

A

Term

55
Q

The ______ rider addresses the inflation factor by automatically increasing the amount the amount of insurance without evidence of insurability from the insured

A

cost of living rider

56
Q

Accelerated death benefits allow the _____ of a portion of the death benefit if the insured has any of the following conditions:

Terminal illness
Medical condition that require extraordinary medical intervention

Maximum benefit is typically a percentage of the face amount of insurance. May be dollar limit

A

early payment

57
Q

The ______ rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years. Purpose of this rider is to provide the insured with the necessary funds to take care of medical and nursing home expenses

A

Living needs

58
Q

Payable Death benefit = Face amount (-) amount withdrawn (-)

A

Earnings lost by insurer in interest

59
Q

Because permanent life insurance policies have cash values, certain guarantees are built into the policy that cannot be forfeited by the policyowner. These guarantees known as ___________ are required by state law to be included in the policy

A

nonforfeiture values

60
Q

Reduced Paid-up Insurance

A

Under this option, the policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a reduced face amount from that of that former policy. The new reduced policy builds its own cash value and will remain in force until death or maturity

61
Q

Under the Extended Term option, the insurer uses the policy cash value to convert to term insurance for the _______ as the former permanent policy. If the policyowner has neglected to select one of these nonforfeiture options, the insurer will automatically implement the extended-term option in the event of termination

A

same face amount

62
Q

_____ are a return of excess premiums, and for that reason they are not taxable to the policyowner. Insurance companies cannot guarantee ____

A

Dividends

63
Q

Policyowners have the option of taking their dividends in one of several different ways:

A

1) Cash
2) Reduction of Premium
3) Accumulation at Interest
4) Paid-up Additions

64
Q

Reduction of Premium

A

Insurer uses the dividend to reduce the next year’s premium

65
Q

Accumulation at Interest

A

The insurance company keeps the dividend in an account where it accumulates interest.

66
Q

Are interest on dividends taxable?

A

YES

67
Q

Paid-up Option

A

Insurer first accumulates the dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early.

68
Q

One-year term option

A

The insurance company uses the dividend to purchase additional insurance in the form of one-year term insurance that increases the overall death benefit

69
Q

_______ options are the methods used to pay the death benefits to a beneficiary upon the insured’s death, or to pay the endowment benefit if the insured lives to the endowment date.

A

Settlement

70
Q

Settlement options are triggered by the insured’s _____ or age 100

A

death

71
Q

Upon the death of the insured, or at the point of endowment, the contract is designed to pay the proceeds in cash, called a ______ unless the recipient chooses different mode of settlement

A

lump sum

72
Q

The ________, also known as straight life, provides the recipient with an income that he or she cannot outlive. Amount of installment is paid based on the recipient’s life expectancy and the amount of principal

A

life-income option

73
Q

Under ___________, the recipient is provided with the “best of both worlds” in terms of a lifetime income and a guaranteed installment period. Not only are the payments guaranteed for the lifetime of the recipient, but there is also a specified period that is guaranteed.

A

life income with period certain option

74
Q

The ________ option guaranteed an income for two or more recipients for as long as they live. Most commonly the reduced option is written as “joint and 1/2 survivor” or “joint and 2/3 survivor”

A

life income joint and survivor

75
Q

The ______ option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient at regular intervals. Considered temporary option since the proceeds are retained by the insurer until some later point when the proceeds are paid out in a lump sum

A

Interest-only

76
Q

Under the _______ option, a specified period of years is selected, and equal installment are paid to the recipient

A

fixed-period installment

77
Q

The _______ option pays a fixed, specified amount in installments until the proceeds are exhausted. Recipient selects a specified fixed dollar amount to be paid until the proceeds are gone

A

fixed-amount installments

78
Q

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

A

The surviving beneficiary will continue receiving 2/3 of the benefits paid when both beneficiaries were alive

79
Q

An insured receives an annual life insurance check. What term best describes this arrangement?

A

Cash option

80
Q

What type of insurance would be used for a Return of Premium rider

A

Increasing term

81
Q

Which rider is often used in business life insurance policies when the policyowner needs to change the insured under the policy

A

Substitute insured rider

82
Q

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

A

Becomes terminally ill

83
Q

Under an extended term nonforfeiture option, the policy cash value is converted to

A

the same face amount as in the whole life policy

84
Q

which nonforfeiture option provides coverage for the longest period of time

A

reduced paid up

85
Q

what happens when a policy is surrendered for its cash value

A

coverage ends and the policy cannot be reinstated

86
Q

this type of settlement option which pays throughout the lifetime of two or more beneficiaries is called

A

Joint and survivor

87
Q

Which type of insurance would be used for a return of premium rider

A

increasing term

88
Q

Benefit of choosing extended term as a nonforfeiture option

A

it has the highest amount of insurance protection

89
Q

what nonforfeiture option has the highest amount of insurance protection

A

extended term

90
Q

according to the entire contract provision, a policy must contain

A

a copy of the original application for insurance

91
Q

items stipulated in the contract that the insurer will not provide coverage for are found in the

A

exclusion clause

92
Q

a policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due what provision

A

Automatic premium loan

93
Q

under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner

A

cash surrender

94
Q

which premium payment modes will incur the lowest overall payment

A

Annual

95
Q

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

A

Guaranteed insurability rider

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