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Questions and Answers
All of the following are dividend options except:
All of the following are dividend options except:
- Reduction of premiums
- Fixed-period option (correct)
- Dividend accumulations
- Paid-up additions
What provision was added by Ned to his life insurance policy?
What provision was added by Ned to his life insurance policy?
Waiver-of-premium provision
Which statement is true regarding options available in life insurance contracts?
Which statement is true regarding options available in life insurance contracts?
- All life insurance policies provide dividend options.
- Cash value policies provide nonforfeiture options. (correct)
- All life insurance policies provide nonforfeiture options.
- Participating policies get dividends. (correct)
Which contractual provision supports Barb's position regarding her son's policy loan?
Which contractual provision supports Barb's position regarding her son's policy loan?
All of the following are settlement options except:
All of the following are settlement options except:
Which statement is true with regard to the incontestable clause?
Which statement is true with regard to the incontestable clause?
If Rod committed suicide four months after purchasing a policy, what must her insurer pay?
If Rod committed suicide four months after purchasing a policy, what must her insurer pay?
How can Christine transfer all ownership rights in her policy to a charity?
How can Christine transfer all ownership rights in her policy to a charity?
Which nonforfeiture option should Tom exercise considering he is diagnosed with a terminal condition?
Which nonforfeiture option should Tom exercise considering he is diagnosed with a terminal condition?
What provision did Mary add to her life insurance policy to guard against inflation?
What provision did Mary add to her life insurance policy to guard against inflation?
A change-of-plan provision permits the policy owner to exchange his/her present policy for a different life insurance contract.
A change-of-plan provision permits the policy owner to exchange his/her present policy for a different life insurance contract.
Interest is not required on life insurance policy loans.
Interest is not required on life insurance policy loans.
Reduced paid-up insurance is a dividend option.
Reduced paid-up insurance is a dividend option.
Settlement options are available on all insurance contracts.
Settlement options are available on all insurance contracts.
The purpose of the suicide clause is to reduce adverse selection against the insurer.
The purpose of the suicide clause is to reduce adverse selection against the insurer.
Failure to pay a life insurance premium by the due date automatically results in a policy lapse.
Failure to pay a life insurance premium by the due date automatically results in a policy lapse.
All ownership rights in a policy are transferred through a collateral assignment.
All ownership rights in a policy are transferred through a collateral assignment.
Under a waiver-of-premium provision, if the insured becomes totally disabled before a stated age, all premiums coming due during the period of disability are waived.
Under a waiver-of-premium provision, if the insured becomes totally disabled before a stated age, all premiums coming due during the period of disability are waived.
Evidence of insurability must be demonstrated to purchase additional life insurance under a guaranteed purchase option.
Evidence of insurability must be demonstrated to purchase additional life insurance under a guaranteed purchase option.
If a policy loan has not been repaid by the time the insured dies, the amount paid to the beneficiary is reduced by the amount of the debt.
If a policy loan has not been repaid by the time the insured dies, the amount paid to the beneficiary is reduced by the amount of the debt.
Cash value life insurance contracts include nonforfeiture options.
Cash value life insurance contracts include nonforfeiture options.
What does the ownership clause state?
What does the ownership clause state?
What does the entire contract clause state?
What does the entire contract clause state?
What is the purpose of the incontestable clause?
What is the purpose of the incontestable clause?
What does the suicide clause do?
What does the suicide clause do?
What happens due to a misstatement of age clause?
What happens due to a misstatement of age clause?
What is the grace period?
What is the grace period?
What does the reinstatement clause allow?
What does the reinstatement clause allow?
What is the policy loan provision?
What is the policy loan provision?
What is the beneficiary designation?
What is the beneficiary designation?
Beneficiaries may be:
Beneficiaries may be:
What does the assignment clause state?
What does the assignment clause state?
What is the absolute assignment?
What is the absolute assignment?
What is the collateral assignment?
What is the collateral assignment?
Dividend options: alternative methods of using policyowner (_____) dividends.
Dividend options: alternative methods of using policyowner (_____) dividends.
What are dividend options?
What are dividend options?
Nonforfeiture Options: alternatives for the cash value if a life insurance policy is ____.
Nonforfeiture Options: alternatives for the cash value if a life insurance policy is ____.
Nonforfeiture options are only for cash value policies.
Nonforfeiture options are only for cash value policies.
What are the available nonforfeiture options?
What are the available nonforfeiture options?
Settlement options are available for:
Settlement options are available for:
What are the available settlement options?
What are the available settlement options?
What is the waiver of premium rider?
What is the waiver of premium rider?
What does an accidental death (double indemnity) rider provide?
What does an accidental death (double indemnity) rider provide?
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Study Notes
Dividend Options
- Dividend options exclude fixed-period option, while available options include cash, premium application, interest accumulation, paid-up additions, and one-year term insurance.
- Nonforfeiture options are available in cash value life insurance policies, allowing alternatives if the policy is surrendered.
Waiver-of-Premium Provision
- This provision releases the insured from premium payments if they become totally disabled before a specified age.
Life Insurance Contract Options
- Only participating policies provide dividends, while cash value policies offer nonforfeiture options.
Ownership Clause
- Ensures the policyowner retains major decision-making rights over the policy, rather than the insured or beneficiary.
Settlement Options
- Excludes extended term insurance; available options are fixed period, interest option, life income, and cash.
Incontestable Clause
- Protects beneficiaries from insurer denial of death claims after two years, but allows insurers to contest claims during the initial two years.
Suicide Clause
- In the first two policy years, only premium refunds are issued if the insured commits suicide.
Absolute Assignment
- This process allows full transfer of ownership rights of a life insurance policy, enabling the policyowner to assign policies completely.
Policy Loan and Nonforfeiture Options
- Policyholders may borrow against the cash value at interest. The preferred nonforfeiture option for someone nearing death is extended term insurance.
Cost-of-Living Rider
- Protects against inflation by allowing purchase of term insurance equal to the increase in the consumer price index since policy issuance.
Assignments in Policy Ownership
- Assignment clauses permit either full (absolute) or limited (collateral) transfer of rights, with collateral assignments securing debts.
Misstatement of Age Clause
- Adjusts insurance proceeds based on age misrepresentation, without impacting other types of misrepresentation.
Grace Period and Reinstatement Clause
- Policyholders have a 31-day grace period to pay overdue premiums; a reinstatement clause permits revival of lapsed policies subject to insurability.
Beneficiary Designation
- Policyowners may designate primary, contingent, revocable, or irrevocable beneficiaries, indicating control over policy proceeds.
Riders and Insurance Provisions
- Waiver of premium riders exempt disabled policyholders from premium obligations.
- The accidental death rider pays double the face value to beneficiaries in case of qualifying accidental deaths.
General Facts
- Dividend options and settlement options are integral components of life insurance contracts which can impact policy benefits and claims processing.
- Cash value life insurance contracts include nonforfeiture options, providing financial security for the policyholder.
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