Questions and Answers
All of the following are dividend options except:
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 contractual provision supports Barb's position regarding her son's policy loan?
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All of the following are settlement options except:
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Which statement is true with regard to the incontestable clause?
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If Rod committed suicide four months after purchasing a policy, what must her insurer pay?
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How can Christine transfer all ownership rights in her policy to a charity?
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Which nonforfeiture option should Tom exercise considering he is diagnosed with a terminal condition?
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What provision did Mary add to her life insurance policy to guard against inflation?
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A change-of-plan provision permits the policy owner to exchange his/her present policy for a different life insurance contract.
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Interest is not required on life insurance policy loans.
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Reduced paid-up insurance is a dividend option.
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Settlement options are available on all insurance contracts.
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The purpose of the suicide clause is to reduce adverse selection against the insurer.
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Failure to pay a life insurance premium by the due date automatically results in a policy lapse.
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All ownership rights in a policy are transferred through a collateral assignment.
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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.
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Evidence of insurability must be demonstrated to purchase additional life insurance under a guaranteed purchase option.
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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.
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Cash value life insurance contracts include nonforfeiture options.
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What does the ownership clause state?
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What does the entire contract clause state?
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What is the purpose of the incontestable clause?
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What does the suicide clause do?
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What happens due to a misstatement of age clause?
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What is the grace period?
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What does the reinstatement clause allow?
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What is the policy loan provision?
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What is the beneficiary designation?
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Beneficiaries may be:
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What does the assignment clause state?
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What is the absolute assignment?
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What is the collateral assignment?
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Dividend options: alternative methods of using policyowner (_____) dividends.
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What are dividend options?
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Nonforfeiture Options: alternatives for the cash value if a life insurance policy is ____.
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Nonforfeiture options are only for cash value policies.
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What are the available nonforfeiture options?
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Settlement options are available for:
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What are the available settlement options?
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What is the waiver of premium rider?
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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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Description
Test your knowledge with this Finance Quiz focused on key concepts in insurance and dividends. This quiz includes scenarios and multiple-choice questions to help reinforce your understanding. Perfect for students or professionals looking to brush up on finance fundamentals.
