Questions and Answers
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
What does the incontestable clause allow an insurer to do?
Contest a claim during the contestable period
If D was killed in an accident and had a War Exclusion clause in his Whole Life policy, how much will D's beneficiary receive?
The full face amount
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
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Which provision of P's life insurance policy will pay a stated benefit amount for his industrial accident?
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If a young teacher wants an increasing death benefit to protect against inflation, which Dividend Option should be selected?
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How do life insurance companies handle cases where the insured commits suicide within the contract's stated contestable period?
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In a life insurance contract, what is an insurance company's promise to pay stated benefits called?
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What provision in a life insurance policy states that the application is considered part of the contract?
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How are policyowner dividends treated in regards to income tax?
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What action will an insurer take if an interest payment on a policy loan is not made on time?
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If M has an outstanding policy loan at the time of death, what will the insurer deduct from the policy proceeds?
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All of these statements about the Waiver of Premium provision are correct EXCEPT
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Whose life is covered on a life insurance policy that contains a payor benefit clause?
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What type of Whole Life policy would a 40-year-old client want to accumulate cash value at a faster rate?
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Study Notes
Health Insurance Policy Provisions
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Policy Loan Provision: Allows policyowners to borrow against the guaranteed cash value of their life insurance policy, with interest not exceeding this value.
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Incontestable Clause: Ensures that after two years, insurers cannot contest the validity of the life insurance policy, as long as the policy remains in force.
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War Exclusion Clause: In cases of death due to war-related activities, beneficiaries will still receive the full death benefit, as seen in situations like D's automobile accident while on leave from the Marines.
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Guaranteed Insurability Rider: Permits the insured to purchase additional coverage at specified future dates without needing to provide evidence of insurability.
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Accidental Death and Dismemberment Clause: Provides benefits for death or loss of limbs/eyes resulting from an accident, applicable to situations like P's industrial accident.
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Dividend Option of Paid-Up Additional Insurance: A recommended choice for those, such as a teacher with a Whole Life policy, who wish to ensure an increasing death benefit to offset inflation.
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Suicide Clause: Claims will be denied if the insured commits suicide within the contestable period stated in the policy.
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Insuring Clause: Represents the insurer's basic promise to pay stated benefits in the life insurance contract.
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Entire Contract Provision: Stipulates that the policy document, application, and any attached riders form the complete contract between the insurer and insured.
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Taxation of Policyowner Dividends: Dividends exceeding total premium payments are taxable, with interest on accumulations subject to income tax.
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Policy Loan Interest Payment: If interest payments on a policy loan are not made on time, the due amount is automatically added to the total loan balance.
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Deduction of Loan Balance from Policy Proceeds: Upon the insured's death, any outstanding loan balance and accrued interest are deducted from the policy proceeds.
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Waiver of Premium Provision: Benefits are available after a waiting period, without requiring Social Security disability eligibility, but the insured must be totally disabled.
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Payor Benefit Clause: Often included in policies covering children, ensuring continued coverage if the premium payer becomes deceased or totally disabled.
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Faster Cash Value Accumulation: Important for potential clients, especially those in their 40s, considering policies like Whole Life that allow for rapid cash value growth in early years.
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Test your knowledge on key provisions in health insurance policies with these flashcards. Each card provides a specific term and its definition, helping you understand important concepts in life insurance. Ideal for students and professionals studying insurance policies.
