Questions and Answers
What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?
Policy premium in a reinstated policy will be set according to the insured's original age.
What happens if an insured commits suicide one year after their life insurance policy is issued?
Refund the premium paid.
What is the other term for the cash payment settlement option?
Lump sum
What is the rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled called?
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What type of insurance would be used for a Return of Premium rider?
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What would be the face amount of a new term policy if the insured cancels a $50,000 whole life policy and exercises the extended term option for its cash value of $20,000?
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Under an extended term nonforfeiture option, the policy cash value is converted to what?
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What protects the insured from an unintentional policy lapse due to nonpayment of premium?
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Which rider is often used in business life insurance policies when the policy owner needs to change the insured under the policy?
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What does it mean for beneficiaries if an insured has chosen joint and 2/3 survivor as the settlement option?
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In which of the following scenarios will the pay benefit rider waive the payment of premium for a father who purchases a life insurance policy on his teenage daughter?
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If a corporation is the owner and beneficiary of the key person life policy and collects the policy benefit, what is true regarding the benefit?
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Study Notes
Life Insurance Policies
- Reinstating a life insurance policy benefits the insured by keeping the premium based on their original age.
- If an insured commits suicide within a year of policy issuance, the premium paid will be refunded.
Settlement and Payment Options
- The cash payment settlement option is commonly referred to as a lump sum.
- A waiver of premium rider in a whole life policy allows the insurance company to stop collecting premiums if the insured becomes disabled.
Riders and Terms
- Return of Premium rider is typically associated with Increasing Term insurance.
- In an extended term option, the face amount of a new term policy remains the same as the original whole life policy, regardless of the cash value.
Premium and Policy Lapse Protections
- The automatic premium loan feature protects against unintentional policy lapses due to nonpayment of premiums.
- A Substitute Insured rider enables changes to the insured individual on a business life insurance policy.
Beneficiary Settlement Options
- Choosing the joint and 2/3 survivor settlement option means that the surviving beneficiary will continue to receive two-thirds of the original benefit after one beneficiary has passed.
Dependency and Waivers
- The pay benefit rider waives premium payments if the father of the insured daughter is disabled for more than six months.
Key Person Policy Taxation
- Benefits collected by a corporation from a key person life policy are received tax-free, not subject to exclusionary rules or IRS jurisdiction.
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Description
Test your knowledge of life insurance concepts with these flashcards from Chapter 3. Explore important definitions and advantages, including policy reinstatement and settlement options. Perfect for students looking to solidify their understanding of insurance fundamentals.
