Podcast
Questions and Answers
Which nonforfeiture option is the 'automatic' option?
Which nonforfeiture option is the 'automatic' option?
What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value?
What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value?
Reduced paid-up insurance
Which of the following is a guarantee that is required by law to be a part of life insurance policies that build cash value?
Which of the following is a guarantee that is required by law to be a part of life insurance policies that build cash value?
Which of the following nonforfeiture options does not allow the insured to reinstate the policy?
Which of the following nonforfeiture options does not allow the insured to reinstate the policy?
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Which life insurance dividend option does not increase a policy's cash value?
Which life insurance dividend option does not increase a policy's cash value?
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What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?
What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?
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This dividend option provides additional permanent coverage:
This dividend option provides additional permanent coverage:
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Which nonforfeiture option may Eddie not use?
Which nonforfeiture option may Eddie not use?
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Which option would best suit Rick, who wants to increase his life insurance while keeping his costs down?
Which option would best suit Rick, who wants to increase his life insurance while keeping his costs down?
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Which of the following is not a dividend option?
Which of the following is not a dividend option?
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All of the following are nonforfeiture options, EXCEPT:
All of the following are nonforfeiture options, EXCEPT:
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Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid?
Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid?
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What is the automatic dividend option?
What is the automatic dividend option?
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What factor determines the rate of the additional coverage when the policyholder purchases additional insurance?
What factor determines the rate of the additional coverage when the policyholder purchases additional insurance?
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When the extended term option is used, the face amount is?
When the extended term option is used, the face amount is?
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Which of the following is a true statement about dividends in participating policies?
Which of the following is a true statement about dividends in participating policies?
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Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment?
Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment?
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If used, which nonforfeiture option does not allow the policyowner to reinstate the original policy?
If used, which nonforfeiture option does not allow the policyowner to reinstate the original policy?
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What nonforfeiture option allows the policyowner to receive the policy's cash value?
What nonforfeiture option allows the policyowner to receive the policy's cash value?
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Which dividend option allows the policyowner to use the dividend as a single premium to purchase additional face amounts of permanent coverage?
Which dividend option allows the policyowner to use the dividend as a single premium to purchase additional face amounts of permanent coverage?
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Which of the following is NOT an option available to Mr. George regarding his dividend?
Which of the following is NOT an option available to Mr. George regarding his dividend?
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Which nonforfeiture option(s) may Jenny select if she has a rated whole life insurance policy?
Which nonforfeiture option(s) may Jenny select if she has a rated whole life insurance policy?
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What is the automatic nonforfeiture option?
What is the automatic nonforfeiture option?
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How will Mr. Johnson's decision to surrender his whole life policy affect the cash value of his new policy?
How will Mr. Johnson's decision to surrender his whole life policy affect the cash value of his new policy?
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What is the provision to access the cash value of the policy called?
What is the provision to access the cash value of the policy called?
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Which option is not available to Charlotte if she decides to exercise a nonforfeiture option?
Which option is not available to Charlotte if she decides to exercise a nonforfeiture option?
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Which of the following is not true about the accumulation of interest dividend option?
Which of the following is not true about the accumulation of interest dividend option?
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How should Marie use her dividend for one year of extra term life insurance protection valued at $10,000?
How should Marie use her dividend for one year of extra term life insurance protection valued at $10,000?
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Study Notes
Nonforfeiture Options
- The extended term option is the automatic nonforfeiture option used when the policyowner cannot be contacted and premium payments have ceased.
- Reduced paid-up insurance allows policyowners to purchase paid-up whole life insurance at a reduced face amount, utilizing the existing cash value of the policy.
- Nonforfeiture values are legally required guarantees in life insurance policies that accumulate cash value.
Cash Surrender
- The cash surrender option does not allow policy reinstatement as it results in surrendering the policy for its cash value, leading to no remaining coverage.
Dividend Options
- The cash payment dividend option involves the policyholder receiving a check for dividends, which does not enhance the policy’s cash value.
- Paid-up additions permit using dividends to increase coverage without significant cost, with dividends acting as a single premium for additional whole life coverage.
- Accumulation at interest is classified as a dividend option and is not a nonforfeiture option.
Additional Insurance and Policy Terms
- The attained age of the insured affects the rate of additional insurance purchased, particularly during major life events like marriage or childbirth.
- Using the extended term option, the face amount equals the original coverage, as the cash value purchases term coverage equivalent to the initial policy face value.
- Participating policies yield dividends that are not taxable, are typically paid annually, and reflect a return of premium overcharges.
Miscellaneous Provisions
- Premium offsets can be managed through a reduction of premium payments option, allowing dividends to cover future premium costs.
- Dividends cannot be applied to past due premiums from previous years, only to future premium payments or for purchasing additional insurance.
- Policy cash values continue to grow under a reduced paid-up policy despite a decrease in face value following surrender.
Special Cases and Considerations
- Jenny, with a rated whole life insurance policy, can only choose the reduced paid-up or cash options since extended term options are not available for such policies.
- The nonforfeiture provision safeguards policyholders against total loss of investment if premiums are not paid or if the policy is surrendered.
Summary Points
- The one-year term option allows policyholders to use dividends for temporary term life insurance, providing additional coverage as needed.
Studying That Suits You
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Description
Test your knowledge with these flashcards covering key nonforfeiture options in insurance from Chapter 5. Understand terms like extended term option and reduced paid-up insurance. Perfect for anyone studying insurance fundamentals!
