Insurance Chapter 5 Quiz

Questions and Answers

What does a cost-of-living rider allow a policyowner to do?

Pay additional premiums for increased death benefits

Decrease the death benefit over time

Increase the death benefit to match the cost-of-living index (correct)

Attach an increasing term insurance rider to the base policy (correct)

There is no additional premium required to pay for increases in the death benefit resulting from the cost-of-living rider.

True

If Jay commits suicide 3 years after purchasing a $50,000 life insurance policy, how much will his beneficiary receive?

50000

For a waiver of premium rider to become operative, the insured must be:

Totally disabled Signup and view all the answers

What are accelerated benefits?

Life insurance death benefits paid before the death of an insured with a terminal illness Signup and view all the answers

Which of the following riders provides for changes in the benefit payable based on changes in the Consumer Price Index?

Cost-of-living adjustment rider Signup and view all the answers

The payor benefit option or rider is typically used with

Juvenile policies Signup and view all the answers

Since the insured in a $25,000 life insurance policy died of a heart attack, what amount will the policy beneficiary receive under a double indemnity provision?

25000 Signup and view all the answers

Which of the following statements about accelerated benefit provisions is NOT correct?

The insured must be expected to die within 6 months. Signup and view all the answers

Which option would be the best source of funds for Steve, diagnosed with inoperable cancer, if he wants a lump-sum payment?

Accelerated benefit rider Signup and view all the answers

If an insured does not exercise the option to increase coverage under a guaranteed insurability rider, what is the result?

The coverage will not change and the option automatically expires. Signup and view all the answers

Which life insurance policy rider allows insureds to purchase additional insurance at future dates regardless of their health?

Guaranteed insurability option Signup and view all the answers

Which statement about accelerated living benefits is NOT correct?

The proceeds must be spent on the insured's medical expenses. Signup and view all the answers

Which of the following statements regarding a spousal rider to a life insurance policy is NOT correct?

This rider usually provides coverage that lasts as long as the coverage that is provided through the base policy. Signup and view all the answers

A rider on a whole life policy that adds temporary coverage for a spouse and children is?

A family term rider Signup and view all the answers

Upon the insured's death, which policy will pay the face amount plus a sum equal to all or a portion of the premiums paid?

Return-of-premium policy Signup and view all the answers

What can an insured add to a permanent insurance policy to provide additional coverage, yet cost less than purchasing a separate policy?

Term insurance rider Signup and view all the answers

A life insurance policy may pay death benefits before the insured dies for all of the following reasons EXCEPT?

Financial difficulties Signup and view all the answers

How can an insured access all or a portion of a life insurance benefit to pay for a long-term illness or life-threatening disease?

Purchase an accelerated benefit rider Signup and view all the answers

Which type of life insurance rider is NOT based on term life insurance?

Waiver of premium Signup and view all the answers

Which statement regarding a disability income rider is NOT correct?

The only way to provide disability benefits in a life insurance policy is through a disability income rider. Signup and view all the answers

If Sarah owns a life insurance policy with a $50,000 face amount and a 10-year return-of-premium rider, what would be the total amount payable to the beneficiary if she dies 6 years after purchasing the policy?

54200 Signup and view all the answers

What is an option whereby additional insurance may be purchased at various times without evidence of insurability?

Guaranteed insurability Signup and view all the answers

For a beneficiary to receive accidental death benefits, the death of the insured generally must occur within how many days following the accident?

90 days Signup and view all the answers

Which statement regarding accelerated death benefits is NOT correct?

Accelerated death benefit payments are always 100% of the death benefit. Signup and view all the answers

An accidental death and dismemberment (AD&D) policy rider's principal sum is equal to?

The death benefit on the base life insurance policy Signup and view all the answers

Because increasing term insurance can be added to permanent policies, and when added, is less expensive than a stand-alone policy, it is almost always sold as?

A rider Signup and view all the answers

The payor benefit typically waives premiums on a juvenile policy if?

The person who pays the premium dies or becomes disabled before the insured child reaches a certain age Signup and view all the answers

At age 34, how many opportunities will Ben have to purchase additional life insurance in the future if he has a guaranteed insurability option?

2 Signup and view all the answers

Which statement regarding the cost-of-living rider is NOT correct?

A drawback of the rider is that a drop in the Consumer Price Index (CPI) can result in a decrease in the coverage previously added. Signup and view all the answers

Study Notes

Accelerated Benefits

Accelerated benefits provide life insurance death benefits paid before an insured's death if diagnosed with a terminal illness.
This feature allows early access to part of the policy's face amount for medical expenses.

Riders

Cost-of-living adjustment rider indexes benefits based on changes in the Consumer Price Index (CPI).
The payor benefit rider waives premiums on juvenile policies if the premium payer dies or becomes disabled.
Guaranteed insurability option allows the purchase of additional insurance at specified intervals without proving insurability.
The spousal rider typically consists of level term life insurance, covering a spouse alongside the primary policy.

Accelerated Living Benefits

Ensure that the proceeds from accelerated benefits can be spent freely, not limited to medical expenses.
Payments vary, reducing the total death benefit of the policy.

Insurance Policy Clauses

Double indemnity provisions pay double the face amount for accidental deaths; the cause matters in claim settlements.
Return-of-premium policies pay back all or a portion of premiums in addition to the death benefit upon the insured's death.

Disability and Dismemberment Riders

Disability income rider provides benefits if the insured becomes totally disabled; does not apply to partial or temporary disabilities.
Accidental death and dismemberment (AD&D) policy rider pays an amount equal to the base life insurance policy's death benefit upon certain accidental events.

Policy Option Implications

If the guaranteed insurability option is not exercised, the option expires without changing the underlying policy.
A waiver of premium clause allows waiving of premiums for the life policy during periods of total disability.

Financial Considerations

A family term rider adds coverage for family members and can be attached to a whole life policy.
The cost-of-living rider allows for coverage increases tied to inflation but typically incurs additional premiums for increased coverage.

Special Cases in Benefits

Policies generally exclude accidental death benefits if death occurs more than 90 days after an accident.
An insured's death attributed to suicide or failure to remain within policy terms may affect claims, such as during specified exclusion periods.

Additional Key Points

The insured must be totally disabled for the waiver of premium rider to activate, removing the financial burden of premiums during disability.
Josie's example demonstrates that even with a waiver, the total death benefit remains stated in the policy without acceleration for premiums paid during disability.

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Description

Test your knowledge of key concepts in Chapter 5 of insurance study material. This quiz focuses on accelerated benefits and their definitions. Prepare to enhance your understanding of insurance policies and their applications.