Insurance Chapter 5 Quiz
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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:

    <p>Totally disabled</p> Signup and view all the answers

    What are accelerated benefits?

    <p>Life insurance death benefits paid before the death of an insured with a terminal illness</p> 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?

    <p>Cost-of-living adjustment rider</p> Signup and view all the answers

    The payor benefit option or rider is typically used with

    <p>Juvenile policies</p> 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?

    <p>25000</p> Signup and view all the answers

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

    <p>The insured must be expected to die within 6 months.</p> 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?

    <p>Accelerated benefit rider</p> 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?

    <p>The coverage will not change and the option automatically expires.</p> Signup and view all the answers

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

    <p>Guaranteed insurability option</p> Signup and view all the answers

    Which statement about accelerated living benefits is NOT correct?

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

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

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

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

    <p>A family term rider</p> 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?

    <p>Return-of-premium policy</p> 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?

    <p>Term insurance rider</p> 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?

    <p>Financial difficulties</p> 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?

    <p>Purchase an accelerated benefit rider</p> Signup and view all the answers

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

    <p>Waiver of premium</p> Signup and view all the answers

    Which statement regarding a disability income rider is NOT correct?

    <p>The only way to provide disability benefits in a life insurance policy is through a disability income rider.</p> 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?

    <p>54200</p> Signup and view all the answers

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

    <p>Guaranteed insurability</p> 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?

    <p>90 days</p> Signup and view all the answers

    Which statement regarding accelerated death benefits is NOT correct?

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

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

    <p>The death benefit on the base life insurance policy</p> 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?

    <p>A rider</p> Signup and view all the answers

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

    <p>The person who pays the premium dies or becomes disabled before the insured child reaches a certain age</p> 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?

    <p>2</p> Signup and view all the answers

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

    <p>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.</p> 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.

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