Rear End Loaded Provision in Life Insurance Quiz

Questions and Answers

What action will the insurer take if N, who is covered by a Term Life policy, does not make the required premium payment and dies?

Claim will be approved

Claim will be delayed

Claim will be denied (correct)

Claim will be processed on a grace basis

What is the provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment?

Reinstatement

How much will the insurance company pay K's beneficiary if K dies after paying on a $20,000 20-Year Endowment policy for 10 years?

$20,000 death benefit

How can additional coverage be added to a Whole Life policy?

By adding a decreasing term rider Signup and view all the answers

What does the incontestable clause allow an insurer to do?

Contest a claim during the contestable period Signup and view all the answers

What is referred to as the promise to pay stated benefits in a life insurance contract?

Insuring clause Signup and view all the answers

Which of these is NOT an example of a Nonforfeiture option?

Life Income Signup and view all the answers

All of the following statements are true regarding a policy's Grace Period EXCEPT which one?

Past due premiums are made Signup and view all the answers

Which types of policies may NOT have the Automatic Premium Loan provision attached to them?

Decreasing Term Signup and view all the answers

Which feature would limit the insurer's obligation if N, a student pilot, was killed while flying?

Exclusion Signup and view all the answers

What will the beneficiary receive if the insured dies during the Grace Period?

Full face amount minus any past due premiums Signup and view all the answers

Which statement is TRUE regarding a policy loan?

Past-due interest on a policy loan is added to the total debt Signup and view all the answers

Which provisions require proof of insurability after a policy has lapsed?

Reinstatement Signup and view all the answers

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued Signup and view all the answers

Which life insurance rider typically appears on a Juvenile life insurance policy?

Payor Benefit rider Signup and view all the answers

What provision of a life insurance policy will pay a stated benefit amount if P is blinded in an industrial accident?

Accidental Death and Dismemberment clause Signup and view all the answers

What is the purpose of the automatic premium loan provision?

Avoid a policy lapse Signup and view all the answers

What is the TRUE statement about accumulated interest earned on dividends from an insurance policy?

It is taxed as ordinary income Signup and view all the answers

What is the purpose of the Suicide provision?

To safeguard the insurer from an applicant who is contemplating suicide Signup and view all the answers

Which statement regarding Whole Life policies is correct for a potential client age 40 wishing to accumulate cash value faster?

20-Pay Life accumulates cash value faster than Straight Life Signup and view all the answers

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

At future dates specified in the contract with no evidence of insurability required Signup and view all the answers

What does the ownership clause in a life insurance policy state?

Who the policyowner is and what rights the policyowner is entitled to Signup and view all the answers

What action will an insurer take if an interest payment on a policy loan is not made on time?

Automatically add the amount of interest due to the loan balance Signup and view all the answers

What does the Consideration clause in a life insurance policy indicate?

A policyowner's consideration consists of a completed application and the initial premium Signup and view all the answers

What is the term for the agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death?

Insuring agreement Signup and view all the answers

Study Notes

Life Insurance Provisions and Options

Non-payment of premium results in claim denial if the policy lapses before the insured's death.
Reinstatement provision allows lapsed policies to be put back in force upon meeting certain conditions.
The death benefit of a 20-Year Endowment policy remains at $20,000 if the insured dies during the policy term.
Whole Life policies can have additional coverage through a decreasing term rider.
Insurers may contest claims during the contestable period due to the incontestable clause.

Key Definitions

The insuring clause is the insurer's commitment to pay the stated benefits upon the insured's death.
Nonforfeiture options do not include Life Income.
Grace Period rules do not cover payments of past due premiums.
Automatic Premium Loan provisions cannot be attached to decreasing term policies.

Insurer Obligations and Provisions

Exclusions may limit coverage for specific activities, such as flying while being a student pilot.
If the insured dies during the Grace Period, the beneficiary receives the full face amount minus past due premiums.
Past-due interest on policy loans increases the total debt but does not void the policy.
Reinstatement of policy after lapse requires proof of insurability.

Policy Features and Riders

Surrender charges apply when a policy is discontinued and are referred to as rear-end loaded provisions.
Juvenile life insurance commonly includes a Payor Benefit rider.
The Accidental Death and Dismemberment clause provides stated benefits for specific accidents.

Premium Payment and Taxation

Automatic premium loans help avoid policy lapses.
Accumulated interest on dividends from insurance policies is taxable as ordinary income.
The Suicide provision protects insurers from potential losses due to applicants contemplating suicide.

Whole Life Policy Characteristics

20-Pay Life policies accumulate cash value more quickly than Straight Life policies.
The Guaranteed Insurability Rider allows additional coverage purchase at specified future dates without proof of insurability.
The ownership clause defines the policyowner's identity and rights.

Policy Loan and Consideration

Any missed interest payment on a policy loan is added to the loan balance.
The consideration clause details the policyowner's obligations, including the completed application and initial premium.
The insuring agreement states the amount paid to a designated beneficiary upon the insured's death.

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Description

This quiz focuses on key concepts from Chapter 3 of life insurance, covering provisions, options, and riders. Test your knowledge on important terms such as policy lapses, reinstatement, and claim processes. Ideal for students and professionals in insurance and finance.

Life Insurance Chapter 3 Provisions and Options