Questions and Answers
How do life insurance companies handle cases where the insured commits suicide within the contract's stated contestable period?
Claims are denied under the Suicide clause of the policy.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
In a life insurance contract, what is the insurance company's promise to pay stated benefits called?
Insuring clause
What action will the insurer take if M had an annual life insurance premium payment due January 1, and she died January 10 without making the premium payment?
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When is the face amount of a Whole Life policy paid?
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Interest on a policy loan which is not paid when due is added to the total debt.
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When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
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What is the purpose of the automatic premium loan provision?
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A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
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What type of policy would offer a 40-year old the quickest accumulation of cash value?
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Credit life insurance is typically issued with which of the following types of coverage?
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Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
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What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
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How does a typical Variable Life Policy investment account grow?
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Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
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What kind of premium does a Whole Life policy have?
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What type of life policy pays the face value upon the death of the insured or when the insured reaches age 100?
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What type of life insurance incorporates flexible premiums and an adjustable death benefit?
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Which type of policy is considered to be overfunded, as stated by IRS guidelines?
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What type of life policy covers two people and pays upon the death of the last insured?
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Which statement is correct regarding the premium payment schedule for whole life policies?
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What type of insurance offers permanent life coverage with premiums that are payable for life?
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What action will an insurer take if an interest payment on a policy loan is not made on time?
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Which life insurance rider typically appears on a juvenile life insurance policy?
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Whose life is covered on a life insurance policy that contains a payor benefit clause?
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Which of the following Dividend options results in taxable income to the policyowner?
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Study Notes
Life Insurance Provisions and Policies
- Payor Provision: Waives premiums on juvenile life insurance if the adult payor dies or becomes disabled until the child reaches a specified age or policy maturity.
- 20-Pay Life Policy: Offers rapid cash value accumulation for individuals around 40 years old due to shorter premium payment periods.
- Credit Life Insurance: Typically linked with decreasing term coverage, matching the length of the loan.
- Universal Life: Features a cash value that fluctuates based on mortality costs, interest rates, and expense factors.
- Convertible Term Insurance: Starts as temporary coverage and allows transition to permanent coverage without evidence of insurability.
- Variable Life Policy: Investment account grows based on mutual funds, stocks, and bonds.
Types of Coverage
- Joint Life Policy: Protects against an unpaid mortgage balance upon the first insured's death, utilizing permanent insurance.
- Whole Life Insurance: Provides level premiums and matures at age 100.
- Survivorship Life Policy: Covers two individuals, paying benefits upon the second death.
- Modified Endowment Contract (MEC): Overfunded policies failing the 7-pay test, with tax implications.
Premium Payment and Policy Features
- Whole Life Premiums: Payable throughout the insured's lifetime, ensuring coverage until death.
- Limited Pay Life: Coverage for the insured's life with level premiums paid over a limited period.
- Automatic Premium Loan Provision: Keeps a whole life policy active by using accumulated cash value for premium payments if not paid.
Policy Loan and Dividends
- Policy Loans: Can be taken up to the guaranteed cash value, and unpaid interest is added to the loan balance.
- Dividend Options: Interest on dividends is taxed as ordinary income; insurance dividends themselves are not taxable.
Special Considerations
- ACCIDENTAL DEATH & DISMEMBERMENT (AD&D) Clause: Provides benefits for death or loss of limbs/eyes due to accidents.
- Guaranteed Insurability Option: Allows for additional whole life purchases without proving insurability, limited to specified amounts and times.
- Child Term Rider: Adds coverage for children under a parent's life insurance policy.
Other Notable Provisions
- Misstatement of Age Provision: Adjusts the death benefit if the insured's age is misrepresented on the application, typically during the contestable period.
- Renewable Term Policies: Guarantee renewal of term coverage at the insured's option upon expiration.
- Exclusions: Specific risks not covered by the insurance policy, explicitly stated in contract language.
Claims and Settlement
- Claims Denial for Suicide: Claims are denied under the suicide clause if the insured commits suicide during the contestable period.
- Face Amount Payment: The face amount of a whole life policy is paid at death or maturity, whichever occurs first.
- Settlement Options: Various methods for disbursing death proceeds, except for the "Interest Only" option, which does not involve liquidation.
These study notes summarize key concepts and provisions relating to life insurance, suitable for exam preparation or review.
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Description
Test your knowledge of life insurance concepts in Chapter 3. This quiz focuses on essential terms such as payor provision and other key elements of juvenile policies. Perfect for those studying for insurance licensing or related courses.
