Life Insurance Policy Provisions
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Questions and Answers

What does the mode of premium payment refer to?

  • The amount of the payment
  • The duration of the policy
  • The frequency of the payment (correct)
  • The method of payment (cash, check)

    • To reinstate a lapsed policy, the insured must do all of the following EXCEPT?

    Sign a notice to the applicant regarding replacement

    Which of the following is a required provision in all individual life insurance policies?

    Reinstatement

    Who designates the beneficiary of a life insurance policy?

    <p>The policy owner</p> Signup and view all the answers

    All of the following are life insurance policy provisions EXCEPT?

    <p>Notice of claim</p> Signup and view all the answers

    The payment of claims provisions states that the insurer will pay the death benefit within how many days after receiving notification of the claim?

    <p>60 days</p> Signup and view all the answers

    What is a written request for a change to be made on a policy called?

    <p>An endorsement</p> Signup and view all the answers

    Which of the following is NOT required in order to reinstate a lapsed permanent life policy?

    <p>Submit an application for reinstatement within 4 years of the lapse</p> Signup and view all the answers

    What is NOT a condition of reinstatement for a lapsed policy?

    <p>Assignment of a new beneficiary</p> Signup and view all the answers

    How much would each child receive if Peggy takes out a $50,000 10-year term policy?

    <p>$25,000</p> Signup and view all the answers

    Which statement pertaining to reinstatement of a life insurance policy is CORRECT?

    <p>A new contestability period is renewed with a reinstated policy</p> Signup and view all the answers

    Which is NOT a life insurance policy provision?

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

    An individual life insurance policy must include all of the following EXCEPT?

    <p>A table showing the annual loan values of the policy for at least 30 years</p> Signup and view all the answers

    What is stated in the consideration clause of a life insurance policy?

    <p>The amount and frequency of premium payments</p> Signup and view all the answers

    Which provision of a life insurance policy states that no statement shall void this policy unless contained in the application?

    <p>Entire contract clause</p> Signup and view all the answers

    What is the purpose of the common disaster provision?

    <p>Protect the interests of the contingent beneficiary</p> Signup and view all the answers

    What is the best reason for designating a trust as a life insurance policy beneficiary?

    <p>Make it possible to manage the policy proceeds for the long-term benefit of an individual or organization</p> Signup and view all the answers

    How are the proceeds from a life insurance policy treated in relation to the debts of the beneficiary?

    <p>It can be subject to the beneficiary's debts and creditors</p> Signup and view all the answers

    Which statement regarding reinstatement of a life insurance policy is NOT correct?

    <p>A suicide exclusion period is renewed with a reinstated policy</p> Signup and view all the answers

    Which statement regarding the insuring clause in a life insurance policy is NOT correct?

    <p>It specifies the length of the grace period</p> Signup and view all the answers

    What will happen if Vivian commits suicide 4 years after taking out her life insurance policy?

    <p>The company has definite proof of the cause of her death, so it can refuse to pay the death benefit</p> Signup and view all the answers

    Which statement regarding the grace period for life insurance is NOT correct?

    <p>It is usually shorter than 30 days</p> Signup and view all the answers

    Under a common disaster clause in a life insurance policy, it is assumed that?

    <p>The insured died last, unless the primary beneficiary lives beyond a stipulated period</p> Signup and view all the answers

    All of the following are required provisions in life insurance policies EXCEPT?

    <p>A replacement provision</p> Signup and view all the answers

    Which life insurance policy provision refers to the prompt payment of the death benefit?

    <p>Payment of claims</p> Signup and view all the answers

    Which section of a life insurance policy specifies conditions under which the insured is NOT covered?

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

    Which of the following policy owner rights relates directly to the cash value of permanent insurance?

    <p>Right to take a policy loan</p> Signup and view all the answers

    All of the following statements regarding the insuring agreement are true EXCEPT?

    <p>The agent or producer must sign the clause</p> Signup and view all the answers

    What is the transfer of ownership rights known as when Tina's grandparents purchase a life insurance for her?

    <p>An absolute assignment</p> Signup and view all the answers

    The incontestability period is usually?

    <p>The same for both individual and group life insurance policies</p> Signup and view all the answers

    Which of the following statements regarding the insuring clause is NOT correct?

    <p>It is usually signed by the insured</p> Signup and view all the answers

    Study Notes

    Life Insurance Policy Provisions

    • Mode of Premium Payment: Refers to the frequency of premium payments, which can be monthly, quarterly, semi-annually, or annually.

    • Reinstating a Lapsed Policy: The insured must provide a written application, evidence of insurability if needed, and pay all overdue premiums plus interest. The selling agent is only required to sign a Notice to the Applicant Regarding Replacement in a replacement transaction.

    • Reinstatement Provision Requirement: All individual life insurance policies must include reinstatement provisions, allowing policies to be reinstated within 3 years after default, under specific conditions.

    • Designating the Beneficiary: The policy owner has the right to designate and change the beneficiary for policy proceeds.

    • Policy Provisions: "Notice of claim" is associated with health insurance, not life insurance.

    • Payment of Claims: Life insurance death benefits must be paid within 60 days of notice of a claim, with interest on claims delayed beyond this period.

    • Endorsement: A written request for changes to a policy is termed an endorsement or modification, needing acceptance from the insurer.

    • Application for Reinstatement: Insurers may request reinstatement applications within 3 years, rather than the commonly assumed 4 years.

    • Conditions for Reinstatement: Conditions include submitting an application, paying overdue premiums and debts, and possibly a medical exam—assigning a new beneficiary is not required.

    • Insurance Benefits Division: In case of Peggy's term policy, each child would receive $25,000 if she died during the policy term.

    • Contestability Period: Reinstating a policy resets the contestability period to 2 years, and premiums remain unchanged from before the lapse.

    • Policy Provisions Exclusion: "Cancellation" is specific to health insurance policies, whereas consideration, reinstatement, and endorsements are life insurance provisions.

    • Annual Loan Values Table: Policies must include a loan values table for at least 20 years, excluding tables for more than 30 years.

    • Consideration Clause: Specifies the amount and frequency of premium payments required to keep the insurance active.

    • Entire Contract Clause: States that the policy, application, and any riders constitute the entire contract, with no outside documents referenced.

    • Common Disaster Provision: Ensures contingent beneficiaries receive proceeds if both the insured and primary beneficiary die in a common disaster, requiring the primary beneficiary to outlive the insured for benefits.

    • Trust as Beneficiary: Naming a trust as a beneficiary allows management of proceeds for long-term benefit, with no unique tax advantages when compared to individual beneficiaries.

    • Debt and Proceeds: A lump-sum payment from life insurance proceeds can be subject to the beneficiary's debts, whereas installment payments are protected from creditors during the trust period.

    • Suicide Exclusion Clause: No new exclusion period applies upon reinstatement; death benefits are payable after a policy has been active for 2 years.

    • Grace Period: Typically lasts 30 days, allowing for premium payment after the due date, not shorter.

    • Assumptions Under Common Disaster Clause: Assumes the insured died last unless the primary beneficiary survives a specified time post-insured's death.

    • Replacement Provision: This is not a mandatory provision in life insurance policies.

    • Claims Payment Requirement: The insurer is obligated to process death benefits promptly, usually within 60 days.

    • Exclusions Section: States the conditions under which the insured is not covered by the policy.

    • Cash Value Accumulation: Policy owners can take loans based on the cash value of permanent insurance policies.

    • Insuring Clause Signatory: An insuring agreement is typically signed by an authorized officer, not an agent.

    • Absolute Assignment: Refers to the permanent transfer of ownership rights to another individual.

    • Incontestability Period Standard: Generally set at 2 years for both individual and group life insurance policies.

    • Insuring Clause Signature: Usually signed by an authorized officer of the insurance company, not by the insured.

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    Description

    Test your knowledge on the various provisions of life insurance policies. This quiz covers key aspects such as premium payment modes, reinstating lapsed policies, and beneficiary designations. Evaluate your understanding of how these provisions work in real life to better navigate insurance options.

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