Questions and Answers
What is variable universal life?
Self-directed investing always refers to variable.
What will the insurer deduct when M dies with an outstanding policy loan?
What kind of rider did S include on their Whole Life policy?
Which of the following provisions requires proof of insurability after a policy has lapsed?
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How much will the insurance company pay the beneficiary if K dies from an automobile accident?
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Which Dividend option results in taxable income to the policyowner?
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Which Nonforfeiture Option continues a build-up of cash value?
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In what scenario does a long-term care rider in a life insurance policy pay a benefit?
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All of the following statements are true regarding a policy's Grace period EXCEPT
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The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
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What will the beneficiary receive if the insured dies during the Grace Period?
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What benefit does the Payor clause on a Juvenile Life policy provide?
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How are surrender charges deducted in a life policy with a rear-end loaded provision?
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If J let her life insurance policy lapse 8 months ago due to nonpayment, under which provision can she reestablish coverage?
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When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
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How much will the insurer pay if T commits suicide five years later?
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Which provision would keep S's Whole Life policy in force if they do not make the required payment?
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Regarding the Misstatement of Age provision, which statement is true?
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What does the insuring agreement in a Life insurance contract establish?
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What does the ownership clause in a life insurance policy state?
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Which rider provides coverage for a child under a parent's life insurance policy?
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Additional coverage can be added to a Whole Life policy by adding a(n)
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What action can a policyowner take if an application for a bank loan requires collateral?
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If premiums are waived due to a disability for P, which statement is true?
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What action will the insurer take if M died without making the premium payment due January 1?
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How much will D's beneficiary receive due to the War Exclusion clause in the Whole Life policy?
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Which statement is correct regarding Whole Life policies for faster cash value accumulation?
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Study Notes
Life Insurance Policy Provisions
- Suicide Clause: Claims are denied if the insured commits suicide during the contestable period.
- Insuring Agreement: Specifies that a designated sum will be paid upon the insured's death.
- Policy Loan Interest: If interest on a policy loan is unpaid, it's added to the loan balance, maintaining the loan's status.
- Exclusion: Insurers refuse to cover certain risks, delineating what is not included in the policy.
Settlement and Dividend Options
- Settlement Options: Most options systematically liquidate death proceeds; "interest only" does not.
- Dividend Options: Paid-up additional insurance helps increase death benefits against inflation.
Insurer and Policyowner Rights
- Guaranteed Benefits: Insurers promise benefits as specified in the insuring clause; policyowners must adhere to the consideration clause regarding premiums.
- Policyowner Rights: Rights include surrendering cash value and assigning ownership; modifying contract provisions is not included.
Provisions Regarding Death and Disability
- Payment upon Death: Whole life policies pay either at the insured's death or at policy maturity.
- Payor Benefit Clause: Provides coverage on a child's policy if the parent becomes disabled.
- Accelerated Death Benefits: Coverage available for terminal illness, typically adjusting how benefits are received.
Misrepresentation and Claims
- Misstatement of Age: If discovered during the contestable period, the death benefit may be adjusted based on the actual age.
- Material Misrepresentations: Insurers may void a policy only if misrepresentation is material and discovered during the contestable period.
Nonforfeiture Options
- Nonforfeiture Provisions: Options include extended term and reduced paid-up insurance to maintain cash value without new premiums.
- Cash Surrender: Results in a payout equal to the cash value but relinquishes the policy.
Tax Implications
- Taxes on Dividends: Accumulated interest on dividends is taxable; dividends themselves are not.
Additional Riders and Options
- Term Rider: Offers excess coverage temporarily at low cost.
- Waiver of Premium: Relieves policyowners from premium payments if they become disabled.
Policy Ownership and Changes
- Ownership Transfer: Transfer does not alter existing beneficiary designations; beneficiaries retain rights unless changed by the policyowner.
- Collateral Assignment: Occurs when using the policy as collateral for a loan.
Key Clauses
- Entire Contract Provision: Ensures no terms can be changed without consent and documents outside the policy don't apply.
- Incontestable Clause: Limits the period during which insurers can contest a policy based on misrepresentation.
Overview of Policy Features
- Variable Life Insurance: Combines life insurance with investment options affecting cash values and premiums.
- Guaranteed Insurability: Allows purchase of additional coverage without proving insurability under specific conditions.
Claims Process and Benefits
- Claim Processing: Insurers follow stipulated procedures after death, including verification of premiums and loan statuses before disbursing benefits.
- Death Benefits in Accidental Cases: Whole Life policies generally still pay the death benefit in cases of accidental death even if premiums are due.
These notes provide crucial insights into various aspects of life insurance policy provisions, rights, and claims management, essential for understanding life insurance framework and its applications.### Critical and Terminal Illness
- Critical illness refers to severe medical conditions that may significantly impact life expectancy or quality of life.
- Terminal illness indicates a medical condition that cannot be cured and is likely to result in death within a specified time period.
Activities of Daily Living (ADLs)
- Inability to perform more than two ADLs may qualify as a critical illness, impacting insurance coverage and benefits.
Grace Period in Insurance Policy
- Grace period allows a policyholder to make overdue premium payments without losing coverage.
- Past due premiums are not waived; full coverage continues during this period, but the policy terms apply.
Accidental Death and Dismemberment (AD&D) Provisions
- AD&D pays out additional benefits for injuries resulting from accidents, not from natural causes or illnesses.
- Being blinded in an accident triggers these additional benefits under the AD&D rider.
Life Insurance Death Benefits during Grace Period
- If the insured passes away during the Grace Period, beneficiaries receive the full face amount minus any overdue premiums.
Payor Clause in Juvenile Life Insurance
- The Payor clause waives premiums if the policyholder (payor) becomes disabled, ensuring coverage for the juvenile insured.
Surrender Charges
- Surrender charges are deducted when the policy is discontinued, impacting the cash value and death benefit of the policy.
Reinstatement of Lapsed Policy
- A lapsed life insurance policy can be reinstated through the reinstatement provision, allowing the insured to regain coverage.
Guaranteed Insurability Rider
- This rider permits the insured to purchase additional coverage at specified future dates without evidence of insurability, facilitating easier policy adjustments.
Suicide Clause in Life Insurance
- If an insured commits suicide after the exclusion period (1-2 years), the insurer pays the face amount of the policy.
Automatic Policy Loan Provision
- This provision prevents lapse of the policy due to nonpayment by using cash value to cover premiums automatically.
Misstatement of Age Provision
- If age is misrepresented, coverage is adjusted based on the insured's correct age, impacting benefits accordingly.
Insuring Agreement in Life Insurance
- The insuring agreement establishes the insurer's basic promise to provide coverage as outlined in the policy.
Ownership Clause
- The ownership clause defines who the policyowner is and the rights associated with ownership, impacting control over the policy.
Child Term Rider
- This rider extends coverage to children under a parent's life insurance policy, offering additional financial protection for the family.
Additional Coverage Options
- A decreasing term rider can be added to a Whole Life policy to provide extra coverage, adjusting over time as needed.
Collateral for Bank Loan
- Policyowners may assign ownership of their life insurance policy to a bank as collateral for a loan, securing the financial transaction.
Disability and Premium Waivers
- In the event of a disability, waived premiums do not affect the insured's ability to receive declared dividends from participating policies.
Death Claim Procedures
- If a premium is unpaid at the time of the insured's death, the insurer will pay the face amount minus any outstanding premiums.
War Exclusion Clause
- Life insurance policies often contain exclusions for death caused by activities like military service, though full benefits may still apply under certain conditions.
Whole Life Policy and Cash Value Accumulation
- A 20-Pay Life policy accumulates cash value faster in the early years compared to a Standard Straight Life policy, enhancing early financial benefits.
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Description
Explore key provisions and options in life insurance policies, including suicide clauses, settlement options, and policyowner rights. This quiz covers essential aspects that affect both insurers and policyowners, helping to clarify the complexities of life insurance agreements.
