Life Insurance Provisions and Riders

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Questions and Answers

What does the term 'double indemnity' mean?

The insurer will pay a benefit of twice the face amount

To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

A copy of the original insurance application

Who does the common disaster clause protect?

The contingent beneficiary

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatement on the application after a certain period of time?

Incontestability Signup and view all the answers

What dividend option is automatically selected by the company if not chosen by the policyowner?

Paid-up additions Signup and view all the answers

What is the purpose of a free-look period?

To allow the insured to return the policy with a full refund Signup and view all the answers

What is consideration on the part of the insurer?

A promise to pay policy benefits Signup and view all the answers

What type of beneficiary can be changed at any point by the policyowner?

Revocable Signup and view all the answers

Who controls changes in premium payments, face values, and loans in a life insurance policy?

Policyowner Signup and view all the answers

Statements on the application made by an applicant for a life insurance policy are known as what?

Representations Signup and view all the answers

Who has the right to cash value of a life insurance policy?

Policyowner Signup and view all the answers

What is the disadvantage of selecting the life income settlement option?

If the beneficiary dies shortly after the payments begin, the balance of the principal will be forfeited. Signup and view all the answers

What are the dividend options in life insurance policies?

Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term, and acceleration of endowment Signup and view all the answers

What are the most common exclusions in life insurance policies?

War and military service, hazardous occupation, and aviation Signup and view all the answers

What dividend option can increase the death benefit of the existing life policy?

Paid-up additions Signup and view all the answers

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Extended term Signup and view all the answers

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Primary beneficiary Signup and view all the answers

What nonforfeiture option provides coverage for the longest period of time?

Reducer paid-up Signup and view all the answers

When would a misrepresentation be considered material?

When it may alter the underwriting decision Signup and view all the answers

With the reduction of premium dividend option, how is the dividend used?

The dividend is applied to the next year's premium (it reduces the next year's premium) Signup and view all the answers

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Cash surrender Signup and view all the answers

What provision in a life insurance policy extends coverage beyond the premium due date?

Grace period Signup and view all the answers

What is the name for the life insurance policy rider that provides coverage on the insured's family members?

Other-insured rider Signup and view all the answers

Is the beneficiary required to have insurable interest in the insured?

False Signup and view all the answers

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

The death benefit will be adjusted to the amount that the insured could obtain for her correct age. Signup and view all the answers

What are representations on life insurance applications?

Statements made by the applicant that are true to the best of the applicant's knowledge Signup and view all the answers

With the interest only settlement option, what happens to the policy's death benefit?

Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary Signup and view all the answers

What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?

Settlement options Signup and view all the answers

If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?

Lump-sum payment Signup and view all the answers

Study Notes

Life Insurance Policy Provisions, Options, and Riders

Double Indemnity: Insurer pays twice the face amount of the policy in certain circumstances.
Entire Contract Provision: Insurance policy must include a copy of the original application to be valid as a whole.
Common Disaster Clause: Provides protection for the contingent beneficiary if the insured and primary beneficiary die in a common event.
Incontestability Provision: Limits the insurer’s ability to contest a claim due to misstatements after a specified period.
Dividend Option Default: If not chosen by the policyowner, the company automatically selects paid-up additions as the default option.
Free-Look Period: Allows the insured to return the policy for a full refund within a specified period after purchase.
Insurer's Consideration: Defined as the insurer’s promise to pay benefits upon a covered event.
Revocable Beneficiary: Policyowner can change this type of beneficiary at any time.
Policy Control: The policyowner has authority over changes to premiums, face values, and loans.
Representations: Statements made by an applicant that are believed to be true at the time of application.
Cash Value Access: The policyowner is entitled to access the cash value of the life insurance policy.
Life Income Settlement Option Disadvantage: If the beneficiary dies shortly after payments begin, the remaining balance is forfeited.
Available Dividend Options: Include cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term, and acceleration of endowment.
Common Exclusions: Typical exclusions involve war, hazardous occupations, and aviation-related risks.
Paid-Up Additions: This dividend option can be used to increase the death benefit of an existing policy.
Default Nonforfeiture Option: If no choice is made, the insurer selects extended term as the default option.
Primary Beneficiary: This designation has first claim to the policy’s death proceeds.
Reducer Paid-Up Option: Provides coverage for the longest duration when compared to other nonforfeiture options.
Material Misrepresentation: Considered material if it could alter the insurer’s underwriting decision.
Reduction of Premium Dividend Use: The dividend reduces the policy’s upcoming premium payment for the following year.
Cash Surrender Option: The company provides the policy's surrender value and relinquishes all further obligations.
Grace Period Provision: Extends coverage beyond the due date for premium payments.
Other-Insured Rider: Covers insured's family members under the same insurance policy.
Beneficiary Insurable Interest: No requirement for the beneficiary to have insurable interest in the insured.
Misstatement of Age Impact: Death benefit is adjusted to reflect what would have been obtained had the correct age been stated.
Applicant Representations: Statements are made truthfully to the applicant’s knowledge during application.
Interest Only Settlement Option: Death benefit proceeds are held by the insurance company; only interest earned is paid to the beneficiary.
Settlement Options Definition: Methods for disbursing death benefits to the beneficiary upon the insured's death.
Default Settlement Option: If no option is chosen by the policyowner or beneficiary, the insurer pays a lump-sum amount.

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Test your knowledge of life insurance policy provisions, options, and riders with these flashcards. Understand terms like 'double indemnity' and explore important clauses such as the common disaster clause. Perfect for anyone studying insurance concepts.