Questions and Answers
What does the free-look provision give the policyowner?
The right to return the policy for a full refund within a specified number of days.
Which dividend option would the insurer invest the policyowner's money and add any interest earning as the dividends accrue?
What will be payable to Matt's beneficiary if Matt dies instantly from a car accident with a double indemnity rider?
Double indemnity benefit.
A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT:
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What is the term for a whole life policy option where extended term insurance is selected?
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Which military service exclusion clause would pay upon Kurt's death if he was an active-duty serviceman killed while on leave?
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What allows a policyowner to withdraw a policy's cash value interest free?
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What is a reinstatement condition in life insurance?
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What will be the death benefit amount if James's age was misstated on the life insurance application?
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Which are considered nonforfeiture options available to a policyowner EXCEPT:
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Which are standard exclusions found in a life insurance policy EXCEPT:
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What right does a life insurance policyowner NOT have?
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Which of these are common exclusions to a life insurance policy EXCEPT:
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If an insured and the beneficiary die from the same accident, what does the common disaster provision state?
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What must the insured provide to activate the reinstatement clause of a lapsed life insurance policy?
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In which area do errors commonly occur on life insurance applications and for which the incontestable clause does NOT apply?
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What is the term used when ownership of a life insurance policy is temporarily transferred?
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How are loans obtained by a policyowner against the cash value of a life insurance policy treated?
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What is a provision that allows a policyowner to temporarily give up ownership rights to secure a loan?
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What is a life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability?
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What dividend option allows a policyowner to use dividends to pay all or part of the next premium due?
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What allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type?
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What does the cash value of a whole life insurance policy become?
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Which of these is NOT considered to be a common life insurance nonforfeiture option?
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What limits a company's liability to provide insurance coverage?
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What period allows an insurer to accept a late premium and continue coverage?
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Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?
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Which of these is NOT a characteristic of the Accelerated Death Benefit option?
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What protects a policyowner from a misrepresentation caused by an innocent mistake?
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What type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
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Which rider would pay a monthly amount due to total and permanent disability?
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What is an insurance policy's grace period?
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If Ron has a life insurance policy worth $100,000.00 and the consumer price index increases by 4%, how much may he increase the face value of the policy?
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Life insurance policies will normally pay for losses arising from what?
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Which of the following is considered an alternative to a life settlement?
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What is true about a 20-pay life policy with a paid-up dividend option owned by Pat?
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Which of these dividend options is taxable?
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What is an insurer required to do when faced with a misstatement of age?
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Study Notes
Life Insurance Provisions and Riders
- Free-look provision allows policyowners to return the policy for a full refund within a specified number of days.
- Accumulation at interest option invests policyowner's money, adding interest to dividends.
- Double indemnity rider pays a benefit to the beneficiary if the insured dies instantly from a car accident.
- Coverage restrictions may apply in certain situations, allowing coverage for fare-paying passengers.
- Nonforfeiture options allow policy surrender for a reduced paid-up policy, using cash value.
Military Service and Exclusions
- The "results clause" in military exclusions states that insurers are excused from paying benefits only if death is war-related.
- Common exclusions include hazardous occupations, aviation, and war, with disability as an exception.
Policyowner Rights and Benefits
- Policyowners cannot revoke an absolute assignment.
- In case of a common disaster where the insured and beneficiary die simultaneously, the insurer assumes the insured outlived the beneficiary.
- To activate a reinstatement clause for a lapsed policy, evidence of insurability is required from the insured.
Application Errors and Assignments
- Errors on life insurance applications commonly occur in stating age; the incontestable clause does not apply here.
- Collateral assignment allows temporary transfer of policy ownership to secure a loan.
Tax Implications and Payments
- Loans against a life insurance policy's cash value are not treated as taxable income.
- Payments during the grace period ensure coverage remains in force despite a late premium payment.
Nonforfeiture and Dividend Options
- Nonforfeiture provisions include cash surrender, extended term insurance, and reduced paid-up options.
- Reduction of premium dividend option allows dividends to pay part or all of the next premium due.
- Accelerated death benefit options can be offered at no additional cost, unlike other riders which might require extra payment.
Special Riders and Adjustments
- Payor benefit rider waives the premium on a child’s policy if the premium-payer dies.
- Disability Income Rider pays a monthly amount if the insured becomes totally and permanently disabled.
- Cost of living rider allows an increase in policy face value based on CPI adjustments.
Miscellaneous Provisions
- Grace period is the time after a premium is due when the policy remains active.
- Accumulation at interest dividend options are taxable, unlike other nonforfeiture options, which generally aren't.
- Insurers are required to adjust benefits to age-corrected amounts under the Misstatement of Age provision.
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Description
Test your knowledge on life insurance provisions, riders, and policyowner rights with this comprehensive quiz. Explore topics ranging from the free-look provision to military service exclusions and understand how they affect policy benefits. Perfect for those studying insurance principles!
