Life Insurance Provisions Flashcards
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Questions and Answers

What is a reinstatement provision?

A lapsed policy may be reinstated within 3 years by paying back premiums, with interest, and proving insurability.

What will the insurer do if the insured commits suicide one year after his life insurance policy was issued?

  • Pay the full death benefit
  • Deny the claim
  • Pay half of the premiums
  • Refund the premiums paid (correct)

    • What settlement option should a beneficiary select for guaranteed benefits for 10 years?

    Fixed period/period certain

    What is a revocable beneficiary?

    <p>A policy owner may change the designation at any time without beneficiary consent.</p> Signup and view all the answers

    The ownership provisions entitle the policyowner to do all of the following EXCEPT:

    <p>Set premium rates</p> Signup and view all the answers

    A single life settlement option provides income that the beneficiary cannot outlive.

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

    Which document may contribute to proof of death for the purposes of insurance benefits payment?

    <p>Death certificate</p> Signup and view all the answers

    The two types of assignments are:

    <p>Absolute and collateral</p> Signup and view all the answers

    The return of premium rider pays the beneficiary face amount and premium paid amount.

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

    Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

    <p>Cash surrender</p> Signup and view all the answers

    The mandatory free look period in a life insurance policy commences when the policy is delivered.

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

    What type of policy does an insured likely have if she withdraws a portion of the policy's cash value with limits and fees?

    <p>Universal life</p> Signup and view all the answers

    The paid-up addition option uses the dividend to purchase what?

    <p>A smaller amount of the same type of insurance</p> Signup and view all the answers

    If the insured continually uses the automatic premium loan option, the policy will terminate when the cash value is reduced to nothing.

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

    If the primary beneficiary predeceases the insured, the death benefit proceeds will be paid to whom?

    <p>The contingent beneficiary</p> Signup and view all the answers

    Which entity determines the amount of accelerated death benefits that will be paid to an insured?

    <p>The insurer</p> Signup and view all the answers

    A children's rider added to a permanent life insurance policy provides TERM coverage that is convertible to permanent insurance.

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

    Irrevocable beneficiaries can be changed without the written consent of that beneficiary.

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

    What is the waiting period on a Waiver of Premium rider in life insurance policies?

    <p>6 months</p> Signup and view all the answers

    What will the company do if an insured is found to have overstated his age at the time of application?

    <p>Pay a reduced death benefit</p> Signup and view all the answers

    During partial withdrawal from a universal life policy, which portion will be taxed?

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

    When should the insurer pay the policy benefit upon submission of a death claim?

    <p>Immediately after receiving written proof of loss</p> Signup and view all the answers

    Which option allows the insurer to relieve a minor insured from premium payments if the payor becomes disabled or dies?

    <p>Payor benefit</p> Signup and view all the answers

    The premium on the children's rider in a life insurance policy remains the same, no matter how many children are added.

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

    Under what circumstances can a contingent beneficiary collect the death benefit?

    <p>If the primary beneficiary predeceases the insured</p> Signup and view all the answers

    What is the least amount of the original death benefit that a beneficiary would receive after the insured's death if they accepted accelerated death benefits?

    <p>0%</p> Signup and view all the answers

    The interest earned on policy dividends is non-taxable.

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

    What clause describes the method of paying the death benefit if the insured and the beneficiary are both killed in the same accident?

    <p>Common disaster clause</p> Signup and view all the answers

    When is the automatic premium loan provision activated?

    <p>At the end of the grace period</p> Signup and view all the answers

    Which of the following are true statements regarding the accumulation at interest option?

    <p>Annual dividend is retained by the company</p> Signup and view all the answers

    The guaranteed insurability rider is available to all insureds with no additional premium.

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

    The provision stating that both the policy and the application form the contract with the insurer is called what?

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

    What provision extends coverage beyond the premium due date?

    <p>Grace period</p> Signup and view all the answers

    What will the insurer do if the insured overstates their age on the application?

    <p>Pay the death benefit based on the correct age's premium</p> Signup and view all the answers

    What is the purpose of a fixed-period settlement option?

    <p>To provide a guaranteed income for a certain amount of time</p> Signup and view all the answers

    What does the incontestability clause do?

    <p>Prevents an insurer from denying a claim due to false statements after the policy is in force for 2 years.</p> Signup and view all the answers

    Most insurers limit the amount of the death benefit paid to what percentage when the Accelerated Death Benefit Rider is used?

    <p>50%</p> Signup and view all the answers

    What is the benefit of choosing extended term as a nonforfeiture option?

    <p>It has the highest amount of insurance protection</p> Signup and view all the answers

    The Waiver of Cost Insurance rider is found in whole life policies.

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

    What is the dividend option that increases the death benefit using policy dividends called?

    <p>Paid-up addition</p> Signup and view all the answers

    Which rider does NOT cause the death benefit to increase?

    <p>Payor Benefit Rider</p> Signup and view all the answers

    Which of the following explains the policyowner's right to change beneficiaries?

    <p>Owner's rights</p> Signup and view all the answers

    What will the insurance producer say regarding naming two beneficiaries for a life insurance policy?

    <p>The policy owner can specify how proceeds are split in the policy.</p> Signup and view all the answers

    What is an absolute assignment?

    <p>Transfer of all ownership rights in a policy</p> Signup and view all the answers

    Children's riders attached to whole life policies are usually issued as what type of insurance?

    <p>Term insurance</p> Signup and view all the answers

    What term describes an arrangement where an insured receives an annual life insurance dividend check?

    <p>Cash option</p> Signup and view all the answers

    When a policyholder designates a group of individuals as the beneficiary, this is called what?

    <p>Class designation</p> Signup and view all the answers

    If a policyowner uses dividends to help pay for premiums, what option would this be?

    <p>Reduction of premium</p> Signup and view all the answers

    What does joint and 2/3 survivor settlement option mean for beneficiaries?

    <p>The surviving beneficiary will continue receiving 2/3 of the benefit amount.</p> Signup and view all the answers

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

    <p>Reduced paid-up</p> Signup and view all the answers

    What provision prevents the beneficiary from changing or borrowing from planned installments?

    <p>Spendthrift provision</p> Signup and view all the answers

    What proof of insurability is required when a child is converting their Children's Term rider coverage?

    <p>None</p> Signup and view all the answers

    Suicide is covered under a life insurance policy after a specific period of years.

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

    Which method to designate a beneficiary means 'by the head'?

    <p>Per capita</p> Signup and view all the answers

    Which kind of policy allows withdrawals or partial surrenders?

    <p>Universal life</p> Signup and view all the answers

    What rider provides coverage on the insured's family members?

    <p>Other-insured rider</p> Signup and view all the answers

    Under an extended term nonforfeiture option, the policy cash value is converted to what?

    <p>The same face amount as in the whole life policy</p> Signup and view all the answers

    The accidental death rider will pay two or three times the face amount if the insured dies due to an accident.

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

    All of the following are beneficiary designations EXCEPT:

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

    Warranties in a life insurance policy are guaranteed to be true.

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

    Which rider allows customization for temporary insurance on the insured or family members?

    <p>Term rider</p> Signup and view all the answers

    The spendthrift clause protects policy proceeds from creditors of the beneficiary.

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

    What will a beneficiary receive from a policy without a war clause if the insured is killed during wartime?

    <p>The full death benefit</p> Signup and view all the answers

    When a life insurance policy is canceled with the extended term nonforfeiture option, the cash value will be used to purchase what?

    <p>Term insurance equal to the original policy's face amount</p> Signup and view all the answers

    When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to purchase what?

    <p>A single premium policy for reduced face amount</p> Signup and view all the answers

    What policy provision allows reactivation of a lapsed life insurance policy?

    <p>Proof of insurability within a certain period</p> Signup and view all the answers

    Study Notes

    Life Insurance Policy Provisions, Options, and Riders

    • Ownership Provisions: The policyowner has various rights except for setting premium rates, which are determined by the insurer based on underwriting criteria.

    • Single Life Settlement Option: This option guarantees lifetime income to a beneficiary, ceasing payments upon their death.

    • Proof of Death: A death certificate serves as a key document for proving death to claim insurance benefits.

    • Types of Assignments: Assignments can be absolute (entire policy transferred) or collateral (part or all of the benefits assigned).

    • Return of Premium Rider: Provides a death benefit plus a refund of the premiums paid, contingent on death occurring before a specified age.

    • Cash Surrender Option: This option allows policy owners to receive surrender value, ending all obligations from the insurer immediately upon payment.

    • Free Look Provision: This mandatory feature enables policyholders to examine their policy upon delivery, beginning the moment they receive it.

    • Universal Life Policy: This type of policy allows limited withdrawals from the cash value, but typically incurs fees and limitations.

    • Paid-Up Addition Option: Uses dividends to purchase additional, smaller amounts of the same insurance type, enhancing overall coverage.

    • Automatic Premium Loan: Utilizing this option can lead to policy termination when cash value is fully depleted.

    • Contingent Beneficiary: In cases where a primary beneficiary dies before the insured, the contingent beneficiary receives the death benefit.

    • Accelerated Death Benefits: The insurer determines the amount that can be paid out to the insured in advance of death benefits, often capping it at 100%.

    • Children's Rider: This provision offers term coverage convertible to permanent insurance, activated before the child reaches a defined age.

    • Irrevocable Beneficiaries: Their designation can only be changed with their written consent, ensuring their protection.

    • Waiting Period for Waiver of Premium Rider: Typically six months, this period must lapse post-disability before premiums are waived.

    • Incontestability Clause: After two years, insurers cannot contest statements made during application, except related to age, sex, or identity.

    • Tax Implications on Withdrawals: Only interest is subject to taxation during partial withdrawals from a universal life policy.

    • Death Claim Payment: Insurers are obligated to pay benefits immediately upon receiving written proof of loss.

    • Payor Benefit Rider: Enables premium waivers for a minor if the payor becomes disabled or dies.

    • Children's Rider Premiums: Remain consistent regardless of how many children are added to the policy.

    • Beneficiary Designation: A child's eligibility to collect benefits depends on the status of the primary beneficiary.

    • Accelerated Death Benefit Consequences: Accepting these benefits could reduce the death benefit received by the beneficiary to as low as 0%.

    • Dividends Taxability: The interest earned on policy dividends is subject to tax as they are regarded as returns on previously taxed premiums.

    • Common Disaster Clause: Specifies the procedure for death benefits if both the insured and beneficiary perish in the same accident.

    • Grace Period Provision: Mandates coverage after premiums are past due for a specified duration.

    • Lapses and Surrender Introduction: If a policy lapses or is surrendered before maturity, the cash value aids in a smaller face amount policy purchase.

    • Fixed-Period Settlement Option: Guarantees a defined income for a specified duration.

    • Incontestability and False Statements: This clause protects insurers from denying claims attributed to misrepresentations after two years.

    • Limited Accelerated Death Benefits: Insurers typically restrict pre-death benefit payments to around 50% of the total death benefit.

    • Extended Term Nonforfeiture Option: Converts cash value into term insurance with equivalent face amounts for as long as the cash will sustain.

    • Waiver of Cost Insurance Rider: Found in universal life policies, allowing premium waivers under specific circumstances of disability.

    • Paid-up Addition Strategy: Dividends can serve as single premiums to procure additional coverage based on the insured's age.

    • Beneficiary Rights: The spendthrift provision restricts beneficiary abilities regarding claims and changes to payment distributions.

    • Children’s Term Rider Conversions: When dependent age limits are reached, coverage can convert without needing proof of insurability.

    • Suicide Clause Applicability: Limits liability to premium refunds if suicide occurs within two years of policy issuance.

    • Fixed Period Option Selection: Guarantees benefit payments over a set time frame, regardless of the beneficiary's survival.

    • Revocable vs. Irrevocable Designations: Policyowners can alter revocable beneficiaries at will, while irrevocable changes require consent.

    • Class Designation for Beneficiaries: Allows policyowners to name groups of individuals rather than specifying each one.

    • Other-Insured Rider: Provides coverage for family members, typically in term insurance form that can transition to permanent coverage.

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    Test your knowledge on life insurance policy provisions, options, and riders with these flashcards. Each card highlights key concepts and definitions related to ownership provisions and settlement options. Perfect for students and professionals looking to reinforce their understanding of insurance fundamentals.

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