Life Provisions Chapter 2 Exam

Questions and Answers

This person's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. What is this rider called?

Term Rider

Accidental Death Benefit Rider

Waiver of Premium Rider

Guaranteed Insurability Rider (correct)

If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?

A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age.

A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n):

Accidental Death Benefit Rider

Term Rider

Guaranteed Insurability Rider (correct)

Convertible Term Rider

Loans obtained by a policyowner against the cash value of a life insurance policy are treated as taxable income.

False Signup and view all the answers

What is NOT a valid policy dividend option for a life insurance policyowner?

Accumulate without interest Signup and view all the answers

What is TRUE regarding the death benefit amount if a person's age was misstated on the application?

The death benefit paid will be what the premium would have been if purchased at the correct age. Signup and view all the answers

A Guaranteed Issue Insurance policy has no medical underwriting.

True Signup and view all the answers

What does it mean if a policy has a paid-up dividend option?

The policy may be paid up early by using policy dividends. Signup and view all the answers

What is a whole life policy option where extended term insurance is selected called?

Nonforfeiture Option Signup and view all the answers

What is an insurer required to do when faced with an error made under the Misstatement of Age provision?

Pay age-corrected benefits Signup and view all the answers

What is NOT a standard exclusion found in a life insurance policy?

Disability Signup and view all the answers

What dividend option is taxable?

Accumulation of Interest Signup and view all the answers

The double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n):

Accident Signup and view all the answers

What applies when the policyowner's death occurs due to an accident?

Life Insurance Policy's Double Indemnity Provision Signup and view all the answers

What is TRUE about borrowing against the cash value of a $100,000 whole life policy with an accumulated $25,000 of cash value?

Net death benefit will be reduced if the loan is not repaid. Signup and view all the answers

Which situation accurately describes a reduced paid-up nonforfeiture option?

Policy has decreased face amount Signup and view all the answers

The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of:

Past due premiums that have not been paid by the end of the grace period Signup and view all the answers

Ownership of a life insurance policy may be temporarily transferred with a(n):

Collateral Assignment Signup and view all the answers

In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST:

Provide evidence of insurability to the insurer Signup and view all the answers

What is NOT considered to be a common life insurance nonforfeiture option?

Life Income Annuity Signup and view all the answers

What is the name of the provision which states that a copy of the application must be attached to the policy when issued?

Entire Contract Signup and view all the answers

A life insurance policyowner injured in an automobile accident which results in a total and permanent disability would be covered by which rider?

Disability Income Rider Signup and view all the answers

What is the purpose of having an accelerated death benefit on a life insurance policy?

It allows for cash advantages to be paid against the death benefit if the insured becomes terminally ill. Signup and view all the answers

A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n):

Payor Rider Signup and view all the answers

A double indemnity benefit will be payable to the beneficiary if the insured dies instantly from a car accident.

True Signup and view all the answers

If an insured dies during the grace period with no premiums paid, what happens?

The policy would be payable, minus the premium amount. Signup and view all the answers

What is NOT part of an insurance contract?

Certificate of Authority Signup and view all the answers

Study Notes

Life Insurance Concepts

A Guaranteed Insurability Rider allows policyholders to purchase additional insurance without proof of insurability at certain times.
If an insured's age is misstated, the insurer pays a prorated death benefit based on what premiums would have been had the correct age been stated.
Loans taken against a life insurance policy's cash value are not taxable income.

Policy Dividends and Options

A common invalid policy dividend option is to accumulate without interest.
A 20-Pay Life policy with a paid-up dividend option can be fully paid up early using dividends.
Nonforfeiture Options include selecting extended term insurance for whole life policies.

Provisions and Riders

The Double Indemnity Provision applies in cases where death is caused by an accident, leading to increased benefits.
The automatic premium loan provision allows an insurer to use cash value to cover unpaid premiums.
Collateral Assignment enables temporary transfer of policy ownership.

Reinstatement and Nonforfeiture

Reinstating a lapsed policy requires the insured to provide evidence of insurability.
Common nonforfeiture options do not include a Life Income Annuity.
The Entire Contract provision mandates that the application be attached to the policy when issued.

Disability and Accelerated Benefits

The Disability Income Rider provides monthly benefits to an insured who becomes totally and permanently disabled.
An accelerated death benefit can be accessed if the insured is terminally ill, allowing cash payments against the death benefit.

Loans and Benefits

A loan against a whole life policy decreases the net death benefit if not repaid.
If an insured passes away during the grace period with unpaid premiums, the benefit payable will be the policy amount minus dues.
The Payor Rider ensures premiums on a juvenile policy are paid until the child reaches a specific age.

Exclusions and Miscellaneous

Standard exclusions in life insurance policies do not typically include disability.
Accumulated interest from dividends is taxable.
A double indemnity benefit is applicable when an insured dies instantly from an accident, ensuring extra protection for beneficiaries.

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