Podcast
Questions and Answers
Which statement is true regarding policy dividends?
Which statement is true regarding policy dividends?
- Dividends are optional and can be ignored
- Dividends are used to increase the premium
- A dividend option is selected by the insured at the time of policy purchase (correct)
- Dividends must be taken as cash
Which is NOT a valid policy dividend option?
Which is NOT a valid policy dividend option?
- Cash payment
- Reduced premium
- Paid-up additions
- Monthly income payments (correct)
What option does Mike have regarding his cash value?
What option does Mike have regarding his cash value?
He can purchase a reduced amount of paid-up whole life insurance
How does the cost recovery rule apply when a life insurance policy is surrendered?
How does the cost recovery rule apply when a life insurance policy is surrendered?
Which policy provision protects the policyowner from unintentional lapse of the contract?
Which policy provision protects the policyowner from unintentional lapse of the contract?
Which provision allows the insured to continue coverage after a policy has lapsed?
Which provision allows the insured to continue coverage after a policy has lapsed?
What time period allows an insured's life insurance policy to remain in force even if the premium is not paid on the due date?
What time period allows an insured's life insurance policy to remain in force even if the premium is not paid on the due date?
Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness?
Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness?
When does a life insurance policy's waiver of premium take effect?
When does a life insurance policy's waiver of premium take effect?
An insurer can be protected from adverse selection with which policy provision?
An insurer can be protected from adverse selection with which policy provision?
How is a life insurance policy dividend legally defined?
How is a life insurance policy dividend legally defined?
A life insurance policy can be surrendered for its cash value under which policy provision?
A life insurance policy can be surrendered for its cash value under which policy provision?
Which of the following does a policyowner NOT have a right to change?
Which of the following does a policyowner NOT have a right to change?
If an insured dies because of an accident, which type of life insurance rider will provide additional coverage?
If an insured dies because of an accident, which type of life insurance rider will provide additional coverage?
What does the guaranteed insurability option allow an insured to do?
What does the guaranteed insurability option allow an insured to do?
What are collateral assignments normally associated with?
What are collateral assignments normally associated with?
How are acts of war and aviation treated under a group life insurance policy?
How are acts of war and aviation treated under a group life insurance policy?
Which of the following is NOT a common life insurance policy rider?
Which of the following is NOT a common life insurance policy rider?
In a life insurance policy, what does the entire contract consist of?
In a life insurance policy, what does the entire contract consist of?
What does the grace period allow a life insurance policyowner to do?
What does the grace period allow a life insurance policyowner to do?
How will Jerry's adjusted death benefit be calculated if he understated his age?
How will Jerry's adjusted death benefit be calculated if he understated his age?
Which provision allows the insured to continue coverage after a policy has lapsed?
Which provision allows the insured to continue coverage after a policy has lapsed?
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Study Notes
Policy Dividends
- A dividend option must be selected by the insured at the time of policy purchase.
- Monthly income payments are not a valid option for policy dividends.
- Life insurance dividends are legally defined as returns of excess premium and are not taxable.
Cash Value and Coverage Options
- Cash value can be used to purchase reduced amounts of paid-up whole life insurance.
- Term policies provide no cash value and have no nonforfeiture benefits.
- Nonforfeiture options allow a policy to be surrendered for cash value.
Provisions and Benefits
- The grace period protects the policyowner from unintentional lapses in the contract.
- Policies remain in force during the grace period, even without premium payment.
- The accelerated death benefit provision pays a portion of the death benefit prior to the insured's death, due to serious illness.
- Waiver of premium takes effect when the insured becomes totally disabled.
Suicide and Exclusions
- The suicide clause protects insurers from adverse selection related to self-inflicted injuries.
- Acts of war and aviation incidents are typically treated as policy exclusions under group life insurance.
Riders and Options
- An accidental death rider provides additional coverage if the insured dies due to an accident.
- Guaranteed insurability option allows purchasing additional coverage without proof of insurability.
- Collateral assignments are commonly associated with bank loans.
Rights and Adjustments
- Policyowners do not have the right to change the dividend schedule.
- Adjusted death benefits for an insured who understated their age are calculated at the ratio of the premium paid to the correct premium.
Entire Contract and Continuation of Coverage
- The entire contract of a life insurance policy includes the policy itself and the attached application.
- Reinstatement provision allows insured individuals to continue coverage after a policy has lapsed.
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