Life Provisions Flashcards
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Questions and Answers

The _______ has the right to change a life insurance policy's beneficiary.

Policyowner

Variable Whole Life Insurance can be described as?

both an insurance and securities product

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Variable Universal Life

A Whole Life insurance policyowner does NOT have the right to?

<p>change the grace period</p> Signup and view all the answers

What provision in a life insurance policy states that the application is considered part of the contract?

<p>entire contract provision</p> Signup and view all the answers

Which of these life insurance riders allows the applicant to have excess coverage?

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

Which of the following is an example of a nonforfeiture option?

<p>Reduced Paid-Up Option</p> Signup and view all the answers

A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as an ________________ rate loan.

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

Which statement regarding the Misstatement of Age provision is considered to be true?

<p>coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered.</p> Signup and view all the answers

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

<p>Accidental Death &amp; Dismemberment clause</p> Signup and view all the answers

Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?

<p>Taxed as ordinary income</p> Signup and view all the answers

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

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

Dividends paid from a life insurance policy are?

<p>issued by the insurer</p> Signup and view all the answers

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

<p>Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)</p> Signup and view all the answers

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

<p>Claims are denied under the Suicide clause of the policy</p> Signup and view all the answers

Which life insurance rider typically appears on a Juvenile life insurance policy?

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

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?

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

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled?

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

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

<p>Claim will be denied</p> Signup and view all the answers

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

<p>Void the policy only if its</p> Signup and view all the answers

Which of these nonforfeiture options continue a build-up of cash value?

<p>Reduced Paid Up</p> Signup and view all the answers

Who does the ownership clause in a life insurance policy state?

<p>Who the policyowner is entitled to</p> Signup and view all the answers

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

<p>Evidence of insurability is required when the option is exercised</p> Signup and view all the answers

Which statement is TRUE in regards to a policy loan?

<p>Past due interest on a policy loan is added to the total debt</p> Signup and view all the answers

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

<p>Beneficiary will be paid the death benefit; the incontestable clause prevents the insurer from canceling the contract even for a material misrepresentation</p> Signup and view all the answers

If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she choose?

<p>Paid-Up Additional Insurance</p> Signup and view all the answers

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

<p>P will still receive declared dividends; just as if the insured were still making the payments themselves.</p> Signup and view all the answers

All of the settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT?

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

The Accelerated Death Benefit provision in a life insurance policy is also known as a?

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

The consideration clause in a life insurance contract contains what pertinent information?

<p>Amount of premium payments and when they are due.</p> Signup and view all the answers

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

<p>Pay face amount minus the past due premium</p> Signup and view all the answers

A policy loan is made possible by which of these life insurance policy features?

<p>Cash Value provision</p> Signup and view all the answers

A cost of living rider gives the insured?

<p>additional death benefits</p> Signup and view all the answers

In a life insurance contract, an insurance company's promise to pay stated benefits is called the?

<p>Insuring clause</p> Signup and view all the answers

An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?

<p>Long term care</p> Signup and view all the answers

The free look provision begins?

<p>Upon receipt of the policy by the policyowner</p> Signup and view all the answers

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of?

<p>additional whole life coverage at specified times</p> Signup and view all the answers

How are policyowner dividends treated in regards to income tax?

<p>Interest on accumulations is taxed</p> Signup and view all the answers

What does the insuring agreement in a life insurance contract establish?

<p>An insurer's basic promise</p> Signup and view all the answers

A Term Life rider offers the insured?

<p>additional life coverage</p> Signup and view all the answers

Which of these Nonforfeiture Options continue a build-up of cash value?

<p>Reduced Paid-Up</p> Signup and view all the answers

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:

<p>Policy Loan Provision</p> Signup and view all the answers

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

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

Which rider provides coverage for a child under a parent's life insurance policy?

<p>Child term rider</p> Signup and view all the answers

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

<p>at future dates specified in the contract with no evidence of insurability required</p> Signup and view all the answers

All of these statements about the Waiver of Premium provision are correct EXCEPT?

<p>Insured must be eligible for social security disability for claim to be accepted.</p> Signup and view all the answers

An insurer may normally delay the payment of a cash value loan or surrender value for up to?

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

A term life rider offers the insured?

<p>additional life coverage</p> Signup and view all the answers

The consideration clause in a life insurance policy indicated that a policy owner's consideration consists of a completed application and?

<p>the initial premium</p> Signup and view all the answers

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

<p>Automatic Policy Loan</p> Signup and view all the answers

Which life is covered on a life insurance policy that contains a payor benefit clause?

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

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

<p>Collateral Assignment</p> Signup and view all the answers

Study Notes

Life Insurance Provisions and Policies

  • Policyowner has the right to change a life insurance policy's beneficiary.
  • Variable Whole Life Insurance functions as both an insurance and securities product.
  • Variable Universal Life includes a monthly mortality charge and offers self-directed investment choices.
  • Whole Life policyowners cannot change the grace period.
  • The entire contract provision states that the application is part of the life insurance contract.

Riders and Options

  • A Term rider allows for excess life coverage.
  • An example of a nonforfeiture option is the Reduced Paid-Up Option.
  • A policy loan against cash value in a Whole Life policy may have a variable interest rate.
  • The Misstatement of Age provision adjusts coverage based on the insured's true age if inaccuracies are found.

Claims and Benefits

  • The Accidental Death & Dismemberment clause pays a specified benefit amount in certain accidents, like blindness.
  • Accumulated interest from policy dividends is taxed as ordinary income.
  • S's Whole Life policy included a Return of Premium rider, paying the beneficiary $10,500 upon death.
  • Dividends from a life insurance policy are issued by the insurer.

Long-Term Care and Disability Provisions

  • A long-term care rider pays benefits if the insured cannot perform more than two Activities of Daily Living (ADLs).
  • Life insurance claims may be denied under the Suicide clause if the insured commits suicide within the contestable period.
  • Payor Benefit rider typically appears on juvenile life insurance policies and waives premiums if the payor becomes disabled.

Miscellaneous Provisions

  • Claims from premature death without premium payment, like N's, will be denied if payment is overdue.
  • Misrepresentation on an application can lead to the insurance company voiding the policy only if it affects coverage.
  • The Guaranteed Insurability Option allows additional coverage without proof of insurability.
  • In policy loan scenarios, past-due interest is added to the total debt.

Other Important Features

  • Classifications of dividends include interest only for tax purposes.
  • When an increasing death benefit is desired, the Paid-Up Additional Insurance dividend option is recommended.
  • The insuring clause outlines the insurance company's necessary promise to pay benefits.
  • Collateral Assignment occurs when a life insurance policy is used as collateral for a bank loan.

Premium Payments and Cash Value

  • Automatic Premium Loan provisions keep a policy active if cash value is sufficient to cover missed premium payments.
  • In whole life policies, available cash value may be accessed via a Policy Loan Provision.
  • The consideration clause outlines premium payment amounts and schedules.
  • A Child term rider covers children under a parent's life insurance policy.

Surrender and Delays

  • Insurers can delay the payment of cash value loans or surrenders for up to six months.
  • P's premiums are waived due to disability, but he still receives dividends as if payments were made.
  • The free look provision allows a policyowner to reconsider their policy upon receipt.

These notes provide an overview of key life insurance concepts, riders, claims, provisions, and financial implications relevant for study and understanding.

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Test your knowledge on life insurance concepts and policies with these flashcards. This quiz covers key terms like policyowner, variable whole life insurance, and more. Perfect for anyone studying life insurance or preparing for an exam.

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