Chapter 3: Life Provisions Quiz
This flashcard set presents real-life scenarios and key concepts in life insurance, including beneficiary rules, misstatement of age, collateral assignments, exclusions, riders, settlement options, and tax treatment of dividends and interest. Great for exam prep and practical understanding.
L takes out a life insurance Policy and dies 10 years later. during the claim process, the insurer discovers that L had understate her age on the application. under the misstatement of a provision, the insurer will
adjust the death benefit to a reduced amount
Key Terms
L takes out a life insurance Policy and dies 10 years later. during the claim process, the insurer discovers that L had understate her age on the application. under the misstatement of a provision, the insurer will
adjust the death benefit to a reduced amount
D is the policy owner and insured for a $50,000 life insurance policy. the beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. if D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife.
D’s exwife is still the beneficiary of this policy even though policy ownership has changed to his current ...
M has an insurance policy that also has an outstanding policy loan at the time of M’s death. the insurer will deduct the outstanding loan balance from the
policy proceeds
S buys a $50,000 whole life policy with a $50,000 accidental death and dismemberment rider. S dies 1 year later of natural causes. how much will the insurer pay the beneficiary?
$50,000
which of these actions is taken when a policyowner uses a life insurance policy as collateral for a bank loan?
collateral assignment
when an insurer issues a policy that refuses to cover certain risks, this is referred to as an
exclusion
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| Term | Definition |
|---|---|
L takes out a life insurance Policy and dies 10 years later. during the claim process, the insurer discovers that L had understate her age on the application. under the misstatement of a provision, the insurer will | adjust the death benefit to a reduced amount |
D is the policy owner and insured for a $50,000 life insurance policy. the beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. if D dies without making any further changes, to whom will the policy proceeds be paid to? | Ex-wife. D’s exwife is still the beneficiary of this policy even though policy ownership has changed to his current spouse |
M has an insurance policy that also has an outstanding policy loan at the time of M’s death. the insurer will deduct the outstanding loan balance from the | policy proceeds |
S buys a $50,000 whole life policy with a $50,000 accidental death and dismemberment rider. S dies 1 year later of natural causes. how much will the insurer pay the beneficiary? | $50,000 |
which of these actions is taken when a policyowner uses a life insurance policy as collateral for a bank loan? | collateral assignment |
when an insurer issues a policy that refuses to cover certain risks, this is referred to as an | exclusion |
a(n) ______ rider may be used to include coverage for children under their parents life insurance policy. | term |
the advantage of reinstate an original life policy is | the premiums are based on a younger age |
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 purpose? | interest only |
all of these statements concerning settlement options are true except | only the beneficiary may select |
the accelerated death benefit provision in a life insurance policy is also known as | living benefit |
B recently died and was insured with a life insurance policy for over 5 years, during the claims process, the insurer discovered that B had understated his age by 5 yearsat the tie of application. in this situation the insurer will | pay the amount that the premium would have purchased at the correct age |
A return of premium life insurance policy is | whole life and increasing term |
the accidental death and dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured: | is blinded in an accident |
the _______ is authorized to assign a life insurance policy as collateral for a loan. | policyowner |
when is the face amount of a Whole Life policy paid? | when the insured dies or a the policys maturity date, whichever happens first |
how are policyowner dividends treated in regards to income tax | interest on accumulations is taxed |
P died 5 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? | beneficiary will be paid the death benefit |
which of these is not considered to be a right given to a policy owner? | modify a provision in the insurance contract |
K owns a whole-life policy. if K wants an increasing death benefit to protect against inflation, which dividend option should she choose? | paid-up additional insurance |
which of these statements about a guaranteed insurability option rider is not true? | evidence of insurability is required when the option is excersized |
the provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called | reinstatment |
the free-look provision begins | upon receipt of the policy by the policyowner |
what action will an insurer take if an interest payment on a policy loan is not made on time? | automatically add the amount of interest due to the loan balance |
K pays on a $20,000 20-year endownment policy for 10 years and dies from an automobile accident. how much will the insurance company pay the beneficiary? | $20,000 death benefit |
S would like to use dividends from her life insurance policy to purchase paid up additions. all of these would be factors that determine how much coverage can be purchased except | beneficiary's age |
the purpose of the _ period clause is to avoid an unintentional lapse of a life insurance policy. | grace |
dividends paid from a life insurance policy are | issued by the insurer |
a cost of living rider gives the insured | additional death benefits this type of coverage is designed to help you hedge your bests against inflation. for example if you purchase this rider your policy is going to increase in value if inflation increased |
K's whole life insurance policy lapsed two months ago due to nonpayment. she would now like to reinstate the policy. all of these statements are correct about the policy's reinstatement except | K will forfeit the right to use the automatic loan provision upon reinstatement |
which statement is true in regards to a policy loan | past due interest on a policy loan is added to the total debt |
which of the following nonforfeiture options offers the highest death benefit | extended term allows the policy owner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole life policy |
which of the following provisions guarentees that premiums will be wavied if a juvenile life policy owner becomes disabled? | payor clause ensures that premiums will be waved if juvenile life policy policyowner becomes disabled |
a potential client age 40, would like to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy. which of these statements made by the producer would be correct? | 20-pay life accumulates cash value faster than straight life |
S buys a $10,000 whole life policy in 2003 and pays and 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 | return of premium rider |
which of these nonforfeiture options continue a build up of cash value | reduced paid up |
a long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following | inability of the insured to perform more than 2 activites of daily living (ADLs) |
a long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following | inability of the insured to perform more than 2 activites of daily living (ADLs) |
a nonforfeiture clause gives the policyowner | guaranteed values even if the policy has lapsed |
typically a life insurance death benefit is paid by lump sum payment. a option is a method of distributing a life insurance policys death benefit OTHER than by a lump sum payment. | settlement |
how are surrender charges deducted in a life policy with a rear end loaded provision | deducted when the policy is discontinued |
how are surrender charges deducted in a life policy with a rear end loaded provision | deducted when the policy is discontinued |
which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself | entire contract provision nothing my be incorporated by reference meaning that the policy cannot refer to any outside documents as being apart of the contract |
which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself | entire contract provision nothing my be incorporated by reference meaning that the policy cannot refer to any outside documents as being apart of the contract |
additional coverage can be added to a whole life policy by adding a | decreasing term rider |
whose life is covered on a life insurance policy that contains a payor benefit clause | child |