What type of beneficiary is next in line after the primary beneficiary?
Contingent Beneficiary
What are the dividend options in life insurance policies?
Cash, Reduced Premium, Accumulation at Interest, Paid-Up Additions, Pain-Up Option, One-Year Term, and Acceleration of Endowment
What are the three non forfeiture options in life insurance policies?
Cash Surrender, Reduced Paid-Up, and Extended Term
What happens to a policy's cash value under an extended term non forfeiture option?
The cash value is converted the same face amount as in the whole life policy.
What is the purpose of settlement option in life insurance policies?
To determine how the death benefit will be paid to the beneficiary.
What type of beneficiary can be changed at any point by the policyowner?
Revocable
To meet the requirement of the entire contract policy provision, an insurance policy must contain what?
A copy of the original insurance application.
What does the term "double indemnity" mean?
The insurer will pay a benefit of twice the face amount.
When can an insurance company use suicide as a defense against paying a death claim?
When a suicide is committed within a specified period of time after the policy is purchased, usually 2 years.
What non forfeiture option provides coverage for the longest period of time?
Reducer Paid-Up
An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?
The death benefit will be adjusted to the amount that the insured could obtain for her age.
What is the disadvantage of selecting the life income settlement option?
If the beneficiary dies shortly after the payments begin, the balance of the principal will be forfeited.
Who controls changes in premium payments, face values, and loans in a life insurance policy?
Policyowner
What is the purpose of the Automatic Premium Loan provision?
To prevent the unintentional lapse of a policy because of nonpayment of the premium.
What are policy dividends?
Return of unused premiums.
What are the most common exclusions in life insurance policies?
War and Military Service, Hazardous Occupation, and Aviation
In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?
The longer the period selected, the smaller each installment will be.
Under what non forfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?
Cash Surrender
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
Collateral Assignment
What is the name for a life insurance policy rider that provides coverage on the insured's family members?
Other-Insured Rider
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?
It will be paid to the insured's estate.
Who has the right to the cash value of a life insurance policy?
Policyowner
With the interest only settlement option, what happens to the policy's death benefit?
Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary.
Is the beneficiary required to have insurable interest in the insured?
No. Beneficiaries do not have insurable interest in the insured.
When would a misrepresentation be considered material?
When it may alter the underwriting decision.
Statements on the application made by an applicant for a life insurance policy are known as what?
Representations
What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death?
Settlement Options
What dividend option is automatically selected by the company if not chosen by the policyowner?
Paid-Up Additions
Who does the common disaster clause protect?
The Contingent Beneficiary
When will a contingent beneficiary receive death benefits from a life insurance policy?
When the primary beneficiary dies before the insured.
What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?
Entire Contract
What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?
Policy premium in a reinstated policy will be set according to the insured's original age.
What beneficiary designation has first claim to the death proceeds of a life insurance policy?
Primary Beneficiary
What is the purpose of a free-look period?
To allow the insured to return the policy with a full refund.
What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?
Reinstatement
What non forfeiture option is automatically selected by the company if not chosen by the policyowner?
Extended Term
With the reduction of premium dividend option, how is the dividend used?
The dividend is applied to the next year's premium.
What settlement options are available in life insurance policies?
Lump-Sum/Cash, Fixed Period, Fixed Amount, Life Income, and Interest Only
What happens to the proceeds of a life insurance policy if there is no named beneficiary?
The proceeds are paid to the insured's estate.
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?
Absolute Assignment
What life policy rider allows the company to forgo collection the premium if the insured becomes disabled?
Waiver of Premium
What required provision protects against unintentional policy lapse?
Grace Period
What is consideration on the part of the insurer?
A promise to pay policy benefits.
An insured purchased a life policy, and then committed suicide 5 years later. Will the company pay the death benefit to the beneficiary?
Yes, since the suicide was committed long after the restricting period.
What are representations on life insurance applications?
Statements made by the applicant that are true to the best of the applicant's understanding.
What dividend option can increase the death benefit of the existing life policy?
Paid-Up Additions
If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?
Lump-Sum Payment
What provision in a life insurance policy extends coverage beyond the premium due date?
Grace Period
What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain time?
Incontestability
An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?
Pay a reduced death benefit.