3. Life Policy Riders, Provisions, Options and Exclusions UPDATED Actual Exam Questions and CORRECT Answers
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Life Policy Riders
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Life Policy Riders
. Life Policy Riders, Provisions, Options
and Exclusions UPDATED Actual Exam
Questions and CORRECT Answers
If a policy has an automatic premium loan provision, what happens if the insured dies before
the loan is paid back?
AThe policy beneficiary takes over the loan payments.
BThe policy i...
3. Life Policy Riders, Provisions, Options
and Exclusions UPDATED Actual Exam
Questions and CORRECT Answers
If a policy has an automatic premium loan provision, what happens if the insured dies before
the loan is paid back?
AThe policy beneficiary takes over the loan payments.
BThe policy is rendered null and void.
CThe balance of the loan will be taken out of the death benefit.
DThe policy beneficiary receives the full death benefit. - CORRECT ANSWER✔✔- C.The
balance of the loan will be taken out of the death benefit.
If the loan and interest are not repaid and the insured dies, then it will be subtracted from the
death benefit
When an insured under a life insurance policy died, the designated beneficiary received the
face amount of the policy as well as a refund of all of the premiums paid. Which rider is
attached to the policy?
APremature death
BReturn of premium
CCost of living
DDecreasing term - CORRECT ANSWER✔✔- B.Return of premium
The Return of Premium Rider pays the beneficiary not only the face amount of the policy but
also the amount that had been paid in premiums. The rider stipulates that death must occur
prior to a certain age in order for the premium amount to be returned. The Return of Premium
Rider is funded by using increasing term insurance
Which of the following named beneficiaries would NOT be able to receive the death benefit
directly from the insurer in the event of the insureds' death?
AThe wife of the deceased insured
BThe former wife of the deceased insured
CA minor son of the insured
DA business partner of the insured - CORRECT ANSWER✔✔- C.A minor son of the
insured
,Because a minor does not have the legal capacity to release the insurer from further
obligation, benefits normally have to be passed through a guardian or trustee
An insured purchased a 15-year level term life insurance policy with a face amount of
$100,000. The policy contained an accidental death rider, offering a double indemnity
benefit. The insured was severely injured in an auto accident, and after 10 weeks of
hospitalization, died from the injuries. What amount would his beneficiary receive as a
settlement?
A$0
B$100,000
C$200,000
D$100,000 plus the total of paid premiums - CORRECT ANSWER✔✔- C.$200,000
The beneficiary would most likely receive twice the face value of the policy, since his fatal
injuries were caused by an accident and he died within the 90-day benefit limit stipulated in
most policies.
Which is TRUE about the cash surrender nonforfeiture option?
AAfter the cash surrender, the insured is covered for a grace period of 1 month.
BThe policy remains active for some time after the policyholder opts for cash surrender.
CThe policyholder receives the original cash value of the policy.
DFunds exceeding the premium paid are taxable as ordinary income. - CORRECT
ANSWER✔✔- D.Funds exceeding the premium paid are taxable as ordinary income
The insurers surrender the policy at its current cash value. Only any excess of value is taxable
as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.
What is the waiting period on a Waiver of Premium rider in life insurance policies?
A30 days
B3 months
C5 months
D6 months - CORRECT ANSWER✔✔- D.6 months
Most insurers impose a 6-month waiting period from the time of disability until the first
premium is waived
, If a life policy allows the policyowner to make periodic additions to the face amount at
standard rates, without proving insurability, the policy includes a
AGuaranteed insurability rider.
BPaid-up additions option.
CCost of living provision.
DNonforfeiture option. - CORRECT ANSWER✔✔- A Guaranteed insurability rider
The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of
additional insurance at specific dates or events, without proving continued insurability. Rates
for the additions are based upon attained age.
All of the following are TRUE statements regarding the accumulation at interest option
EXCEPT
AThe interest is credited at a rate specified by the policy.
BThe policyholder has the right to withdraw the accumulations at any time.
CThe interest is not taxable since it remains inside the insurance policy.
DThe annual dividend is retained by the company. - CORRECT ANSWER✔✔- C.The
interest is not taxable since it remains inside the insurance policy
The interest credited under this option is TAXABLE, whether or not the policyowner receives
it.
Under an extended term nonforfeiture option, the policy cash value is converted to
AA higher face amount than the whole life policy.
BThe same face amount as in the whole life policy.
CThe face amount equal to the cash value.
DA lower face amount than the whole life policy. - CORRECT ANSWER✔✔- B.The same
face amount as in the whole life policy
Under this option the insurer uses the policy cash value to convert to term insurance for the
same face amount as the former permanent policy.
All of the following are dividend options EXCEPT
APaid-up additions.
BFixed-period installments.
CAccumulated at interest
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