Brain Teasers

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  1. The policy provision that allows the insured to return the policy to the insurer within a specified period of time and request a full refund of premium is the              provision.
  2. The insurer’s agreement to provide the coverage is stated in the                            .
    insuring agreement
  3. The insured’s consideration for the contract consists of                                and the                     of premiums.
    • statements in the application
    •  payment
  4. The consideration given by the insurer is the                        the policy face amount if the insured dies during the coverage period and the premium has been paid.
     promise to pay 
  5. The provision that states that the contract consists of the policy, the application, and other forms endorsed on or attached to the policy at the time of issue is called the                                    
    entire contract provision
  6. The person purchasing the life insurance policy is referred to as the                   , and when the policy is issued, that person becomes the                                     .
    • applicant
    •  policyowner/owner
  7. All rights of ownership are identified in the                    provision. 
  8. The provision that allows a policyowner to transfer ownership of the policy to another person is called the                        provision
  9. A temporary assignment pledging the policy’s cash value as repayment of a loan would be considered a                     assignment
  10. A permanent transfer of ALL rights of ownership to another would be an                    assignment.
  11. The Internal Revenue Code (IRC) states that a policy owned by the insured within             years of his death becomes part of his estate, subject to estate tax.
  12. The only party who is able to borrow from the cash value of a policy is the                                 .
  13. A loan must be available to the policyowner after the policy has been in force for             full years.
  14. An insurer must give a policyowner                            notice if the amount of the loan plus interest ever reached the amount of the cash value in order to prevent the policy from lapsing.
    one month/30 days’
  15. An insurer may defer granting a loan request from a policyowner for up to            months. This is known as the            clause.
    • six
    • delay
  16. The policy                        will state the mode of premium payment.
  17. The                                  provision states that the insurer will loan the premium amount from the cash value if the premium has not been paid before the end of the grace period.
     automatic premium loan
  18. A $100,000 policy has an outstanding policy loan balance of $10,000, including principal and interest. If the insured dies before the loan is paid back, the beneficiary will receive                    as a death benefit.
  19. The process of placing a lapsed permanent insurance policy back in force is called                          .
  20. A policyowner may reinstate a lapsed policy within            years of the lapse, provided that either               insurance or                            insurance was the nonforfeiture option in effect.
    • three
    • reduced paid-up
    • extended term
  21. An insured will have to pay all past due premiums, show proof of                                , and repay or reinstate any                       that existed prior to the lapse in order to reinstate his policy.
    • insurability
    • policy loans
  22. The provision that states that the insurer must settle a claim promptly upon death of the insured is referred to as the                          .
    payment of claims provision
  23. An insurer can only contest a claim due to fraud or misrepresentations in the application during the first          years of the policy. This provision in the policy is called the                                     .
    • two
    • incontestable clause/incontestability
  24. A life insurance policy may exclude death due to                     ,            and                     .
    • suicide
    • war
    • aviation
  25. If an insured commits suicide during a suicide clause’s stated period, the insurer will                the  paid                    , with no interest to the beneficiary.
    • refund
    • premium
  26. The two versions of the war exclusion are the               clause and the                clause.
    • status
    • result
  27.  Under either version of the war exclusion, when the death is excluded, the insurer will refund either the                        or the                       paid, depending on the policy.
    • cash value
    • premium
  28. Generally,                         passengers on commercial flights are covered if death is due to aviation, but death of pilots, crew members and private aircraft are excluded.
  29. In the event the insured and the primary beneficiary die at the same time or it’s simply not known who died first, the insurer presumes the                     died first because of the                                        .
    • beneficiary
    • Uniform Simultaneous Death Act
  30. A policy provision that states that the beneficiary must live a stipulated length of time after the insured dies in order to collect the death benefit is called the                                           clause.
    common disaster/shortterm survivorship
  31. A beneficiary that cannot be changed is known as an                         beneficiary.
  32. A beneficiary that can be changed is known as a                   beneficiary.
  33. State law provides that a policy that will develop cash value must do so no later than the end of the policy’s           year and that any cash value cannot be declared forfeited if the policy lapses due to nonpayment of premium. This law is referred to as the                                .
    • third
    •  standard nonforfeiture law
  34. The choices that a policyowner has upon lapse of a cash value policy are known as the                      options.
  35. The nonforfeiture option that allows the policyowner to buy paid-up term insurance is called the                          option. 
    extended term 
  36. The nonforfeiture option that allows the policyowner to buy permanent life insurance at a lesser face amount is called the                           option.
    reduced paid-up
  37. Premiums are based on these three factors:                      ,                        , and                       credited for the use of the premiums.
    • mortality
    • loading/expenses of insurer
    • interest
  38. Some policies offer a return of premium from the insurer’s divisible surplus to be distributed to the policyholders in the form of policy                       .
  39. Policies that offer dividends are known as                    policies, while policies that do not offer dividends are called                       policies.
    • participating
    • non-participating
  40. The five dividend options are            ,                  ,                              ,                           , and        -year term insurance.
    • cash
    • interest
    • paid-up additions
    • reduced premium
    • one
  41. The dividend option that is considered a temporary option is the                  option. 
  42. The dividend choice that uses the dividend to buy additional paid-up insurance of the same type as the original policy is called                            .
    paid-up additions
  43. The dividend option that is used to pay premiums is called the                                   option. 
     reduced premium
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Brain Teasers
Policy Provisions/Policy Options
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