Life and Health California Exam Life Insurance Policy Provisions and Riders 2 — Questions and Answers
Question 1: A 'waiver of premium' rider on a life insurance policy provides that:
- Premiums are waived if the insured cannot make payments due to financial hardship
- Premiums are waived if the insured becomes totally disabled for a specified period (Correct answer)
- The insurer waives the right to contest the policy after 2 years
- Premiums are reduced if the insured maintains good health
Correct answer: Premiums are waived if the insured becomes totally disabled for a specified period
The waiver of premium rider keeps the policy in force without premium payments if the insured becomes totally disabled, typically after a waiting period of 3 to 6 months.
Question 2: An 'accidental death benefit' rider pays an additional death benefit if the insured dies:
- Within 90 days of any accident
- As a direct result of accidental bodily injury within a specified time period (Correct answer)
- While traveling outside the United States
- From any cause before age 65
Correct answer: As a direct result of accidental bodily injury within a specified time period
The accidental death benefit (double indemnity) rider pays an additional amount—typically equal to the face amount—if death results directly and solely from accidental injury within a defined time period.
Question 3: Which nonforfeiture option provides the original face amount of life insurance for a reduced period of time?
- Cash surrender value
- Reduced paid-up insurance
- Extended term insurance (Correct answer)
- Automatic premium loan
Correct answer: Extended term insurance
The extended term nonforfeiture option uses the cash value to purchase term insurance in the same face amount as the original policy for as long as the cash value will sustain.
Question 4: The 'guaranteed insurability' rider allows the policyowner to:
- Convert a term policy to whole life at any time without proof of insurability
- Purchase additional life insurance at specified dates or events without proving insurability (Correct answer)
- Ensure the policy is guaranteed to pay regardless of cause of death
- Guarantee that premiums will never increase
Correct answer: Purchase additional life insurance at specified dates or events without proving insurability
The guaranteed insurability rider lets the policyowner buy additional coverage at specified option dates (e.g., marriage, birth of child, age milestones) without undergoing medical examination.
Question 5: When a life insurance policy has a 'reduced paid-up' nonforfeiture option, what happens?
- The face amount stays the same and premiums are reduced proportionally
- The face amount is reduced and no further premiums are required (Correct answer)
- Premium payments continue but the benefit period is shortened
- The policy is converted to an annuity using cash value
Correct answer: The face amount is reduced and no further premiums are required
The reduced paid-up option uses the policy's cash value to purchase a paid-up whole life policy with a lower face amount—no further premiums are owed.
Question 6: Under a life insurance policy's 'facility of payment' clause, who may the insurer pay if the named beneficiary is a minor or incapacitated?
- Only the insured's estate
- A relative or other person who can provide proof of financial dependency (Correct answer)
- The state insurance department as trustee
- No one until a legal guardian is appointed
Correct answer: A relative or other person who can provide proof of financial dependency
The facility of payment clause allows the insurer to pay proceeds to a family member or other person who appears entitled to receive them when the named beneficiary cannot legally receive payment.
Life and Health California Exam Life Insurance Policy Provisions and Riders 2
A 'waiver of premium' rider on a life insurance policy provides that: