Pennsylvania Life Insurance – Provisions Review Questions and Correct Answers

Which of these is NOT a typical life insurance nonforfeiture option? Reduced paid-up option Extended term option Cash surrender option Life income settlement option Life Income Settlement Option A life insurance policy's waiver of premium rider has the ability to waive the premium payments in the event the insured becomes financially insolvent waive the premium payments in the event the insured becomes totally disabled provide a policy loan to cover the premium payments in the event the insured becomes totally disabled waive the premiums on this policy as well as any other insurance policies belonging to the insured in the event of total disability waive the premium payments in the event the insured becomes totally disabled What is payable to a policyowner if a whole life policy is surrendered prior to its maturity date? The loan value The cash value The face amount minus any past due premiums and outstanding loans Nothing Cash Value Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy? Prevents a policy from lapsing in the event of disability Premiums waived by the insurer do not have to be repaid by the policyowner Policy's cash value would still increase as policy premiums are being waived Allows a policyowner to take out a policy loan to cover premium payments in the event of total disability Allows a policyowner to take out a policy loan to cover premium payments in the event of total disability What could be the potential result of taking out a cash value loan on a life insurance policy? Death benefit will be subject to income taxes if insured dies with an outstanding loan balance Interest that accrues on policy loan is tax-deductible to the policyowner Loan amount will be added to the policyowner's gross income Cash surrender value will be reduced if policy is forfeited Cash surrender value will be reduced if policy is forfeited What benefit is normally available to a life insurance policyowner who has contracted a terminal illness? Reduced paid-up option Accelerated (living) benefit Return of Premium benefit Extended term option Accelerated (living) benefit Which term rider attached to a life insurance policy insures an entire family? Kin Household Family Group Family A life insurance policy provision that has the potential to decrease the death benefit is called the accelerated (living) benefit insuring clause payor benefit spendthrift clause accelerated (living) benefit Which situation is an accelerated (living) benefit rider intended for? Insured expected to be confined to a nursing home for life Insured recently had a minor heart attack Insured has lost use of one arm Insured is having dire financial problems Insured expected to be confined to a nursing home for life What is considered the collateral on a policy loan? No collateral is needed The policy's cash value The policy's face value The equity in a policyowner's home The policy's cash value The automatic premium loan provision can be accurately described as a provision that charges a premium for the right to borrow against the cash value provision that provides a loan for necessary expenditures such as hospital bills, mortgage payments etc provision that automatically waives an unpaid premium at the end of the grace period provision that authorizes a policy loan to pay an overdue premium at the end of the grace period provision that authorizes a policy loan to pay an overdue premium at the end of the grace period