PA Life Insurance (Chapter 4) Test Questions and Correct Answers

Absolute Assignment is a policy assignment under which the assignee (person to whom the policy is assigned) receives full control over the policy and full rights to its benefits. Accidental Death Benefit (Multiple Indemnity) Rider pays an additional sum to the beneficiary if the insured dies due to a covered accident. The amount paid is a multiple of the policy face amount such as double or triple the original benefit. Accelerated Benefits Rider allows the insured to receive a portion of the death benefit before death if the insured has a terminal illness and is expected to die within 1-2 years. Whatever amount is withdrawn in an accelerated death benefit will decrease the death benefit when death occurs. Accumulate Interest Option dividend option allows the policy owner to leave dividends with the insurer to accumulate interest. In turn, the policy owner will be required to pay taxes on any interest (profit) generated by the dividend. Assignment Clause allows the right to transfer policy rights to another person or entity Automatic Premium Loan Provision (or rider) Allows the insurance company to deduct overdue premium from an insured's cash value by the end of the grace period if a payment is missed on a life policy. The insurance company can AUTOMATICALLY take out a LOAN for you against your CASH VALUE to cover your PREMIUM in the event they don't receive payment from you. This can continue for as long as they don't receive a payment and you still have cash value. Once all of your cash value is gone, if you don't start paying, your policy will lapse. This is just like any other cash value loan. Cash Option the "cash" dividend option allows the policy owner to cash out the dividends they receive. Cash Surrender Option A nonforfeiture option that allows the policyowner to receive the policy's cash value. The policy owner no longer has coverage at this point. Collateral Assignment is an assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of policy proceeds for the amount owed. The beneficiary is entitled to any excess of policy proceeds over the amount due the creditor in the event of the insured's death.