Assignment Chapter 8 NAME:
Please be sure to include a citation and a copy of any informational source you use. Copy and paste your cited information at the end of this assignment.
1. Discuss the situations in which a life insurance policy can be reinstated and the specific conditions the policyowner must meet to qualify for reinstating a policy.
2. Describe the PURPOSE of the following policy provisions
a. Free-look provision:
b. Incontestability:
c. Grace Period:
d. Reinstatement Provision:
e. Nonforfeiture Provision:
3. Taylor Langworthy applied for an individual $250,000 insurance policy on her life and paid the initial premium. The insurer issued the policy as applied for, and the insurer’s agent delivered the policy to Ms. Langworthy on June 15. The policy included a typical 10-day free-look period. Ms. Langworthy was killed in an automobile accident on June 22. She never indicated whether she intended to keep the policy or return it to the insurer. In this situation, the named beneficiary is entitled to receive
(1) $250,000, because Ms. Langworthy’s coverage was in effect during the 10-day free-look period
(2) a return of the initial premium only, because Ms. Langworthy had not advised the insurer of her decision to keep or return the policy
(3) a return of the initial premium only, because Ms. Langworthy’s death occurred during the 10- day free-look period
(4) nothing, because Ms. Langworthy’s coverage would not have gone into effect until after the expiration of the 10-day free-look period
4. The wording of the entire contract provision in a life insurance policy varies according to whether the policy is a closed contract or an open contract. The following statements are about these two types of contracts. Select the answer choice containing the correct statement.
(1) The entire contract provision in a closed contract typically states that the entire insurance contract consists of the policy, any attached riders, and the attached copy of the application for insurance.
(2) Because insurance policies issued by fraternal insurers are Closed contracts, the insurer must attach a copy of the fraternal society’s charter, constitution, and bylaws to the policy in order for the contract to be valid.
(3) All individual life insurance policies are open contracts.
(4) The entire contract provision in an open contract allows oral statements to modify the terms of the policy.
5. Each of the situations below describes a misrepresentation made in the application for an individual life insurance policy. The insurer discovered the misrepresentations after receiving death claims on the policies. In each case, the insurance policy contains a typical two-year incontestability provision: Millie Boyle stated on her application for insurance that she had broken her right wrist in a jogging accident, when in fact, she had broken her left wrist. Ms. Boyle died during her policy’s contestable period. Miriam Michaels stated on her application for insurance that she had been treated for a chest cold when, in fact, she had been treated for cancer. Ms. Michaels died of cancer three years after the policy was issued. Oliver Brickey stated on his application for insurance that he had received a routine medical check-up on February 26, when in fact, the visit was a post-operative visit following heart bypass surgery. Mr. Brickey died 18 months after the policy was issued. With regard to these situations, it most likely is correct to say that the insurer has the right to avoid the contract on the ground of a material misrepresentation in the application(s) submitted by
(1) Ms. Boyle, Ms. Michaels, and Mr. Brickey
(2) Ms. Boyle only
(3) Ms. Michaels only
(4) Mr. Brickey only
6. Norman Garner applied to the Murfreesboro Insurance Company for an insurance policy on the life of his mother, Ansley. He incorrectly stated on the application that Ansley was age 50, when in fact, she was 53 years old. The policy contained a typical misstatement of age provision. Murfreesboro discovered the misstatement of age when processing a claim for the policy’s death benefits. In this situation, Murfreesboro most likely will
(1) pay the policy’s face amount based on the age stated in the insurance application
(2) reduce the policy’s face amount to the amount that the premiums paid would have
purchased had Ansley’s age been stated correctly on the insurance application
(3) give the policy beneficiary the option to receive as a refund any premium amount
difference caused by the misstatement rather than adjust the policy’s face amount
(4) declare the policy void because Ansley’s age was misrepresented on the
insurance application
7. Cash value life insurance policies typically grant the policyowner the right to borrow money from the insurer by using the cash value of the policy as security for the loan. The following statements are about the characteristics of such policy loans. Select the answer choice containing the correct statement.
(1) Insurers typically do not permit policyowners to take out policy loans on universal life insurance policies.
(2) A policy loan is an advance payment of part of the amount that the insurer eventually must pay out under the life insurance policy.
(3) A policy loan creates a debtor-creditor relationship between the policyowner and
the insurer.
(4) A policyowner has the right to take out a policy loan for any amount up to the policy’s face amount.
8. The following statements are about the nonforfeiture options available to policyowners of life insurance policies that build cash values. Select the answer choice containing the correct statement.
(1) Coverage issued under the reduced paid-up insurance nonforfeiture option does not have a cash value.
(2) Once a policyowner selects the extended term insurance nonforfeiture option, the
policyowner loses the right to cancel the extended term insurance and surrender the policy for its remaining cash value.
(3) Under the cash payment nonforfeiture option, when a policyowner surrenders a policy, the insurer may subtract the amount of any outstanding policy loan, plus any interest on the loan, from the cash surrender value amount listed in the policy.
(4) Under the reduced paid-up nonforfeiture option, any supplemental benefits that were available on the original policy, such as accidental death benefits, are usually available when the policy is continued as reduced paid-up insurance.
9. Virginia Waldman was insured under a $250,000 life insurance policy that contained a typical accidental death benefit rider and a typical two-year suicide exclusion provision. Three years after Ms. Waldman’s policy was issued, Ms. Waldman died, and it was determined that she had committed suicide. At the time of her death, the policy was in force, and there were no unpaid premiums or policy loans. In this situation, the insurer most likely was obligated to pay the beneficiary of Ms. Waldman’s policy
(1) nothing, because Ms. Waldman committed suicide
(2) a return of premiums paid for the policy only
(3) the basic death benefit only
(4) both the basic death benefit and the accidental death benefit
10. Tracy Manning was the policyowner-insured of a $100,000 term life insurance policy that contained a typical grace period provision. The policy’s annual premium of $500 was due on September 1 of each year. Mr. Manning died on September 14, 2010, without having paid the renewal premium due on September 1, 2010. At the time of his death, Mr. Manning had paid a total of $10,000 in premiums to the insurer. In this situation, the amount the insurer most likely paid Mr. Manning’s designated beneficiary was
(1) $0
(2) $10,000
(3) $99,500
(4) $100,000
Abu khaled
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