General knowledge · Section II · On both exams

Policy riders, provisions, options, and exclusions

Riders, policy provisions and exclusions in life insurance: what a rider adds, what the standard provisions guarantee to the owner and the beneficiary, and what the policy leaves out. Expect questions on grace periods, reinstatement, nonforfeiture options and settlement options.

Questions on the exam

  • Life, Accident and Health: 15 questions
  • Life Agent: 15 questions

Life, Accident and Health exam · Life Agent exam

What the official outline lists

  • Policy riders
  • Policy provisions and options
  • Policy exclusions

Practice questions

Choose your answer, then open “Show the answer” to see why each option is right or wrong and the exact source text.

1. According to the Texas Department of Insurance, which of the following is one of the two ways life insurance or annuities can pay for long-term care?

  1. Added coverage attached to the contract, known as a rider
  2. A policy loan taken against the policy's cash value
  3. A separate medical expense policy bought from another insurer
  4. A full refund of the premiums paid, requested after the first year
Show the answer

Correct answer: A. Added coverage attached to the contract, known as a rider

According to the TDI Long-term care insurance guide (Paying for long-term care), life insurance or annuities can pay for long-term care in two ways, and one is a rider, or added coverage, to a life insurance policy or annuity.

Why the other options are wrong

  • B. The TDI passage does not list a policy loan; it names two ways, a rider and an accelerated death benefit.
  • C. A separate policy from another insurer is not one of the two ways the passage gives; it names a rider, or added coverage, and an accelerated death benefit.
  • D. The passage does not describe a refund of premiums; it names a rider, or added coverage, and an accelerated death benefit.
Source text: Paying for long-term care

Life insurance or annuities can pay for long-term care in two ways: A rider, or added coverage, to a life insurance policy or annuity.

In effect since · Checked against the source on · Open the source

2. Maria, age 62, asks about adding a disability waiver of premium rider to a life insurance policy. According to the Texas Department of Insurance, what is usually true of this rider?

  1. It is usually only available to people younger than 60
  2. It is usually only available to people who have owned the policy for 60 months
  3. It is usually only available to people with a terminal illness
  4. It is usually available regardless of the applicant's age
Show the answer

Correct answer: A. It is usually only available to people younger than 60

According to the TDI Life insurance guide (Customizing your policy), this rider is usually only available to people younger than 60.

Why the other options are wrong

  • B. The passage limits the rider by age (younger than 60), not by how long the policy has been owned.
  • C. The passage limits the rider by age (younger than 60); it does not require a terminal illness.
  • D. The passage says the rider is usually only available to people younger than 60, so age does matter.
Source text: Customizing your policy

This rider is usually only available to people younger than 60.

In effect since · Checked against the source on · Open the source

3. According to TDI, which condition must a policyowner meet to use the accelerated death benefit option on a life insurance policy?

  1. Having a terminal illness, specified disease, or long-term care illness
  2. Reaching age 65 and retiring from full-time work
  3. Having held the policy for at least ten years
  4. Having a spouse covered under a spousal rider
Show the answer

Correct answer: A. Having a terminal illness, specified disease, or long-term care illness

According to the TDI Customizing your policy guide, to use the accelerated death benefit option you must have a terminal illness, specified disease, or long-term care illness.

Why the other options are wrong

  • B. The passage does not set an age or retirement condition; it requires a terminal illness, specified disease, or long-term care illness.
  • C. The passage does not mention a minimum holding period; it requires a terminal illness, specified disease, or long-term care illness.
  • D. The passage does not require a spousal rider; it requires a terminal illness, specified disease, or long-term care illness.
Source text: Customizing your policy

You must have a terminal illness, specified disease, or long-term care illness.

In effect since · Checked against the source on · Open the source

4. Pat wants to add a children's rider to a life policy for a baby who is 10 days old. According to the Texas Department of Insurance, what do most companies require?

  1. The child to be at least 14 days old
  2. The child to be at least 30 days old
  3. The child to be at least 6 months old
  4. The child to be at least 1 year old
Show the answer

Correct answer: A. The child to be at least 14 days old

According to the TDI Life insurance guide (Customizing your policy), most companies require the child to be at least 14 days old, so a 10-day-old baby would not yet meet that requirement at most companies.

Why the other options are wrong

  • B. The passage says most companies require the child to be at least 14 days old, not 30 days.
  • C. The passage says most companies require the child to be at least 14 days old, not 6 months.
  • D. The passage says most companies require the child to be at least 14 days old, not 1 year.
Source text: Customizing your policy

Most companies require the child to be at least 14 days old.

In effect since · Checked against the source on · Open the source

5. According to the Texas Insurance Code, what must a life insurance policy provide with respect to the contract between the parties?

  1. That the policy, or the policy and the application for the policy, constitute the entire contract between the parties
  2. That the application alone constitutes the entire contract between the parties
  3. That the policy and the insurer's internal underwriting file constitute the entire contract between the parties
  4. That the policy constitutes the entire contract and that the application can never be part of that contract
Show the answer

Correct answer: A. That the policy, or the policy and the application for the policy, constitute the entire contract between the parties

Under TIC §1101.003 (Entire Contract), a life insurance policy must provide that the policy or the policy and the application for the policy constitute the entire contract between the parties. Option A restates that requirement.

Why the other options are wrong

  • B. The quoted text does not say the application alone is the entire contract; it names the policy, or the policy and the application together.
  • C. TIC §1101.003 names only the policy and the application for the policy. It does not mention an insurer's internal underwriting file as part of the contract.
  • D. The quoted text allows the entire contract to be the policy and the application for the policy, so it does not say the application can never be part of the contract.
Source text: Texas Insurance Code §1101.003, “Entire contract”

A life insurance policy must provide that the policy or the policy and the application for the policy constitute the entire contract between the parties.

In effect since · Checked against the source on · Open the source

6. According to the TDI life insurance guide, during the first two years of a life insurance policy, what do companies usually do if the cause of death is suicide?

  1. They usually do not pay the death benefit
  2. They usually pay the full death benefit
  3. They usually pay only half of the death benefit
  4. They usually pay the benefit after a one-year wait
Show the answer

Correct answer: A. They usually do not pay the death benefit

According to the TDI Life insurance guide (contestable period), during the first two years of a policy, companies usually won't pay the death benefit if the cause of death is suicide.

Why the other options are wrong

  • B. The quoted text says companies usually will not pay the death benefit in the first two years when the cause of death is suicide, not that they pay it in full.
  • C. The quoted text does not describe any partial payment; it says the death benefit usually is not paid in that period.
  • D. The quoted text does not describe a one-year wait; it says companies usually won't pay the death benefit during the first two years.
Source text: Life insurance guide (What is the contestable period?)

During the first two years of a policy, companies usually won't pay the death benefit if the cause of death is suicide.

In effect since · Checked against the source on · Open the source

7. A policyholder owns a whole-life policy that pays a dividend. Which of the following is one of the ways the dividend can be used?

  1. Applying it toward the policy's premiums
  2. Using it to shorten the policy's contestable period
  3. Exchanging it for a lower death benefit
  4. Moving it into the insurer's general reserve
Show the answer

Correct answer: A. Applying it toward the policy's premiums

According to the TDI Life insurance guide (Types of permanent life insurance), you can get the dividend in cash, add it to your policy's cash value, or use it to pay premiums. Using it to pay premiums is therefore one of the stated options.

Why the other options are wrong

  • B. The TDI passage does not list shortening the contestable period as a use of the dividend; it lists cash, adding to cash value, or paying premiums.
  • C. The TDI passage does not say a dividend can be exchanged for a lower death benefit; the stated uses are cash, cash value, or premiums.
  • D. The TDI passage does not describe moving a dividend into the insurer's reserve; the policyholder can take it in cash, add it to cash value, or pay premiums.
Source text: Types of permanent life insurance

You can get the dividend in cash, add it to your policy's cash value, or use it to pay premiums.

In effect since · Checked against the source on · Open the source

8. An insured assigns a policy benefit after the Title IV-D agency has filed a child support lien notice against the insured. What is the effect of the assignment on the child support lien?

  1. The lien continues to apply to the assigned benefit after the date of assignment
  2. The lien ends on the date of the assignment
  3. The lien applies only to arrearages owed on the date of assignment
  4. The lien is suspended until the new assignee is notified
Show the answer

Correct answer: A. The lien continues to apply to the assigned benefit after the date of assignment

According to TIC §1108.101(b), a benefit or right assigned after a child support lien notice has been filed continues to be subject to the child support lien after the date of assignment.

Why the other options are wrong

  • B. Section 1108.101(b) says the assigned benefit continues to be subject to the lien after the date of assignment, so the assignment does not end it.
  • C. Section 1108.101(b) says the lien continues to secure all arrearages, including arrearages that accrue after the date of assignment, not only those owed on that date.
  • D. Section 1108.101(b) provides no suspension and no notice to the assignee; the lien continues to apply after the date of assignment.
Source text: Texas Insurance Code §1108.101(b), “Assignment generally”

(b) A benefit or right described by Subsection (a) assigned by an insured, owner, or annuitant after a child support lien notice has been filed against the insured, owner, or annuitant by the Title IV-D agency continues to be subject to the child support lien after the date of assignment. The lien continues to secure payment of all child support arrearages owed by the insured, owner, or annuitant under the underlying child support order, including arrearages that accrue after the date of assignment.

In effect since · Checked against the source on · Open the source

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Key flashcards

Front and back, as in the app.

Texas life insurance: what must the entire contract provision state? (TIC §1101.003)
The policy must provide that the policy, or the policy and the application for the policy, constitute the entire contract between the parties. (Texas Insurance Code §1101.003, “Entire contract”)
Suicide in a life policy: for how long do companies usually not pay the death benefit (TDI guide)?
During the first two years of a policy, companies usually won't pay the death benefit if the cause of death is suicide (TDI Life insurance guide). (Life insurance guide (What is the contestable period?))

Terms on this topic

  • Annuity — Anualidad
  • Waiver of premium — Exoneración de la prima
  • Disability — Discapacidad
  • Entire contract — Contrato entero
  • Assignment — Asignación (cesión)
  • Suicide — Suicidio
  • Application — Solicitud

Glossary

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