Life Insurance Policy Provisions, Options, and Riders — New York exam
20% of the scored questions — about 20 of 100. This section is general life insurance knowledge, shared with every state's exam.
1 / 8
A beneficiary elects a fixed period of ten years and dies in year six. What becomes of the remaining instalments?
Answer and explanation
Answer: D. A fixed-period settlement is a certain obligation for the term elected, so the unpaid instalments run to a contingent payee or to the beneficiary's estate. Payments measured by a lifetime and ending at death belong to the life income option.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, fixed period option
2 / 8
A beneficiary receiving instalments under a spendthrift clause offers those future payments as security for a loan. What is the position?
Answer and explanation
Answer: D. A spendthrift clause makes the retained instalments non-assignable, so a lender cannot take them as security and the beneficiary cannot pledge them. Notice to the insurer and a partial pledge do not overcome the restriction.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, spendthrift clause
3 / 8
A child covered by a children's term rider reaches the age at which the cover ends. What is normally available?
Answer and explanation
Answer: D. Children's riders customarily allow conversion at the terminal age to permanent insurance without evidence of insurability, frequently up to five times the rider's face amount. No refund arises, and cover is not extended or transferred between children.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, children's term rider conversion
4 / 8
A cost of living rider is attached to a life policy. What does it do as an inflation index rises?
Answer and explanation
Answer: A. A cost of living rider periodically raises the face amount in step with a published inflation index. The increases are issued without new underwriting, though the premium rises with the added coverage.Source: NAIC Life Insurance Buyer's Guide — Riders: cost of living adjustment of the face amount
5 / 8
A dividend declared happens to exceed the premium next falling due under this option. What ordinarily follows?
Answer and explanation
Answer: D. The insurer pays the surplus over to the owner or applies it under one of the other dividend options, commonly accumulation at interest. Forfeiture, a reduction in the face amount and an idle holding are not how the excess is treated.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, dividend reduction of premium
6 / 8
A New York beneficiary asks the insurer to stop the owner from changing the designation. What is the position?
Answer and explanation
Answer: D. Where the designation is revocable, the beneficiary holds only an expectancy and the owner may change it, which is one of the rights ownership carries. Consent, notice, and objection become relevant only where the designation has been made irrevocable.Source: N.Y. Ins. Law § 3203 — 3203, Owner's rights and the beneficiary
7 / 8
A New York owner assigns a life policy as collateral for a loan. What does the assignment achieve?
Answer and explanation
Answer: C. An assignment transfers rights in the contract to the assignee to the extent the assignment provides, which is what makes a policy usable as collateral. It cannot change who is insured, does not by itself move the premium obligation, and does not alter the policy's premium status.Source: N.Y. Ins. Law § 3203 — 3203, Assignment of the contract
8 / 8
A payee elects a life income with a ten year period certain and dies in the eighth year. What does the insurer do?
Answer and explanation
Answer: A. The period certain guarantees payments for the full ten years, so a successor payee receives the balance of that term, here two years. The guarantee runs from the start of the income, not from the payee's death, and it is paid as instalments rather than a lump sum.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, life income with period certain
All 106 life insurance policy provisions, options, and riders questions
- A policy designates 'my children' as beneficiary and a child is born after the policy is issued. How is that child treated?
- A policyowner declines several offered cost of living increases in a row. What is the usual consequence under the rider?
- A policyowner exercises a long-term care rider on a life policy and receives benefits. What is the effect on the policy's death benefit?
- A policyowner's guaranteed insurability rider lists the birth of a child as an alternate option date. What may the owner generally do on that date?
- A producer describes a term rider added to a permanent life policy. Which statement avoids overstating what the rider provides?
- A spouse rider is about to end at the stated age. What does the conversion feature ordinarily allow?
- A waiver of premium rider is in force and the insured becomes totally disabled. What does the rider do once the waiting period has been satisfied?
- A whole life owner needs extra protection only while a business loan is outstanding. Which addition most directly fits that limited-duration need?
- A widow wants income now but the capital preserved for her children. Which settlement option answers that?
- A young couple with three children want the whole household covered at modest cost under one contract. Which rider fits?
- Against what does an owner borrow when taking a policy loan?
- An accidental death benefit (double indemnity) rider pays an additional death benefit under what circumstance?
- An insured and the primary beneficiary die in the same accident and the common disaster clause applies. Where do the proceeds go?
- An insured applies to accelerate the death benefit. What must the insurer do before paying under section 3230?
- An insured becomes totally disabled and holds a waiver of cost of insurance rider. When does the waiver ordinarily begin?
- An insured dies with a policy loan outstanding. How does the insurer settle the claim?
- An insured dies with dividends accumulated at interest still on deposit. What does the beneficiary receive?
- An insured exercises a guaranteed insurability option after adopting a child. Which premium basis generally applies to the newly purchased coverage?
- An insured wants a benefit that supplies income after a qualifying total disability rather than merely waiving policy charges. Which rider most directly fits?
- An insured with an accidental death and dismemberment rider loses the sight of both eyes in a covered accident. What does the rider ordinarily provide?
- An insured's health has deteriorated badly since issue. How does that affect the purchase of paid-up additions?
- An owner has relied on the automatic premium loan for several years running. What is the consequence?
- An owner stops paying premiums on a whole life policy and elects nothing. What does the policy generally do with the cash value?
- An owner takes a partial surrender in the fourth policy year of a universal life contract. What should be expected?
- An owner wants the original permanent insurance plan to continue for a smaller amount with no further premiums. Which nonforfeiture option fits?
- An owner wants to replace a named irrevocable beneficiary with someone else. What additional requirement applies?
- Does the grace period in section 3203(a)(1) apply to the first premium?
- How do reduced paid-up and extended term differ in what each keeps from the original policy?
- How does a cost of living (COLA) rider adjust policy coverage over time?
- How does a joint and survivor life income differ from a joint life income?
- How does a long-term care (LTC) rider attached to a life policy fund care expenses?
- How does a partial withdrawal differ from a policy loan on a universal life policy?
- How does a survivorship clause in a common disaster provision operate?
- How does an automatic premium loan come to apply to a policy?
- How does the interest only settlement option work?
- How does the reduction of premium dividend option work?
- How does waiver of cost of insurance differ in effect from waiver of premium on a fixed whole life policy?
- How is a children's term rider ordinarily priced and applied?
- How is the amount of cover under a family term rider usually expressed?
- How is the interest credited under the accumulation at interest dividend option treated for tax?
- How is the interest paid under the interest only settlement option treated for tax?
- How is the lump sum paid under the cash settlement option treated for federal income tax?
- How may an accelerated payment of the death benefit be provided under New York law?
- If a cash-value policyowner stops paying premiums and selects the extended term nonforfeiture option, what coverage is provided?
- If a traditional policy uses the amount-purchased method for a misstated age, what is adjusted?
- In the succession of beneficiaries, who receives the death benefit if the primary beneficiary has died before the insured?
- In what order are withdrawals from a universal life policy that is not a modified endowment contract generally taxed?
- Interest credited on the retained proceeds exceeds the guaranteed rate under a fixed-amount option. What is the effect?
- Is an owner obliged to repay a policy loan, and what follows from leaving it outstanding?
- Three children share a benefit and one dies before the insured, leaving two children of her own. How do per stirpes and per capita designations differ here?
- Under a fixed-period settlement, what happens to the instalment if the beneficiary shortens the period elected?
- Under the cash dividend option, what does the participating policyowner receive?
- What benefit does a return of premium (ROP) term rider provide if the insured survives to the end of the term?
- What condition must be satisfied before a waiver of premium rider waives the policyowner's premium obligations?
- What delay may an insurer impose on paying a policy loan on a fixed policy?
- What distinguishes a class beneficiary designation from an individual beneficiary designation?
- What does a family term rider add to a base life insurance policy?
- What does a spendthrift clause in a life insurance settlement do?
- What does a waiver of cost of insurance rider cover on a universal life policy during total disability?
- What does an accidental death benefit rider generally provide when the insured dies from a covered accident?
- What does an owner gain from paid-up additions that the one-year term dividend option does not provide?
- What does the automatic premium loan provision do at the end of the grace period?
- What does the cash surrender nonforfeiture option give an owner who ends a permanent policy?
- What does the one-year term dividend option buy with the declared dividend?
- What does the paid-up additions dividend option buy?
- What does the straight life income settlement option guarantee to the payee?
- What follows from naming the insured's estate, rather than a person, as the beneficiary of the policy?
- What happens to a spouse or other-insured term rider if the base insured dies first?
- What happens to dividends left with the insurer under the accumulation at interest option?
- What is fixed and what varies under the fixed-amount settlement option?
- What is fixed and what varies under the fixed-period settlement option?
- What is the function of a payor benefit rider attached to a juvenile life insurance policy?
- What is the practical difference for an owner between a revocable and an irrevocable beneficiary designation?
- What is the role of a tertiary beneficiary in the succession of beneficiaries?
- What may an insurer promise about the dividends on a participating policy?
- What need does a children's term rider chiefly meet?
- What notice does section 3230 require in the application for a policy providing accelerated death benefits?
- What problem does the entire contract provision address?
- What problem is the common disaster clause written to solve?
- What restriction applies to an owner who names an irrevocable beneficiary?
- What right does a guaranteed insurability rider (GIR) grant to the policyowner?
- What role does proof of death play in a New York life claim?
- When an increasing term rider is added to a whole life policy to provide a return-of-premium death benefit, what does the total benefit equal at death?
- When does a spendthrift clause stop protecting proceeds from the beneficiary's creditors?
- Which beneficiary designation generally allows the owner to make a change without the beneficiary's consent?
- Which description best identifies the coverage supplied by a term rider?
- Which need does the fixed-amount option meet better than the fixed-period option?
- Which owner is the reduction of premium dividend option best suited to?
- Which owner would the one-year term dividend option suit?
- Which three nonforfeiture options does a permanent policy customarily make available?
- Who exercises the rights a New York life policy confers, where the owner is not the insured?
- Who may elect a settlement option other than cash payment, and when may that election be made?
- Whom does a spouse or other-insured term rider cover, and for how long?
- Why does a life income option pay a younger payee less each month than an older payee for the same proceeds?
- Why does the one-year term dividend option produce more death benefit per dividend dollar than paid-up additions?
- Why is a dividend on a participating life policy generally not taxable to the owner?
- Why is naming a minor directly as beneficiary of a life policy usually discouraged?
- Why might an owner name a trust as the beneficiary of a life insurance policy?
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