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Life Policy Riders, Provisions, Options and Exclusions: Practice Questions

20 free practice questions with explanations. Pick an answer for each, then check your score.

Exam weight: 15 of 100 scored questions on the Life and Health general knowledge exam. Updated 2026-11-04.

Quick study guide

Most questions in this section give a short scenario (the insured dies during the grace period, after understating her age, or in the same accident as the beneficiary) and ask what the insurer pays or what the owner can do. Learn what each rider adds and what each standard clause protects.

Riders

Waiver of premium keeps the policy in force without premiums while the insured is totally disabled as the rider defines it, usually after a waiting period; on universal life the same idea is waiver of monthly deduction. Payor benefit waives premiums on a child's policy if the adult paying them dies or becomes disabled. Guaranteed insurability lets the owner buy more coverage at set dates or life events without proving good health. Accidental death pays an extra benefit when death is accidental; AD&D adds benefits for losing limbs or sight. Term riders add term coverage on the insured or on other insureds such as a spouse or children. Accelerated death benefit and long-term care riders pay part of the death benefit early, which reduces what the beneficiary later receives. Cost of living riders raise coverage with inflation, and return of premium riders refund premiums if the insured outlives the term.

Standard provisions

Provision	What it does	Typical rule
Entire contract	The policy plus the attached application is the whole agreement	Required by state law
Free look	Owner may return the new policy for a full refund	Set by each state; Texas allows at least 10 to 20 days
Grace period	Coverage stays in force while a premium is late	At least one month, often 31 days
Incontestability	After the period ends, the insurer can't void the policy over application misstatements	Two years
Suicide	Suicide early in the policy returns premiums instead of the death benefit	Usually two years
Misstatement of age or gender	Benefit is adjusted to what the premium would have bought	Policy is not voided
Reinstatement	Restores a lapsed policy	Proof of insurability, back premiums with interest, new contestable period

Ownership and beneficiaries

The owner names and changes beneficiaries, borrows, assigns and surrenders the policy. A revocable beneficiary can be changed at any time; an irrevocable beneficiary must consent first. The primary beneficiary is paid first and the contingent beneficiary only if no primary survives; with no surviving beneficiary, proceeds go to the estate. Simultaneous death laws and common disaster clauses treat the insured as outliving a beneficiary who dies at about the same time. Insurers don't pay large sums directly to minors, so a guardian, trustee or custodian is used. A class designation names a group, such as my children.

Cash value, dividends, payouts and exclusions

If premiums stop, the nonforfeiture options are cash surrender, reduced paid-up (smaller coverage for life) and extended term (full face amount for a limited time). A policy loan or automatic premium loan borrows against cash value; any unpaid balance comes off the death benefit. Participating policies pay dividends that are not guaranteed. Settlement options include lump sum, interest only, fixed period, fixed amount and life income. Common exclusions are war, aviation other than as a fare-paying passenger, and hazardous occupations or hobbies.

Practice questions

An insured who has a waiver of premium rider becomes totally disabled as the rider defines it. Once the waiting period has passed, what happens?
1. A.The policy is changed to reduced paid-up insurance with no further premiums.
2. B.The insurer waives the premiums while the disability lasts, and the policy stays in force.
3. C.The insurer pays the insured a monthly income based on lost earnings.
4. D.The insurer pays the face amount to the insured right away.
Show answer
Answer: B. Waiver of premium only covers the premiums so the coverage continues; the Texas Department of Insurance notes it is usually offered only to people younger than 60. A monthly income replacing earnings is a disability income benefit, paying the face amount early is an accelerated death benefit, and reduced paid-up is a nonforfeiture option used when premiums stop.
Source: Texas content outline II.A.1; Texas Department of Insurance: Life insurance guide
A policyowner bought whole life with a guaranteed insurability rider at age 25. At 30 she is diagnosed with diabetes and wants more coverage. Under the rider she can:
1. A.Buy more coverage only after passing a new medical exam.
2. B.Buy more coverage at the next option date or life event without proving good health.
3. C.Buy more coverage at the premium rate for her age when the policy was first issued.
4. D.Increase coverage only if her diagnosis came from an accident.
Show answer
Answer: B. Guaranteed insurability lets the owner add coverage at specified dates or events, such as a birthday or the birth of a child, regardless of health. The extra coverage is priced on her age when she buys it, not her original issue age. The option must be used by the dates the rider sets, and the cause of her condition doesn't matter.
Source: Texas content outline II.A.2; Texas Department of Insurance: Life insurance guide
A life policy has a $200,000 face amount and a $200,000 accidental death rider. The insured dies of a heart attack at home. How much does the beneficiary receive?
1. A.$200,000
2. B.Nothing, because the death was not accidental
3. C.$400,000
4. D.$100,000
Show answer
Answer: A. The accidental death rider pays its extra benefit only when death results from an accident as the rider defines it. A death from illness pays the base face amount alone. Had the insured died in a covered accident, the beneficiary would have received both amounts, $400,000, which matches the Texas Department of Insurance example of a rider doubling the payout.
Source: Texas content outline II.A.4; Texas Department of Insurance: Life insurance guide
A parent adds a children's term rider to her own life policy. Which statement is typically true?
1. A.It pays the parent's premiums if one of the children becomes totally disabled.
2. B.It gives term coverage on her children, usually until each reaches an age such as 21 or 25.
3. C.It covers each child from the moment of birth, with no minimum age requirement.
4. D.It builds a separate cash value account in each child's name for college.
Show answer
Answer: B. A children's rider adds term life coverage on the insured's children. The Texas Department of Insurance says most companies require a child to be at least 14 days old and coverage typically lasts until the child turns 21 or 25. It is term coverage, so it builds no cash value, and waiving premiums is the job of a waiver or payor rider.
Source: Texas content outline II.A.5–6; Texas Department of Insurance: Life insurance guide
A physician certifies that an insured is terminally ill. Her life policy includes an accelerated death benefit. Which statement is correct?
1. A.She receives a separate living benefit that leaves the death benefit unchanged.
2. B.The insurer pays her twice the face amount because the illness is terminal.
3. C.She can receive part of the death benefit now, reducing what her beneficiary later gets.
4. D.She can collect only if the policy has been in force for at least ten years.
Show answer
Answer: C. An accelerated death benefit prepays some or all of the death benefit to an insured with a terminal illness, specified disease or long-term care illness, and the amount paid is deducted from the death benefit (Texas Insurance Code § 1111.052 says this for term policies). Federal tax law treats amounts paid to an insured certified as expected to die within 24 months as paid by reason of death, so they are generally excluded from income.
Source: Texas content outline II.B (accelerated death benefits); Texas Department of Insurance: Life insurance guide; Texas Insurance Code ch. 1111, § 1111.052; 26 U.S.C. § 101(g) (accelerated death benefits)
Under the entire contract provision, the contract between the insurer and the policyowner consists of:
1. A.The policy, the application and the agent's sales brochure.
2. B.The policy and anything the agent said during the sale.
3. C.The policy and the copy of the application attached to it.
4. D.The policy's data page and the insurer's current rate manual.
Show answer
Answer: C. State law requires the policy, or the policy and the application, to make up the entire contract, and Texas also requires a copy of the application to accompany the policy. The insurer can't rely on statements or documents that are not part of the contract, such as brochures, rate manuals or an agent's spoken remarks.
Source: Texas content outline II.B.1; Texas Insurance Code § 1101.003 (entire contract); Texas Insurance Code § 705.103 (application must accompany policy)
A policyowner receives her new life policy, reads it, and decides she doesn't want it after all. Under the free-look provision she can:
1. A.Exchange it for an annuity during the grace period.
2. B.Return it within the free-look period for a full refund of the premium.
3. C.Cancel it only if she proves the agent misrepresented it.
4. D.Return it within two years for a refund minus a surrender charge.
Show answer
Answer: B. The free-look period lets the owner cancel a new policy for any reason and get a full refund. Its length is set by state law: the Texas Department of Insurance says Texas policies allow at least 10 to 20 days, and the NAIC replacement model gives 30 days when a policy replaces existing coverage. Two years is the contestable period, not the free look.
Source: Texas content outline II.B.3; Texas Department of Insurance: Life insurance guide; NAIC Life Insurance and Annuities Replacement Model Regulation (#613), § 5
A policyowner named his brother as irrevocable beneficiary. He now wants to make his new wife the beneficiary instead. Which statement is true?
1. A.He needs approval from the state insurance department.
2. B.The change takes effect automatically after the contestable period.
3. C.He can make the change at any time just by notifying the insurer.
4. D.He needs his brother's written consent to make the change.
Show answer
Answer: D. An irrevocable beneficiary has a vested interest, so the owner can't remove that beneficiary without consent, and usually can't take loans, assign or surrender the policy without it either. A revocable beneficiary is the one the owner can change at any time by notifying the insurer. The contestable period has nothing to do with beneficiary changes.
Source: Texas content outline II.B.6.b
An insured and his wife, the primary beneficiary, die in the same car crash, and no one can show who died first. Their son is the contingent beneficiary. Under a simultaneous death law such as Texas's, the proceeds go to:
1. A.Nobody; the insurer keeps them because no primary beneficiary survived.
2. B.The wife's estate, because she was the primary beneficiary.
3. C.The son, because the insured is treated as having outlived his wife.
4. D.Half to the wife's estate and half to the son.
Show answer
Answer: C. Texas law says that if the insured and a beneficiary die less than 120 hours apart, the insured is considered to have survived the beneficiary, so the wife is treated as having died first and the contingent beneficiary is paid. Other states have similar rules, and a policy's common disaster clause can set its own survival period. If no beneficiary survived, the proceeds would go to the estate, not stay with the insurer.
Source: Texas content outline II.B.6.a and c; Texas Estates Code § 121.153 (insurance proceeds, 120-hour survival); Texas Department of Insurance: Life insurance guide
An insured dies 10 days after missing a premium due date, while the policy is still in its grace period. The insurer will:
1. A.Pay the death benefit minus the overdue premium.
2. B.Deny the claim because the premium was not paid.
3. C.Pay only the policy's cash surrender value.
4. D.Pay the death benefit plus a refund of the last premium paid.
Show answer
Answer: A. The policy stays in force during the grace period, which Texas law requires to be at least one month; most policies allow 31 days. If the insured dies during it, the insurer pays the death benefit and may deduct the unpaid premium. The policy lapses only if the premium is still unpaid when the grace period ends.
Source: Texas content outline II.B.7.b; Texas Insurance Code § 1101.005 (grace period); Texas Department of Insurance: Life insurance guide
A whole life policyowner forgets a premium and the grace period ends. The policy has an automatic premium loan provision and enough cash value. What happens?
1. A.The policy lapses, and the owner must apply for reinstatement with proof of health.
2. B.The policy converts to term insurance for a reduced face amount with no premiums.
3. C.The insurer waives that premium and all later premiums for the life of the policy.
4. D.The insurer pays the premium with a loan against the cash value, and the policy stays in force.
Show answer
Answer: D. An automatic premium loan uses the cash value to pay an overdue premium so the policy doesn't lapse. The loan charges interest, and any unpaid balance is subtracted from the death benefit. Without this provision, the policy would lapse and its default nonforfeiture option would apply. A permanent waiver of premium comes only from a waiver rider when the insured is disabled.
Source: Texas content outline II.B.7.c
To reinstate a lapsed life policy, the owner typically must:
1. A.Buy a new policy at the original issue age with no other conditions.
2. B.Wait until the original contestable period would have ended.
3. C.Pay only the next premium due, with no health questions.
4. D.Show evidence of insurability and pay the overdue premiums with interest.
Show answer
Answer: D. Reinstatement restores the original policy if the owner pays the overdue premiums with interest and, usually, answers health questions or takes an exam. The Texas Department of Insurance says most companies allow reinstatement within five years and that a reinstated policy gets a new contestable period. A policy that was surrendered for its cash value generally can't be reinstated.
Source: Texas content outline II.B (reinstatement); Texas Department of Insurance: Life insurance guide
An insured with a $100,000 whole life policy dies owing a $8,000 policy loan plus $500 of unpaid loan interest. How much does the beneficiary receive?
1. A.$92,000
2. B.$91,500
3. C.$108,500
4. D.$100,000
Show answer
Answer: B. A policy loan is secured by the policy, so any unpaid loan and interest are subtracted from the death benefit: $100,000 minus $8,500 is $91,500. Texas law also says an unpaid loan doesn't void the policy until the amount owed equals or exceeds the cash value. Subtracting the loan but not the interest gives the wrong figure of $92,000.
Source: Texas content outline II.B (policy loans); Texas Insurance Code § 1101.009 (policy loans)
A policyowner stops paying premiums on a whole life policy that has built cash value. She wants to keep the full face amount for as long as the cash value can pay for it, with no more premiums. Which nonforfeiture option fits?
1. A.Extended term insurance
2. B.One-year term dividend option
3. C.Cash surrender
4. D.Reduced paid-up insurance
Show answer
Answer: A. Extended term uses the net cash value to buy paid-up term coverage for the full face amount for as long as the value lasts. Reduced paid-up keeps coverage for life but at a smaller face amount, and cash surrender ends the coverage. State nonforfeiture laws based on the NAIC model require a cash surrender value and a paid-up benefit, with 60 days after the missed premium to choose; one-year term is a dividend option, not a nonforfeiture option.
Source: Texas content outline II.B (nonforfeiture options); NAIC Standard Nonforfeiture Law for Life Insurance (#808), § 2; Texas Insurance Code § 1105.004 (required nonforfeiture provisions)
Which dividend option uses each dividend as a single premium to buy a small amount of additional fully paid-up whole life coverage?
1. A.Paid-up additions
2. B.Reduction of premium
3. C.Accumulation at interest
4. D.One-year term
Show answer
Answer: A. Paid-up additions buy extra permanent coverage that increases both the death benefit and the cash value. The one-year term option buys term coverage that lasts only a year, accumulation leaves dividends with the insurer to earn interest, and reduction of premium applies them to the next premium. Dividends come only from participating policies and are not guaranteed.
Source: Texas content outline II.B (dividends and dividend options); Texas Department of Insurance: Life insurance guide
An insured dies three years after his policy was issued. The insurer then learns he left a past medical condition off the application by mistake. Under the incontestable clause, the insurer generally:
1. A.Can deny the claim because the condition was not disclosed.
2. B.Must refund the premiums instead of paying the death benefit.
3. C.Can reduce the payment to the policy's cash value.
4. D.Must pay the claim, because the two-year contestable period has ended.
Show answer
Answer: D. Once a policy has been in force for two years during the insured's lifetime, the insurer can no longer contest it over application misstatements, except for nonpayment of premium. Denying the claim and refunding premiums is what can happen if the insured dies within the first two years. Texas law also lets a policy stay contestable at any time for breaking policy conditions about military service in wartime.
Source: Texas content outline II.B (incontestability); Texas Insurance Code § 1101.006 (incontestability); Texas Department of Insurance: Life insurance guide
An insured dies by suicide 14 months after the policy was issued. The policy has a two-year suicide clause. The insurer will most likely:
1. A.Pay half of the death benefit and refund the remaining premiums.
2. B.Pay the full death benefit, because the policy was already in force.
3. C.Refund the premiums paid instead of paying the death benefit.
4. D.Pay nothing at all and keep every premium that was paid.
Show answer
Answer: C. During the suicide period, insurers usually don't pay the death benefit for suicide but must return the premiums to the beneficiary. Two years is the usual length, though state law sets the limit. Once the period has passed, the insurer must pay regardless of the cause of death.
Source: Texas content outline II.B (suicide); Texas Department of Insurance: Life insurance guide
On her application an insured gave her age as 40 when she was really 43. The error is discovered after her death. Under the misstatement of age provision, the insurer will:
1. A.Pay the full face amount and bill the estate for the premium difference.
2. B.Deny the claim entirely because the application contained a misstatement.
3. C.Refund the premiums she paid and pay nothing else.
4. D.Pay the amount of coverage her premiums would have bought at her correct age.
Show answer
Answer: D. The policy is not voided. When age is understated, state law requires the benefit to be adjusted to what the premiums paid would have bought at the true age, so the beneficiary receives less than the face amount. The same approach applies to a misstated gender, and the adjustment can be made even after the contestable period.
Source: Texas content outline II.B (misstatement of age and gender); Texas Insurance Code § 1101.008 (understated age)
A beneficiary asks the insurer to hold the death proceeds and pay her only the interest they earn, leaving the principal for later. Which settlement option is this?
1. A.Interest only
2. B.Fixed period
3. C.Fixed amount
4. D.Life income
Show answer
Answer: A. Under the interest option the insurer keeps the proceeds and pays the interest at regular intervals. Fixed period pays out principal and interest over a chosen number of years, fixed amount pays a set sum until the money runs out, and life income pays for the rest of the beneficiary's life.
Source: Texas content outline II.B (settlement options); Texas Department of Insurance: Life insurance guide
A life policy contains a typical aviation exclusion. It would most likely apply if the insured died:
1. A.As a fare-paying passenger on a scheduled airline flight.
2. B.From an illness caught on a business trip abroad.
3. C.While piloting a private plane as a hobby.
4. D.In a car crash on the way to the airport.
Show answer
Answer: C. Aviation exclusions target non-commercial flying, such as private pilots and crew, not fare-paying passengers on scheduled airlines. Texas law lets a policy pay less than the face amount for deaths from aviation activities under conditions stated in the policy, and the same applies to hazardous occupations named in the policy. War is the other classic exclusion. A car crash or an illness is not an aviation risk.
Source: Texas content outline II.D.1–3; Texas Insurance Code § 1101.055 (aviation and hazardous occupation)

Where these questions come from: Texas content outline (Pearson VUE #124401, effective 1 Sep 2026), Life and Health general knowledge, section II: Policy Riders, Provisions, Options, and Exclusions — 15 of 100 scored questions. See how we write questions.