IIQE Paper 3 Benefit Riders and Other Products question: claims under an accelerated death benefit rider

IIQE Paper 3Benefit Riders and Other Products

Which two of the following statements about claims under an accelerated death benefit rider are true? (i) Some insurers ask the beneficiaries to sign a release before paying. (ii) Where the policy is assigned, the assignee's signed release is needed first. (iii) Paying the accelerated benefit leaves the later death benefit unchanged. (iv) The benefit is usually released only after the life insured's death.

A (i) and (ii)
B (i) and (iii)
C (ii) and (iv)
D (iii) and (iv)

Show the answer and explanation

Answer: A. (i) and (ii)

Answer: (i) and (ii). Statements (i) and (ii) are true; (iii) and (iv) are not.(i) True. The release acknowledges that the death benefit is reduced by the payment.(ii) True. An assignee must sign the release before the benefit is paid.(iii) False. The death benefit is reduced by the amount paid early.(iv) False. The whole point is payment before death.Why not the others:• (i) and (iii): includes (iii), which is false, and leaves out (ii), which is true.• (ii) and (iv): includes (iv), which is false, and leaves out (i), which is true.• (iii) and (iv): includes (iii) and (iv), which are false, and leaves out (i) and (ii), which are true.Watch out: Forgetting that an early payment reduces what the beneficiaries later receive.Rule: An accelerated payment reduces the death benefit, so some insurers want the beneficiaries' release, and an assignee must sign one before payment.Source: IA Long Term Insurance (Paper III) Study Notes, 2022 Edition (8th ed., June 2022; for exams from 24 Oct 2022), 3.3(c)-(d), p. 3/6