Tennessee Life Producer Practice Exam

If N is a student pilot with a large life insurance policy, which feature would limit the insurer's obligation if N was killed while flying?

1. Premium increase clause

2. Exclusion, which is a specific hazard listed in a policy for which benefits will not be paid

3. Waiting period clause

4. Full disclosure requirement

The correct answer is: Exclusion, which is a specific hazard listed in a policy for which benefits will not be paid

The feature that would limit the insurer's obligation if N, a student pilot, was killed while flying is the exclusion, which specifically identifies certain hazards or activities that are not covered under the policy. Many life insurance policies contain exclusions for activities that are considered high-risk or dangerous, such as flying, especially if the individual is not fully certified as a pilot. In this situation, if the policy includes an exclusion for flying or for individuals who are not licensed pilots, the insurer is not obliged to pay out the benefits in the event of N's death while flying. Insurers design these exclusions to manage risk and reduce the potential for significant financial loss stemming from activities deemed too hazardous for coverage. Understanding these exclusions is crucial for policyholders, as they directly influence the coverage provided and highlight the importance of disclosing any activities that may impact insurance eligibility or claims.