Life Insurance Policy Provisions

War or Military Service Exclusion

-status type: death occurs while in the military regardless of the reason -results type: death occurs related to the military

Assignment

A transfer of the owner's rights to another individual or entity.

Spendthrift Provision

(may be included in the policy) -Death benefit cannot be paid in a lump sum -Death benefits cannot be claimed by creditors before payment to beneficiary -Death benefits cannot be pledged by the beneficiary to a creditor -Death benefits cannot be used by the beneficiary as collateral for a loan

Ownership Rights

-name or change the beneficiary -select settlement options -borrow or withdraw policy cash values -receive policy dividends (participating policies) -surrender or cancel the policy -assign or transfer ownership -select/change the premium payment mode -select a non-forfeiture option -receive policy proceeds upon maturity or endowment

Incontestability Provision

After an insurance policy has been in effect for 2 years, company cannot claim that a statement in app was meant to defraud insurer

Provisions

Describe how certain common situations will be handled, as well as rights and obligations of the policyowner, and the insurer.

Collateral Assignment

Does not change ownership. The most common type is to pledge all or part of the death benefit as collateral for a loan.

Insuring Clause

Ensures the insurer promises to pay benefits upon the insured's death. It includes what the company will pay, the death benefit amount, and to whom will be paid.

Primary Beneficiary

First in line to receive the death benefit.

Free Look Provision

Gives the policyowner a period of time to return a policy for any reason within ten days of delivery and receive all premiums paid.

Grace Period Provision

If insured does not pay prem on due date, the policy will stay in force before it actually lapses; lasts for up to 31 days

Uniform Simultaneous Death Act

It directs that in life insurance if the insured and the primary beneficiary die at the same time the policy benefits are payable as if the insured outlived the beneficiary.

Hazardous Occupation Exclusion

No coverage if death is related to a hazardous occupation as stated in the policy, such as stunt drivers or auto racers.

Payment of Premium Provision

Specifies when and how premiums are to be paid. The more frequently the premium mode, the more the policy will cost over time. Premiums are due in ADVANCE, on or before the date on which the next period of coverage begins.

Payment of Claims Provision

States the insurer will pay the death benefit PROMPTLY. The company is required to pay a death claim within 60 days after receiving notification of the claim.

Misstatement of Age

The face amount of a policy will be adjusted to an amount the premium would have purchased at the insured's correct age.

Trustee

The party that manages the property according to the grantor's instruction.

Benificiary

The person or entity who will get the death benefit. (person of interest)

Entire Contract

The policy itself and the original application constitute the ENTIRE contract, and the insurer may not refer to documents other than these when disputing a claim.

Trust

a legal entity which can hold title to property while it is managed for the benefit of others. Generally designed to allow someone to enjoy the benefit of the proceeds without giving them ownership.

Absolute Assignment

all ownership rights in the policy are transferred to a new owner

Facility of Payment Provision

allows the insurer to pay all or part of the death benefit to someone other than a designated beneficiary if -the beneficiary is a minor, deceased, or cannot be found -someone other than the beneficiary incurred the insured's final medical or funeral expenses

Endorsements

any change made to the contract must be made in writing and agreed to by both the insurer and the policyowner.

Common Disaster Provision

ensures a policyowner if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary. It also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds.

Consideration

legal value, bargained for and given in exchange for an act or a promise

Contingent Beneficiary

next in line to receive the death benefit if the primary beneficiary dies before the insured.

Aviation Exclusion

only applies to private pilots, test pilots, military pilots and crew.

Reinstatement Provision

permits the owner to reinstate a lapsed policy. Must be within three years of lapse, and you must pay all past-due premiums with interest.

Exclusions

provision in an insurance policy eliminating coverage for certain risks or limiting coverage. For example, an insurer is not liable for a loss caused by the insured engaging in illegal activity.

Suicide Clause

states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid

Grantor

the individual who sets up the trust, transfers property into it, and writes the instructions as to how the trust will operate

Class Beneficiaries

• A class of beneficiary is using a designation such as "my children" • Two types: - Per Capita - by the head (divided between beneficiaries) - Per Stirpes - by the bloodline (benefit paid to a dead beneficiary is split between his/her children)