Life Insurance Policy Provisions, Options and Riders
Guaranteed Insurability rider
Allows the policy owner to purchase specific amounts of additional insurance at specific dates or events, without providing continued insurability.
Contingent Beneficiary
Needs to outlive the insured and primary beneficiary to get death benefit
Advantage of reinstating a policy
Original age is used for premium determination
Face of Term Policy
Same as the face amount provided under the whole life policy.
Extended Term Nonforfeiture option
Uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. Has highest amount of insurance protection
Paid-up additions
Annual dividend acts as a single premium each year to buy additional amounts of insurance
Accidental Death Rider
Pays 2 or 3 times the face amount if death is the result of an accident an occurs within 90 days of accident
Joint and survivor
Pays while either beneficiary is still living
Trustee
Person who receives the legal title of the property to be used for the benefit of the trust beneficiary
Revocable Beneficiary
Policy owner may change a revocable designation at any time and without the consent of the beneficiary
Incontestability Clause
Prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years
Reinstatement Provision
Requires policy owner to pay all overdue premiums plus interest before the policy is reinstated
Joint and 2/3 Survivor
Surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.
Payor Benefit Rider
Does not increase the death benefit, only pays the premium if the payor is disabled or dies.
Waiver of Cost of Insurance rider
Found in Universal Life policies. If insured becomes disabled, the rider allows the cost of insurance to be waived,
Life income with period Certain
Guarantees payments for the life of the recipient and specifies a guaranteed period of continued payments.
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die
Waiting period on a Waiver of Premium rider
6 months
Fixed-Period Option
A specified period of years is selected, and equal installments are paid to the recipient
Two Types of Assignments
Absolute and Collateral
Grace Period
Automatic premium loan provision is activated at the end of this
10-day free-look period
Begins when the policy is delivered. Permits the insured to return the policy for a full refund of premiums paid. Common
Other-insured rider
Useful in providing insurance for more than one family member.
Common Disaster Clause
When an insured and beneficiary die in a common accident, and the beneficiary dies before or within a specific period of time after the insured
Cost Of Living Rider
Adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living
Cash Option
Allows an insurer to send the policyholder an annual, nontaxable dividend check
Lump sum
Automatically used if policy owner dosen't choose settlement option.
Per Stirpes Class Designation
Provides distribution by family line or branch in the event a beneficiary predeceases the insured
Reduced paid-up nonforfeiture option
Provides protection until the insured reaches 100. Face amount is reduced to what the cash would buy. Covers longest period of time.
Interest earned on policy dividends
Taxable
Collateral Assignment
Transferring partial rights under the policy to another person
Payor Benefit
Allows the insurer to relieve a minor insured from premium payments if the parents die or become disabled. Only pays if the owners disabled for at least 6 months.
Reduction of premium
Allows the policyholder to apply policy dividends toward the next years premium
Policy owner
Can request changes in Premium payments, face value, loans, and policy plans. Has the ownership rights under the policy and not the insured or the beneficiary
Cash Surrender
Funds exceeding the premium paid are taxable as ordinary income
Paid-Up option
Insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. Dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy
Interest Only Option
Insurer retains policy proceeds and pays interest on the proceeds to the beneficiary at regular intervals.
Reduced Paid-Up Policy
Original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original.
Policy Reinstatement
Policy owner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.
Automatic Premium loan
Prevents the unintentional lapse of a policy due to nonpayment of the premium
Single Life
Provides beneficiary with income for the rest office/her life.
Per Stirpes
Provides distribution by family line or branch in the event a beneficiary predeceases the insured
Childrens Rider
Term insurance covering all of the children in the family, including newly born children, and are convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability. Proof of Insurability not required
Spouse Term Rider
Allows a spouse to be added for coverage. Usually Level Term insurance. Available until age 65.
Facility of Payment Clause
Allows an insurer to pay death benefits to a person that seems reasonably entitled to those benefits.
Under and extended term Nonforfeiture option policy cash value is converted to...
The same face amount as in the whole life policy
Absolute Assignment
Transfer of all ownership rights in a policy
Triple Indemnity Accidental Death Rider
Obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. Death must be accidental, occur within 90 days of the accident, not contributed by any other factors
Return of Premium Rider
Achieved by using increasing term insurance. Pays the beneficiary not only the face amount the policy but also the amount that had been paid in premiums
Irrevocable Beneficiaries
Can be changed only with the written consent of that beneficiary
Cash Value
Amount available to the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest
Accelerated Death Benefit
Death benefit received by the beneficiary will be reduced by the amount paid by the accelerated death benefit
Class Designation
Designation such as the child of the insured, or all children of the insured, or all current members of a group