CH 4

per capita

by the head, evenly distributing benefits among the living named beneficiaries.

Entire contract

this stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract. No statement before the contract was written can be used to alter the contract.

waiver of premium

this waives the premium if the insured becomes totally disabled. If the insured is never able to return to work, the premium will continue to be waived by the insurance company. Most insurers impose a 6-month waiting period from the time of the disability until the first premium is waived.

Payment of premiums

the policy stipulates when the premiums are due, how often they are to be paid and to whom. if the insured dies during a period of time for which the premium has been paid, the insurer must refund any unearned premium along with the policy proceeds.

per stirpes

this means by the bloodline, aka if a beneficiary has 2 children, and the beneficiary died, the children would get the death benefit.

spendthrift clause

this protects beneficiaries from the claims of their creditors. this clause applies to the benefits that are paid in a fixed period or fixed amount installments. the beneficiary does nt have the right to select a different settlement option and is not allowed to assign or borrow any of the proceeds.

Disability income benefit

With this rider, in the event of disability the insurer will waive the policy premiums and pay a monthly income to the insured. The amount paid is normally based on a percentage

classes

a class of beneficiary is using a designation such as "my children". Usually you want to be specific by saying "the children of the union of Lynn Smith".

cost of living rider

addresses the inflation factor by automatically increasing the amount of insurance without evidence of insurability from the insured. the face value may increase by a cost of living factor tied to an inflation index such as the consumer price index

incontestability

clause that prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years even if there has been a misstatement of facts or concealment of a material fact.

status clause

excludes all causes of death while the insured is on active military duty in the military

Assignment

policy owner of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without consent of the insurer. Transfer of life policy does not change the insured or amount of coverage. There are 2 types of assignments:

other insured rider

provides coverage for one or more family members other than the insured. the rider usually level term insurance, attached to the base policy covering the insured. It can be considered a Spouse term rider, and allows the spouse to be added to coverage for a limited period of time.

suicide provisions

If the insured commits suicide within 2 years following the policy effective date the insurers liability is limited to the refund of premium. if the insured committees suicide after 2 year period, its paid to beneficiary

Absolute assignment

Involves the transferring of all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights. Policy owner does not need to have insurable interest in the insured

Collateral Assignment

Involves transfer of partial rights to another person. This is usually done in order to secure a loan or some other transaction. This is a partial nd temporary assignment of some of the policy rights. Once a loan or debt is repaid, the assigned rights are returned.

misstatement of age and gender

Since age and gender are a big thing, if the applicant misstated their age or gender, the insurer is allowed to adjust the benefits to an application.

exclusions

types of risks the policy will not cover. Certain exclusions are standard for all policies, while others are attached to the policy as an exclusion rider. the most common exclusions found in life insurance policies are aviations or other hazards.

ownership

The parties to the insurance contract are the insurer, the policy owner, the insured, and the beneficiary. the policy owner and the insured may be the same person or different persons. Regardless, only the policy owner has the ownership rights under the policy, and not the insured or the beneficiary. The policy owner has the responsibility of paying the policy premiums and is also the person who must have interest in the insured

payment of claims

upon receipt of a written proof of loss, the insurer must pay death claims immediately. if there is no beneficiary named in the policy, the death proceeds are paid to the estate of the insured.

riders

They modify provisions that already exist and are used to increase or decrease policy benefits and premiums

Long term care coverage

This coverage will

Effects of divorce on designation of beneficiary

if a spouse named as beneficiary has obtained or consented to a final decree, he or she has in effect terminated any marital decree or judgement in not recognized as valid.

estates

if none of the beneficiaries are alive, the insured's estate will automatically receive the proceeds of a life insurance policy.

return of premium

implemented by using increasing term insurance. when added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable.

family term rider

incorporates the spouse term rider along with the children's term rider in a single rider. When added to a whole life policy, the family term rider provides level term insurance benefits covering the spouse and all of the children in the family

uniform simultaneous death law

it will be assumed the primary beneficiary died first in a common disaster. this provides that the proceeds will be paid to enter the contingent beneficiary or to the insureds estate, if no contingent beneficiary is designated. the intent is to fulfill the wishes of the policy owner. most insurers specify a certain period time, usually 14-30 days, in which the death must occur in order for this provision to apply.

options

offer insurers and insureds ways to invest or distribute a sum of money available in a life policy

result clause

only excludes the death benefit if the insured is killed as a result of an act of war

accidental death rider

pays some multiple of the face amount if the death is the result of an accident as defined in the policy. death must usually occur within 90 days of such an accident. The benefit is usually double or even triple the indemnity.

Grace period

period of time after the premium due date that the policy owner has to pay the premium before the policy lapses (usually 30-31 days). The purpose it to make sure that there is no lapse of the policy.

right to examine (free look)

the free-look provision allows the policy owner 10 days from receipt to look over the policy and if dissatisfied for a reason, return it for a full refund of premium.The free look officially begins when the policy owner receives the policy.

individuals as beneficiaries

the owner of a life policy may name any individual as a beneficiary, in which case the individual beneficiaries will split the benefit

beneficiary

the person or interest to which the policy proceeds will be paid upon the death of the insured. the beneficiary may be a person, class of persons, the insured's estate, or an institution.

policy loan option

the policy owner is entitled to borrow an amount equal to the available cash value. Any outstanding loans will be deducted from the policy proceeds upon the insureds death. The insurer must provide 30 days written notice to the policyowner that the policy is going to lapse. Ins. companies may defer a policy loan request for up to 6 months

irrevocable

the policy owner may not exercise certain rights without the consent of the beneficiary. in addition to being unable to change the beneficiary, the policy owner cannot borrow against the policy's cash value.

revocable

there can be any sort of change at any time

provisions

they stipulate the rights and obligations of an insurance contract and are fairly universal

reinstatement

this allows a lapsed policy to be put back in force. The maximum time limit for reinstatement is 3 years after it is done. The policy owner is also required to pay back all the premiums plus interest, and may be required to repay any outstanding loans plus interest. If it's surrendered, it can't be reinstated

Partial withdrawl

this is allowed with universal life policies. There may be a charge for each withdrawal and there are usually limits as to how much or how often a withdrawal may be made. The death benefit will be reduced by the amount of any partial surrender.

Automatic premium loans

this is commonly added. This is a type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.While the insurer may defer requests for the other loans for a period of up to 6 months, loan requests for payment of due premiums must be honored immediately

payor benefit

primarily used with juvenile policies; otherwise, it functions like the waiver of premium rider. if the payor becomes disabled for at least 6 months or dies, the insurer will waive the premiums until they reach 21

Children's term rider

this allows children of the insured to be added to coverage for a limited period of time for a specified amount. This is also term insurance and usually expires when they reach 18 or 21

Accelerated benefit/living needs rider

provides for an early payment of part of the death benefit if the insured is diagnosed with a terminal illness that will result in the death within 2 years. this is mainly meant to help with medical expenses

guaranteed insurability rider

rider allows the insured to purchase additional coverage at specified future dates or special events without evidence of insurability.