CH3. Life Policy Riders, Provisions, Options and Exclusions

Accelerated death benefits allow the EARLY PAYMENT of a portion of the death benefit if the insured has any of the following conditions:

- A terminal illness - A medical condition that requires an extraordinary medical intervention (such as an organ transplant) for the insured to survive - A medical condition that without extensive treatment drastically limits the insured's lifetime; - Inability to perform activities of daily living (ADLs) - Permanent institutionalization or confinement to a long-term care facility; or - Any other conditions approved by the Department of Insurance KNOW THIS: Accelerated benefit = early payment of part of death benefit to the insured from the insurer for qualifying medical expenses

There are 2 types of policy assignemnts:

- Absolute Assignment: involves transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights. The new policyowner does not need to have an insurable interest in the insured. - Collateral Assignment: involves a transfer of partial rights to another person. It is usually done in order to secure a loan or some other transaction. A collateral assignment is a partial and temporary assignment of some of the policy rights . once the debt or loan is repaid, the assigned rights are returned to the policyowner

Riders Affecting Death Benefit (Type Of Rideravailable Riders)

- Accelerated Death Benefit - Accidental Death or AD&D - Guaranteed Insurability - Return of Premium - Term Riders

Dividend Options ( Option Typeavailable options)

- Cash - Reduction of Premium - Accumulation at Interest - Paid-Up Additions (automatic) - Paid-up Insurance - One-year Term

Settlement Options ( Option Typeavailable options)

- Cash (automatic) - Life Income - Interest Only - Fixed Period - Fixed Amount

Nonforfeiture (Option Typeavailable options)

- Reduced Paid-up - Extended Term (automatic) - Cash

Riders Covering Additional Insured (Type of Rideravilable Riders)

- Spouse -Children - Family - Nonfamily

Disability Riders (Type of Rideravailable Riders)

- Waiver of Premium - Waiver of Monthly Deduction - Payor Benefit - Disability Income - Accelerated (Living) Benefit

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A. Fixed period B. Life with period certain C. Fixed amount D. Interest only

A. Fixed period Under the fixed-period installments option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period

What is the term for how frequently a policyowner is required to pay the policy premium? A. Mode B. Schedule C. Grace period D. Consideration

A. Mode The premium mode is the manner or. frequency that the policyowner pays the policy premium

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A. Payor Benefit B. Jumping Juvenile C. Juvenile Premium Provision D. Waiver of Premium

A. Payor Benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? A. The death benefit will be smaller B. The death benefit will be forfeited. C. The death benefit will be the same as the original face amount D. The death benefit will be larger

A. The death benefit will be smaller If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income

Insuring Clause

A.K.A Insuring agreement sets forth the basic agreement between the insurer and the insured

Life-Income option

A.K.A straight life provides the recipient with an income that he or she cannot outlive The amount of each installment paid is based on the recipient's life expectancy and the amount of principal KNOW THIS: Under life-income settlement option, the recipient cannot outlive the benefit payments.

Most common exclusions in life policies

Aviation Hazardous occupation War Military service

Items stipulated in the contract that the insurer will not provide coverage for are found in the A. Consideration clause B. Exclusions clause C. Insuring clauuse D. Benefit Payment clause

B. Exclusions clause Exclusions are restrictions of coverage as stated in the policy

Consideration

Both parties to a contract must provide some value, or consideration, in order for the contract to be valid

For how long is an insurance company allowed to defer policy loan requests? A. 30 days B. 60 days C. 6 months D. 1 year

C. 6 months Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.

Under which of the following circumstances would an insurer pay accelerated benefits? A. An insured is looking for a way to put her daughter through college. B. A couple wants to build a house and would like tom make a larger down payment. C> An insured is diagnosed with cancer and needs help paying for her medical treatment. D> A couple is nearing retirement and needs a steady stream of income

C. An insured is diagnosed with cancer and needs help paying for her medical treatment Accelerated benefits are paid when insureds endure financial hardship due to severe illness. They may request immediate payment of some portion of the policy's death benefit, usually 50-100% depending on the insurer. Benefits are not taxable.

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy? A. Guaranteed insurability rider B. Payor benefit rider C. Substitute insured rider D. Term rider

C. Substitute insured rider The substitute insured rider, or change of insured rider, allows the policyowner to change the insured listed under the policy, subject to insurability. This rider is often used in business life insurance policies

The insured had his wife named as the beneficiary of this life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account al of the following EXCEPT A. Projected interest rates B. Face amount of the policy C. The insured's age at death. D. The beneficiary's life expectancy

C. The insured's age at death The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be

The paid-up addition option uses the dividend A. To reduce the next year's premium B. To accumulate additional savings for retirement C. To purchase a smaller amount of the same type of insurance as the original policy. D. To purchase a one-year term insurance in the amount of the cash value

C. To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy

Which of the following is true of a children's rider added to an insured's permanent life insurance policy? A. the policy covers only the natural children of the insured B. Each child covered must show evidence of insurability C. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age D. It is permanent insurance

C> It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. Children's rider is term insurance covering all of the children in the family, including newly born children, and is convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability.

What is true about a spouse term rider? A. Coverage is allowed for an unlimited time. B. The rider is decreasing term insruance. C. Coverage is allowed up to age 75 D. The rider is usually level term insurance

D. The rider is usually level term insurance The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount o time, typically expiring at age 65. A spouse term rider ( just like any other insured rider) is usually level term insurance.

Dividends

Dividends are paid only on participating policies. Dividends are a return of excess premiums, and for that reason they are not taxable to the policyowner. Insurance companies cannot guarantee dividends The first dividend could be paid as early as the first policy anniversary, but must occur no later than the end of the third policy year. From then on dividends are usually paid on an annual basis. Policyowners have the option of taking their dividends in one of several different ways. KNOW THIS: Dividends are a return of excess premiums; therefore, not taxable when paid to the policyowner

Hazardous occupations or Hobbies

If the insured is engaged in a hazardous occupation or participates in hazardous hobbies ( such as skydiving or auto racing) death that results from the hazardous occupation or hobby may be excluded from coverage. The underwriter also has the option of charging a higher premium for insuring these risks

The beneficiary designation can provide for three levels of priority or choice.

In the event that the first beneficiary predeceases the insured, the second (or sometimes third) level in the succession of beneficiaries will be entitled to the death proceeds. Each level in the succession of beneficiaries is only eligible for the death benefit if the beneficiary(s) in the level(s) above them has died before the insured

War or Military service

Most life insurance policies issued today do not exclude military service. There are actually two different types of exclusions that may be used to limit the death benefit if the insured dies as a result of war, or while serving in the military. Status clause - excludes all causes of death while the insured is on active duty in the military Results clause - only excludes the death benefit if the insured is killed as a result of an act of war (declared or undeclared)

Aviation

Most life insurance will cover an insured as a fare-paying passenger or a pilot on a regularly scheduled airline, but will exclude coverage for noncommercial pilots, or require an additional premium for the coverage

NAIC

National Association of Insurance Commissioners, an organization composed of insurance Commissioners from all states and jurisdictions formed to resolve insurance regulatory issues

Nonfamily Insured

Other riders are also available to insure somebody who is not a member of the insured's family

Payable Death Benefit

Payable Death Benefit = Face Amount 0 Amount withdrawn - Earnings lost by Insurer in interest Example: The policy's face amount is $100,000; however, due to a terminal illness, the insured had to withdraw $30,000 from the policy 3 years before his death. Since this amount was withdrawn, the insurance company lost $300 worth of interest. Upon the insured's death, the beneficiary received $69,700 in death benefit: $100,000 (face amount) - $30,000 (accelerated benefit) - $300 (lost interest) = $69,700

Settlement Options

Settlement options are the methods used to pay the death benefits to a beneficiary upon the insured's death, or to pay the endowment benefit if the insured lives to the endowment date. The policyowner may select a settlement option at the time of policy application, and may also change that option at any time during the life of the insured. Once selected by the policyowner, the settlement option cannot be changed by the beneficiary. If the policyowner does not select a settlement option, the beneficiary will be allowed to choose one at the time of the insured's death KNOW THIS: Settlement options are triggered by the insured's death or age 100

Disability Riders

Some riders provide benefits in the event of the insured's disability, while other riders provide for partial payment of the death benefit prior to the insured's death, called accelerated or living benefits riders

Paid-up Additions

The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy. No new separate policies are issued; however, each of these small single premium payments will increase the death benefit of the original policy by whatever amount the dividend will buy. In addition, each of these paid-up policies will accumulate cash value and pay dividends. The amount of additional coverage that can be purchased with the dividend is based on the insured's attained age at the time the dividend is declared. IF the policyowner did not chose the dividend option, the insurer will automatically use paid-up additions to increase the death benefit of the original policy by the amount the dividend will buy

Accumulation at Interest

The insurance company keeps the dividend in an account where it accumulates interest. The policyowner is allowed to withdraw the dividends at any time. Although the dividends themselves are not taxable, the interest on the dividends is taxable to the policyowner when credited to the policy, whether or not the policyowner receives the interest

One-year Term Option

The insurance company uses the dividend to purchase additional insurance in the form of one-year term insurance that increases the overall policy death benefit. If the insured dies during the one-year term the beneficiary receives both the death benefit of the original policy and the death benefit of the one-year term insurance.

Reduction of Premiums (Dividends)

The insurer uses the dividend to reduce the next year's premium

Owner's Rights

The parties to the insurance contract are the insurer, the policyowner, the insured, and the beneficiary. The policyowner and the insured may be the same person or different persons. Regardless, only the policyowner has the ownership rights under the policy, and not the insured or the beneficiary.

Grace Period

The period is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days, or one month). The purpose of the grace period is to protect the policyholder against an unintentional lapse of the policy. If the insured dies during this period, the death benefit is payable; however, any unpaid premium will be deducted from the death benefit. KNOW THIS: Grace periods protect policyholders from losing insurance coverage if they are late on a premium payment

Revocable and Irrevocable

The policyowner without the consent or knowledge of the beneficiary, may change a revocable designation at any time. An irrevocable designation may not be changed without the written consent of the beneficiary.

Cash Payment (Lump Sum)

Upon the death of the insured, or at the point of endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses a different mode of settlement. If no selection is made, the proceeds are automatically paid to the beneficiary in a single cash payment.

Minor

a person under legal age

Activities of daily living (ADLs)

a persons essential activities that include bathing, dressing, eating transferring, toileting, continence

Indemnity

a principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss

Fixed-period installments options

a.k.a period certain a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period This option does not guarantee income for the life of the beneficiary; however, it does guarantee that the entire principal will be distributed

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 of the policy may be increased by a cost of living factor tied to an inflation index such as the Consumer Price Index (CPI)

Misstatement of Age and Gender

age and gender of an insured are important to the premium that will be charged for a life insurance policy, a provision which allows the insurer to adjust the policy at any time due to a misstatement of age or gender is included in the policy. KNOW THIS: Misstatement of age on the application will result in adjustment of premiums or benefits.

Term Riders

allow for an additional amount of temporary insurance to be provided on the insured, without the need to issue another policy

Children's term rider

allows children of the insured ( natural, adopted or stepchildren) to be added to coverage for a limited period of time for a specified amount. This coverage is also term insurance and usually expires when the minor reaches a certain age (18 or 21). Most riders provide the minor with the option of converting to a permanent policy without evidence of insurability Children's term riders provide temporary life insurance coverage on all children of the family for one premium. The premium does not change on the inclusion of additional children; it is based on an average number of children KNOW THIS: Children's term rider one premium for ALL children

Spouse term rider

allows the spouse to be added to coverage for a limited period of time and for a specified amount ( it usually expires when the spouse reaches age 65)

Uniform Simultaneous Death Law

been adopted by most states to address this problem, and to protect the policyowner's original intent, as well as to protect the contingent beneficiary. This law stipulates that if the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the primary beneficiary died first

The policyowner chooses one of the following nonforfeiture options:

cash surrender value, reduced paid-up insurance, or extended term

Designation by Class

class of beneficiary is using a designation such as "my children." Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive Two class designation are available for use when an insured chooses to "group" the beneficiaries: per capita and per stripes per capita: list of beneficiaries per stripes: bloodline of beneficiary

Incontestability

clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 YEARS During the first 2 years of the policy, an insurer may contest a claim if the insurer feels that inaccurate or misleading information was provided in the application. The incontestability period does not apply in the event of nonpayment of premiums; it also does not usually apply to statement relating to age, sex or identity.

Entire Contract

contract provision stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract. Neither the insurer nor the insured may change policy provisions once the policy is in effect without both parties agreeing to it and the change being affixed to the contract KNOW THIS! : Entire contract = policy + copy of application + any riders or amendments

Long-Term Care (LTC)

coverage, which is often purchased as a separate policy, can also be marketed as a rider to a life insurance policy. These riders provide for the payment of part of the death benefit ( called accelerated benefits ) in order to take care of the insured's health care expenses, which are incurred in a nursing or convalescent home. As with the living needs rider, payment of LTC benefits will reduce the amount payable to the beneficiary upon the insured's death

Status clause (War or Military Service Exclusion)

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

primary beneficiary

first claim to the policy proceeds following the death of the insured. The policyowner may name more than one primary beneficiary, as well as how the proceeds are to be divided.

Total disability

generally defined as the inability to engage in any work

Life income joint and survivor option

guarantees an income for two or more recipients for as long as they live. Most contracts provide that the surviving recipient will receive a reduced payment after the first recipient dies

Disability Income

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 of the face amount of the policy to which it is attached

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 life insurance benefits covering the spouse and all of the children in the family Family Term = Spouse Term + Children's Term

Cash (Dividends)

insurer simply sends the policyowner a check for the amount of the dividend as it is declared, usually annually

Extended Term

insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase the insurer will automatically implement the extended-term option in the event of termination of the original KNOW THIS: Extended term is the automatic nonforfeiture option: same face amount shorter term of coverage

Per Stripes (Designation)

meaning by the bloodline, distributes the benefits of a beneficiary who died before the insured to that beneficiary's heirs

Per Capita (Designation)

meaning, by the head, evenly distributes benefits among the living named beneficiaries

Results clause (War or Military Service Exclusion)

only excludes the death benefit if the insured is killed as a result of an act of war (declared or undeclared)

Policy Loan

option is found only in policies that contain cash value. The policyowner is entitled to borrow an amount equal to the available cash value. However, the insurer must provide 30 days' written notice to the policyowner that the policy is going to lapse. Insurance companies may defer a policy loan request for up to 6 months, unless the reason for the loan is to pay the policy premium. Policy loans are not subject to income taxation KNOW THIS: Policy loans are ONLY available in policies that have cash value (whole life)

Lump sum

payment of the entire benefit in one sum

Fixed-amount installments option

pays a fixed, specified amount in installment until the proceeds (principal and interest) are exhausted. The recipent selects a specified fixed dollar amount to be paid until the proceeds are gone. With this option, the size of each installemnt will determine how long benefits will be received. The larger the installment, the shorter the income period will be As with the fixed-period option, this option does not guarantee payments for the life of the beneficiary, but does guarantee that all proceeds will be paid out

Accidental Death Rider

pays some multiple of the face amount if 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 normally two times (double indemnity) the face amount. Some policies pay triple the face amount (triple indemnity) for accident death - typically expires insured's age 65 - No additional cash value accumulated - Death benefits applied only to policy's base face amount The accident death and dismemberment rider (AD&D) pays the principal (face amount) for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment.

Nonforfeiture options

permanent life insurance policies have cash values, certain guarantees are built into the policy that cannot be forfeited by the policyowner. A table showing the nonforfeiture values for a minimum period of 20 years must be included in the policy. The policyowner chooses one of the following nonforfeiture options: cash surrender value, reduced paid-up insurance, or extended term KNOW THIS: Nonforfeiture options are triggered by policy surrender or lapse

Flexible premium

policies allow the policyowner to increase or decrease the premium during the policy period

Assignments

policyowner of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer. However, the owner must notify the insurer Transfer of the life insurance policy does not change the insured or amount of coverage; it only changes who has the policy ownership rights There are 2 types of policy assignments: - Absolute Assignment: all rights -Collateral Assignemnt: partial KNOW THIS: Absolute assignment is the complete and permanent transfer of ownership rights; collateral assignment is the partial and temporary transfer of rights.

Cash Surrender Value

policyowner simply surrenders the policy for the current cash value at a time when coverage is no longer needed or affordable. A Surrender Charge is a fee charged to the insured when a life policy or annuity is surrendered for its cash value.

Suicide provision in life insurance policies

protects the insurers from individuals who purchase life insurance with the intention of committing suicide. Insurance policies usually stipulate a period of time during which the death benefit will not be paid if the insured commits suicide. If the insured commits suicide within 2 YEARS following the policy effective date (issue date), the insurer's liability is limited to a refund of premium. If the insured commits suicide after the 2-years period, the policy will pay the death proceeds to the designated beneficiary the same as if the insured had died of natural causes.

Other insured rider

provides coverage for one or more family members other than the insured

Living Needs Rider

provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years. The purpose of this rider is to provide the insured with the necessary funds to take care of necessary medical and nursing home expenses that incur as a result of the terminal illness. KNOW THIS: Accelerated benefit = early payment of part of death benefit to the insured from the insurer for qualifying medical expenses

Reinstatement

provision allows a lapsed policy to be put back in force. The maximum time limit for reinstatement is usually 3 YEARS after the policy has lapsed. If the policyowner elects to reinstate the policy, he/she will have to provide evidence of insurability. The policyowner is required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest. The advantage to reinstating a lapsed policy as opposed to purchasing a new one is that the policy will be restored to its original status, and retain all the values that were established at the insured's issue age NOTE: that a policy that has been surrendered cannot be reinstated.

Free Look

provision allows the policyowner a specified number of days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The period starts when the policyowner receives the policy

Automatic Premium Loans

provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium. While the insurer may defer requests for other loans for a period of up to 6 months, loan requests for payment of due premiums must be honored immediately Usually the policyowner must specifically elect this provision in writing to make it effective

contingent beneficiary

referred to as secondary or tertiary beneficiary second claim in the event that the primary beneficiary dies before the insured. Beneficiaries do not receive anything if the primary beneficiary is still living at the time of the insured's death. If none of the beneficiaries is alive at the time of the insured's death, or if no beneficiary has been named, the insured's estate will automatically receive the proceeds of a life insurance policy KNOW THIS: If NO beneficiary is named, policy proceeds go to the insured's estate

Guaranteed insurability

rider allows the insured to purchase additional coverage at specified future dates (usually every 3 years) or events (such as marriage or birth of a child), without evidence of insurability, for an additional premium. When this option is exercised, the insured purchases the additional coverage at his or her attained age. This rider usually expires at the insured's age 40 The guaranteed insurability rider is not modified or defeated by the existence of other riders.

Return of Premium

rider is 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 to the beneficiary. The return of premium rider usually expires at a specified age such as age 60

Payor Benefit

rider is primarily used with juvenile policies (any life insurance written on the life of a minor); otherwise, it functions like the waiver of premium rider. If the payor (usually guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

Waiver of monthly deductions

rider pays all monthly deductions while the insured is disabled, after a 6-month waiting period. This rider only pays the monthly deductions, and not the full premium necessary to accumulate cash values. The length of time this rider will pay monthly deductions will vary based on the age at which the insured disabled. Monthly deductions include the actual cost of insurance charges, expense charges, and costs or charges for any benefits added to the policy by rider, endorsement or amendment, and which are specified in the policy to be deducted from the account value

Waiver of Premium

rider waives the premium for the policy if the insured becomes totally disabled. Coverage remains in force until the insured is able to return to work. 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 disability until the first premium is waived. If the insured is still disabled after this waiting period the insurer will refund the premium paid by the insured from the start of the disability In order for an insured to qualify for this benefit, the insured must meet the policy's definition of total disability. KNOW THIS: Waiver of premium rider waives the premium for a total disability after a waiting period

Consideration

something of value that each party gives to the other (binding force in any contract)

Principal

the face value of the policy; the original amount invested before the earnings

Interest-only option

the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, annually) . The insurer usually guarantees a certain rate of interest and will often pay interest in excess of the guaranteed rate. Usually considered as a temporary option

Paid-up Option

the insurer first accumulates the dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early. If the insured had a continuous premium whole life policy (in which premiums are paid to age 100) using the paid-up option the policyowner is able to pay up the policy early.

Premium mode

the manner of frequency that the policyowner pays the policy premium. If the insured selects a premium mode other than annual, there will be an additional charge to offset the loss of earnings since the company does not have the entire premium at once, and there are additional administrative costs associated with more frequent billing 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.

Reduced Paid-up Insurance

the policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a reduced face amount from that of the former policy. The new reduced policy builds its own cash value and will remain in force until death or maturity

Level premium

the premium remains the same throughout the duration of the contract

Life income iwth period certain option

the recipient is provided with the "best of both worlds" in terms of a lifetime income and a guaranteed installment period

Assignment

transfer of rights of policy ownership

Exclusions

types of risks the policy will not cover The most common exclusions found in life insurance policies are aviation, hazardous occupation, and war and military service.

Common Disaster Clause

when added to a policy, provides that if the insured and the primary beneficiary died in a common disaster (even if the beneficiary outlived the insured by a specified number of days) Most insurers specify a certain period of time, usually 14 to 30 days, in which the primary beneficiary's death must occur in order for the clause to apply. KNOW THIS: Common disaster clause protects the contingent beneficiary