Chapter 4 bludd

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 back all premiums plus interest, and may be required to repay any outstanding loans and interest.

Children's Term Rider

Allows children of the insured to be added to coverage for a limited period of time for a specified amount. (one premium for ALL children)

Guaranteed insurability rider

Allows the insured to purchase additional coverage at specified future dates or events without evidence of insurability for an additional premium.

What is the best way of naming beneficiaries?

Be specific by naming each individual and designate the exact amount to be given for that individual.

Misstatement of age and gender

Because the 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. Misstatement of age on the application will result in adjustment of premiums or benefits.

Settlement Options

Choices available to the insured/owner for distribution of insurance proceeds.

Per stirpes designation (by the bloodline)

Distributes the benefits of a beneficiary who died before the insured to that beneficiary's heirs.

Absolute assignment

Transferring all rights of ownership to another person or entity. This is a permanent and total transfer of all the policy rights.

Exclusions

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

Which insurance can a waiver of cost of insurance be found?

Universal Life Insurance

Riders

Written modifications attached to a policy that provide benefits not found in the original policy. They sometimes require an additional premium, but they can also help tailor a policy to the specific needs of the insured, and can be classified according to their primary purpose.

Contingent beneficiary

entitled to the proceeds if the primary beneficiary dies before the insured

Per Capita designation (by the head)

evenly distributes benefits among the living named beneficiaries

Can a policy that's been surrendered be reinstated

hell nah

Can insurers defer loan requests for payment of due premiums

hell nah

Family Term Rider

incorporates the spouse term rider along with the children's term rider in a single rider

Automatic Premium Loan Provision

special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium This is a loan for which the insurer will charge interest. If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit.

What aviation stakeholders will life insurance cover?

Most life insurance will cover an insured as a 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.

Which type of insurance is policy loans viable?

Only available in policies that have cash value (whole life)

Partial Surrender

Partial withdrawal of the policy cash value. There may be a charge for each withdrawal and there are usually limits as to how much and how often a withdrawal may be made. During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation, depending upon the plan.

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 the face amount. Often expires at the insured's age 65.

Grace Period

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.

Who has ownership rights under an insurance policy?

Policyowner

Revocable designation of beneficiary

May change the beneficiary at any time without needing to let the beneficiary know.

Irrevocable designation of beneficiary

May not be changed without the written consent of the beneficiary

Entire contract

policy + copy of application + any riders or amendments

What are the two types of policy assignment?

- Absolute assignment - Collateral Assignment

Life insurance policies cannot issue or deliver polices that will

- Forfeit the policy for failure to repay any loan on the policy or to pay interest on the loan while the total indebtedness on the policy is less than its loan value - Allow assessments or calls to be made upon policyholders

What doesn't apply to the 10=day free look regulation?

- Group Policies - Credit life insurance - Replacement policies where the required free-look period is 30 days - Any other classes of policies as determined by the commissioner.

What are the ownership rights

- Naming and changing the beneficiary - Receiving the policy's living benefits - Selecting a benefit payment option - Assigning the policy

What certain period of time is determined for the primary beneficiary to die after the policyowner for the Common Disaster Clause to apply?

14-30 days

Payor Benefit rider

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 the minor reaches a certain age, such as 21. This rider is used when the owner and the insured are two different individuals.

What must court do in a decree of divorce?

If either party owns a life insurance policy or annuity contract, the contract must include an acknowledgement that the policyowner has: - Reviewed and updated, when appropriate, the list of beneficiaries - Affirmed that the listed beneficiaries are in fact the intended beneficiaries after the divorce becomes final - Understand that if no changes are made to the policy, the beneficiaries currently listed will receive any funds paid by the insurance company under the policy terms.

Common disaster Clause

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), it is presumed that the primary beneficiary died first, so the proceeds will be paid to either the contingent beneficiary or to the insured's estate, if no contingent beneficiary is designated.

Waiver of Cost of Insurance

In the event of disability of the insured, this rider waives the cost of the insurance and other expenses, but does not waive the cost of premiums necessary to accumulate cash values.

Disability income 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 of the face amount of the policy to which it is attached.

Modifications of insurance contracts

Modifications or changes in the policy must be endorsed on, or attached to. While the policyowner may request changes, only an executive officer can make the changes to the contract.

What happens to death benefit in a partial surrender?

It is reduced by the amount of any partial surrender.

Spouse/Other-insured Term Rider

Life insurance term rider covering a spouse or other individual, usually until age 65.

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, even if there has been a material misstatement of facts or concealment of a material fact. 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.

Spendthrift clause

Protects beneficiaries from the claims of their creditors, as well as prevents the beneficiary's reckless spending of benefits by requiring that the benefits be paid in a fixed period or fixed-amount installments. The spendthrift clause is designed to protect life insurance policy proceeds that have not yet been paid to a named beneficiary from the claims of the creditors of the beneficiary or policyowner.

Suicide Exclusion

Protects the insurers from individuals who purchase life insurance with the intention of committing suicide. If the insured commits suicide within 2 yeras following the policy effectie date, the insurer's liability is limited to a refund of premium. If the insured commits suicide after the 2-year period, the policy will pay the death proceeds to the designated beneficiary the same as if the insured had died of natural causes.

Right to examine (free look)

Provision allows the policyowner 10 days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The free-look period starts when the policyowner receives the policy, not when the insurer issues the policy.

Waiver of Premium Rider

Should the owner be disabled and cant earn an income, after 6 months, all premiums will be paid by the insurer during the disability period; After 6 months, the premiums will be repaid

Loan value

The amount available to the policy owner for a loan equals the cash value minus any outstanding and unpaid policy loans including interest.

How may the premium rate be decreased in insurance?

The applicant can use backdating. If the applicant chooses to do this, the policy may not be backdated for more than 1 year before the date of the application or the medical examination, whichever is later. All premiums must be paid from the effective date of the policy.

If benefits are designated to a minor, who will the benefits go to?

The benefits will either be paid to hte minor's guardian, or paid to the trustee of the minor if the trust is the named beneficiary, or paid as directed by a court.

What are the two types of exclusions that may be used to limit the death benefit if the insured dies as a result of war?

The clause excludes all causes of death while the insured is on active duty in the military. The results clause only excludes the death benefit if the insured is killed as a result of an act of war.

Where do policy proceeds go to if no beneficiary is named?

The insured's estate

What must the policy owner do when transferring partial or complete ownership of a policy?

The owner must notify the insurer in writing of the assignment. Without a written notice, the insurer may not recognize the assignment and would not assume responsibility for its validity.

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 or other entity such as a foundation.

Primary beneficiary

The person who is named as first to receive benefits from a policy.

Physical Examination and autopsy provision

The physical examination and autopsy provision states that the insurance company can, at its own expense, examine the body of the insured or have an autopsy performed on the deceased as often as the insurer reasonably requires during the pendency of a claim, to determine if the death was accidental or due to natural causes.

Policy Loans and Withdrawals

The 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. Any outstanding loans, and accrued interest, will be deducted from the policy proceeds upon the insured's death. The policy will not lapse with an outstanding policy loan unless the amount of the loan and accrued interest exceeds teh available cash value. However, hte 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.

Why reinstate your policy rather than purchase a new one?

The policy will be restored to its original status, and retain all the values that were established at the insured's issue age.

Who has responsibility of paying the policy premiums?

The policyowner

Uniform Simultaneous Death Law

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.

Payment of Premiums policy

This policy stipulates that 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. The payment of premium provision also stipulates that premiums must be paid in advance.

Nonforfeiture Options

Three options available by law to policyowners that enable them to recover a policy's cash-value upon surrender of that policy. (1) Cash (2) Reduced Paid-Up Insurance (3) Extended Term Insurance

Collateral Assignment

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.