Chapter 4 - Life Insurance Riders
what happens if there is a misstatement of age on the application
a misstatement of age on the application will result in adjustment of premiums or benefits
define activities of daily living or A D Ls
a person's essential activities that include bathing, dressing, eating, transferring, toileting, continence
when discussing insurance what is an assignment
a transfer of rights of policy ownership
a rider may be attached to a life insurance policy that will adjust the face amount based on a specific index, such as the consumer price index. What is this called
cost of living rider
what is the waiting period on a waiver of premium rider in life insurance policies
6 months. Most insurers impose a 6 month waiting period from the time of disability until the first premium is waived
what is a primary beneficiary
a beneficiary who has first claim to the policy proceeds after the death of the insured
define contingent beneficiary
a beneficiary who has second claim to the policy proceeds after the death of the insured. This is usually after the death of the primary beneficiary
what is an absolute assignment and how does it differ from a collateral assignment
absolute assignment is the complete and permanent transfer of ownership rights. Collateral assignment is the partial and temporary transfer of rights
when calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value
all outstanding loans and interest
characteristics of a children's term rider
allows children of the insured to be added to coverage for a limited period of time. One premium is for all children
what is a trust in regards to insurance
an arrangement in which funds or property are held by a person or corporation for the benefits of another person. Such as a trust beneficiary
what protects the insured from an unintentional policy lapse due to a nonpayment of premium
automatic premium loan.
what qualifying factors must be met in order for an insured to receive accelerated death benefits
conditions for payment form. In order for an insured to receive accelerated benefits, an insurer may require certain qualifying factors to be med under conditions for payment form
what is the extended term option
extended term is the automatic nonforfeiture option. Same face amount with shorter term coverage
which rider, when attached to a permanent life insurance policy, provided an amount of insurance on every family member
family term rider
when the policyowner specifies a dollar amount in which installments are to be paid, they have chosen which settlement option
fixed amount. Policy owner determines fixed dollar amount, insurer will determine how long the installments will be paid
what are fixed period installments
fixed period installments is a settlement option
what is the purpose of a grace period
grace periods protect policy holders from losing insurance coverage if they are late on a premium payment
at the time the insured purchased life insurance , a rider was added that allowed the purchase of additional insurance in the future with out having to prove insurability. What is this rider called
guaranteed insurability
what happens if there is no beneficiary named
if no beneficiary is named, policy proceeds go to the insureds estate
what type of insurance would be used for a return of premium rider
increasing term. The return of premium rider is achieved by using increasing term insurance.
what is the primary benefit of choosing extended term as a nonforfeiture option
it has the highest amount of insurance protection
what is synonymous with life income option
life income option is also know as straight life.
what is the NAIC
national association of insurance commissioners. It is an organization composed of insurance commissioners from all states, DC and US territories. Formed to resolve insurance regulatory issues
when a whole life policy lapses or is surrendered prior to maturity, can the cash value be used to pay back all premiums owed plus interest
no. you can't pay back all premiums owed plus interest.
when are nonforfeiture options triggered
nonforfeiture options are triggered by policy surrender or lapse
what are some examples of dividend options
paid up additions, accumulated at interest. Reduction of premium
you buy health insurance at 40. you die 3 years later in an accident. It is later discovered you were 2 years older and actually died at 45. what will the life insurance company do
pay out a reduced death benefit
when are policy loans allowed
policy loans are only available in policies that have cash value. Whole live policies
you have a 10k insurance policy. And a $200 premium due on February 1st. You die on the 28th of February. What happens
policy pays out 9,800 since you were in the 30 day grace period
what is the entire contract provision
policy. Plus. Copy of application. Any riders or amendments equals the entire contract
you have a 1,200 annual premium. You earn $300 in accumulated dividends, thus reducing next years premium to $900. what option do you have
reduction of premium. This option allows the policy holder to apply policy dividends towards the next years premium.
an insured under a life insurance policy died, the beneficiary receives the face amount plus al premiums. What is this rider
return of premium rider. Rider stipulates the death must occur prior to a certain age in order for the premium to be returned.
what is the common disaster close and who does it protect
says that if the insured and beneficiary dies in a common disaster it is presumed that the primary beneficiary died firs and the proceeds go to next in line
when are settlement options triggered
settlement options are triggered by the insured's death or age 100
which settlement option provides a single beneficiary with income for the rest of his or her life
single life option. Provides a single beneficiary with income for the rest of their life
what is the guarantee of nonforfeiture values
that the cash value will not be lost
if a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back
the balance of the loan will be taken out of the death benefit
upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does that mean
the beneficiary will only receive payments of the interest earned on the death benefit
define principal amount
the face value of the policy. The original amount invested before the earnings
a father has a life insurance policy on the 15 year old daughter. Policy contains the optional payor benefit rider. If the father becomes disables, what happens to the premiums
the insured premiums will be waived until she is 21
is the interest in an accumulation at interest option taxable
the interest credited under this option is taxable whether or not the policyowner receives it
what will most likely happen if you stop making payments on the cash value policy
the policy will terminate when the loan amount with interest equals or exceeds the cash value
the owner of a life insurance policy wishes to name 2 beneficiaries for the policy proceeds. What will the insurance producer say
the policyowner can specify the way the proceeds are split in the policy
true or false nonforfeiture values are required by state law to be included in the policy
true. Nonforfeiture values are required by state law to be included I the policy and cannot be altered by the policyowner. 20 nonforfeiture values must be included in the policy
true or false. With a cash surrender nonforfeiture option, funds exceeding the premium paid are taxable as ordinary income
true. The insurers surrender the policy at its current cash value. Only any excess of the value is taxable as income. Once the policyholder opts for cash surrender the policy is immediately inactive
true or false. a single life settlement option will provide income the beneficiary cannot outlive.
true. The single life option can provide a single beneficiary income for the rest of their life.
what happens under a straight life or life income settlement option
under life income or straight life settlement option, the recipient cannot outlive the benefit payments
an insured owns a life insurance policy. To be able to pay some medical bills. You withdrawal a portion of the cash balance. There is a limit on the withdrawal and the insurer charges a fee. What type of plan do you have
universal life. These policies allow to withdrawal a limited portion of the cash value, however limited and usually a charge
what is a waiver of premium rider
waiver of premium rider waives the premium for a total disability after a waiting period
define the spendthrift provision
when a life insurance policy stipulate the beneficiary will receive payments in a specified installments or for a specified number of years.
when a whole life policy lapses or is surrendered prior to maturity, can the cash value be used to purchase a single premium policy for a reduced face amount
yes. When a whole life policy pulses the cash value can be used as a single premium to purchase a completely paid up permanent policy