Insurance to Pass ExamFX Ch 3 Premium Payment

Exclusion

~types of risks the policy will not cover which are standard for all policies (aviation, hazardous occupation, war, and military)

Status Clause

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

Flexible Premium

~Universal Life Insurance policies have this; allow the policyowner to pay more or less than the planned premium

Reinstatement Provision

~allows a lapsed policy to be put back in force with a maximum time limit of usually 3 years after the policy has lapsed; if this option is elected, the policyowner will have to provide evidence of insurability and pay all back premiums plus interest and may be required to repay any outstanding loans and interest (if a policy has been surrendered it cannot be reinstated)

Misstatement of Age and Gender

~if misstated on the application, in the event of a claim, the insurer is allowed to adjust the benefits to an amount that the premium would have purchased (proceeds calculations should be based on the insurer's rate at the date of the policy issue

Hazardous Occupations or Hobbies Exclusion

~if the insured dies from skydiving or auto racing as a form of hobby or occupation, this may be excluded from coverage; the underwriter has the option of charging a higher premium for insuring these risks

Aviation Exclusion

~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 coverage

Results Clause

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

Policy Loan

~option found only in policies with a cash value; policyowner is entitled to borrow an amount equal to the available cash value; not subject to income taxation

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 material fact; does not apply in the event of nonpayment of premiums; usually doesn't apply to statements relating to age, sex, or identity

Suicide Provision

~stipulates that, within 2 years of purchasing a life insurance policy, if the insured commits suicide the death benefit will not be paid but only a return of premiums will be paid back; if after two years the insured commits suicide, the beneficiary will receive the death benefits as if the insured died of natural causes

Premium Mode

~the manner or frequency that the policyowner pays the policy premium; if the insured dies during a time for which the premium has been paid, the insurer MUST refund any unearned premium along with the policy proceeds

Grace Period

~the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30-31 days); if the insured dies during this period, the death benefit is still payable but any unpaid premium will be deducted from the death benefit (protects the policyholder against an unintentional lapse

Level Premium

~the premium remains the same throughout the duration of the contract

Automatic Premium Loan

~type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium; insurer will charge interest