Life insurance policy provisions, options, and riders

Nonforfeiture options (guaranteed values)

1. required in all life insurance policies 2. protect the money you have saved in your cash-value account. 3. Cash surrender value 4. Extended term 5. reduced paid-up insurance

disability riders

1. waiver of premium rider 2. disability income benefit 3. payor benefit life/disability

one year term option

company creates new, one-year term policy for policy holder

reduction of premium payments

company retains dividends and applies it towards next premium due

Accumulation at interest

company retains dividends and pays interest to policy owner

Policy loans and withdrawal options

1. Cash loan 2. Automatic premium loans 3. Withdrawals 4. Partial surrender

Cash surrender value

1. you don't want your policy anymore 2. send you accumulated cash value

Cash

company sends check to policy owner

paid-up option

company uses interest accumulated and/or cash values additional whole life policies to pay-up original policy

Settlement options

1. cash: lump sum payment - not taxable to beneficiary 2. interest only: money remains with insurance company to accumulate additional interest. proceeds left are not subject to tex, the interest earned is taxable (even if not paid out) 3. Fixed period installments: pay out policy proceeds to them over a set period of time. unpaid balance continues to earn interest. 4. fixed amount installments: certain amount paid to them monthly. will deplete the principal balance when amount paid exceeds the interest earned on unpaid balance 5. annuity: lifetime income with high degree of safety

paid-up additions

1. company uses dividend to create new, small paid-up whole life policy for policy owner 2. often selected by client with poor health

Cash Loan

1. do not have to be paid back while you are still alive 2. at death, any outstanding loans plus interest will be subtracted from policy proceeds

reduced paid-up insurance

1. exchange it internally with the company for a new policy that has a "reduced"face amount 2. is fully paid for until you reach age 120 3. immediate cash value will approximate the cash value you gave up 4. designed for people who want to continue life insurance in later years but do not want any further payments after they retire. 5. longest period of protection

Riders covering additional insurders

1. family policy: combination of whole life on the breadwinner and a level term rider on the spouse and children (new born = covered without raising premium) 2. family maintenance policy: combines whole life insurance and a level term rider on the same person. 3. family income policy: combines life insurance with a decreasing term rider written on the same person

Waiver of premium rider

1. form of disability insurance attached to a life insurance policy to pay the premium on behalf of the insured in case they become totally disabled

Beneficiaries designation options

1. individuals: used to benefit children 2. classes: whiny want a specific group to share the proceeds equally 3. Estates: wish to name a specific person 4. Minors: as long as a guardian is appointed 5. trusts

Dividend options

1. is subject to tax 2. mutual companies dividend are not taxable = return of overpayment 3. they are not guaranteed 4. Cash 5. Reduction of premium payments 6. accumulation at interest 7. one year term option 8. paid-up additions 9. paid-up options

Free look

1. may be canceled with entire policy refunded 2. starts when policy is delivered

Payor benefit life/disability

1. similar to waiver of premium rider, but is added to a policy written on the life of a child

Extended term

1. automatic option 2. new term policy with the same face amount as your original policy 3. no physical required 4, does not have any cash value (term) 5, no additional payments are due 6. gives the most insurance protection

automatic premium loans

1. available on any life insurance policy that has or will have cash value 2. will protect your life insurance policy from lapsing due to non payment 3. policy will borrow from its own cash value (creates a policy loan) 4. if you die within this period, loan and accrued interest will be subtracted from policy proceeds

Exclusions

1. may only be added at the time the new policy is first underwritten

Beneficiaries successions

1. primary beneficiary: first one named 2. contingent beneficiary: second one named 3. final beneficiary: insured's estate

Provisions

1. Ownership 2. Assignment 3.Entire contract 4. modifications 5. Right to examine 6. Payment of premiums 7. payment of claims 8. grace period 9. reinstatement 10. incontestability 11. Misstatement of age 12. Exclusions 13. Suicide exclusion

Assignment

1. absolute assignment: irrevocably transfer all of your right of ownership 2.Collateral assignment: temporary type of assignment. If you die, the insurance company will pay your policy proceeds to the bank 3. only binding when notified in writing

Riders affecting death benefit amount

1. accidental death: will pay beneficiary double or triple when individual dies within 90 days of the accident as a result of the accident 2. guaranteed insurability rider: protects the insured's right to buy more coverage in the future withut the need to prove good health 3. cost of living: increases the face amount of your policy to coincide with the rate of inflation 4. return of premium rider: you buy an increasing amount of term insurance that always equals the total amount of premiums paid to dat. 5. return of cash value: form of increasing term coverage that will pay an amount equal to your cash value along with your face amount if you die.

Accelerated (living) benefit provision/rider

1. allows owner to accelerate receipt of a portion of the policy's death benefit upon the insured's occurrence of a terminal illness, or LTC 2. no additional premium charge 3. not taxable 4. may affect medicaid and supplemental security income (SSI) 5. future benefits upon death will be reduced by any amounts paid out under the terms of the rider

withdrawals

1. from cash value 2. insurer may defer up to 6 months

Spendthrift clause

1. protects life insurance proceeds that have not yet been paid out. 2. does not apply to proceeds that are payable in one lump sum 3. prevents losing proceeds to creditors

Reinstatement

1. right to apply for reinstatement of lapsed policies 2. must take physical exam 3. pay all back premiums 4. compete reinstatement application 5. based on original age 6. cannot reinstate after taking cash surrender

disability income benefit

1. will pay your loss of net earned income if you are totally disabled as per definition 2. usually sold separate, but can be a rider