Kaplan: Policy Provisions

Facility of Payment provision

- found most often in industrial policies and grants the insurer permission to pay out benefits to any person appearing entitled

Adv of Reinstatement

-Original issue age is used, therefore lower premium

ownership rights

-usually the applicant, insured or premium payer

What is the minimum percentage of the CV that must be made available for VUL policies?

75%

In WL, up to how much can a policyowner borrow?

90%

Spendthrift Clause

A clause that prevents the debtors of a beneficiary from collecting the benefits before he/she receives them.

Insuring Clause

A general statement that identifies the basic agreement between the insurance company and the insured, usually located on the first page of the policy.

Common Disaster Clause

Clause protects the contingent beneficiaries' rights by stipulating a certain number of days the primary beneficiary must outlive the insured after a common accident causing near-simultaneous death in order for the primary beneficiary to receive the policy proceeds.

Modifications

Document changes that include revised text because of a change

Uniform Simultaneous Death Act

It directs that in life insurance if the insured and the primary beneficiary die at the same time the policy benefits are payable as if the insured outlived the beneficiary.

Medical Examination and Autopsy

Life insurance provision that requires the proposed insured to undergo a medical examination prior to issuing coverage, and autopsy where not prohibited by law.

Harry decides to borrow some money from a bank. What type of assignment will Harry probably use to secure the loan?

Partial Assignment

Payment of Premium provision

Policy owner has right to determine mode of premium payment but Insurer can charge admin. fee if not annual.

misstatement of age or sex clause

if the insured's age or sex is misstated, the amount payable is the amount that the premiums paid would have purchased at the correct age and sex

Testamentary Trust

is a trust created by a will. It only comes into use when the person making the will dies.

Filing(Recording) Method

must be filed in writing to the insurer and is made effective by the insurance company recording the change in its records

Irrevocable Beneficiary

one that cannot be changed without the beneficiary's consent

Revocable Beneficiary

one that may be changed by the policy owner without their knowledge or conent

Reinstatement Provision

permits the owner to reinstate a lapsed policy

Per stirpes distribution

receives proceeds through the rights of another

Automatic Premium Loan Provision

- Enables the insurer to withdraw funds from the policy if any cash value has accumulated within the contract - Must be requested by policyowner at the time of application

Consideration Clause

A part of the insurance contract that states that both parties must give something of value for the transfer of risk, and specifies the conditions of the exchange.

Grace Period

A time period during which no finance charges will be added to your account (31 days) -protects against unintentional lapse of policy

Per capita distribution

receives proceeds in his own right

Free Look Provision

Applicant has 10 days to cancel policy

Applicant Control(Ownership) Clause

Applicant wants to maintain control of policy until the insured is of age

assignment

The act of transferring to another all or part of one's rights arising under a contract.

which of the following is allowed when policy proceeds are being paid through a spendthrift clause?

The proceeds are paid directly to the beneficiary in monthly installments

Endorsement Method

This method requires that the beneficiary change be typed or affixed directly to the policy. The insured must make a written request and mail the request along with the policy to the insurance company.

Carol has a policy on her ex-husband that she wants to give to their daughter. Carol no longer wants any control over this policy. What type of assignment will Carol probably use to accomplish this?

Voluntary Assignment

the insuring clause does all of the following except

describe the insured

Suicide Clause

states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid

Entire Contract Clause

states that the life insurance policy and attached application constitute the entire contract between the parties

Incontestable Clause

the insurer cannot contest the policy after it has been in force two years during the insured's lifetime

Under the facility of payment provision

the insurer may select a beneficiary if the named beneficiaries cannot be found

According to the entire contract provision, what document must be made part of the insurance policy?

the premium payment

When waiver of premium applies

the premium payment generally resumes when the insured is no longer disabled

inter vivos trust

trust created during the lifetime of the settler