Life Policy Provisions and Options

Participating policy

Dividends are declared under participating policies, are paid as declared, and are not guaranteed. The dividends are a return of excess premiums paid.

Settlement options

Fixed period, fixed amount, and life income joint and survivor

Frank, the owner of a life insurance policy, chooses a settlement option whereby the proceeds of his policy will be paid out over 20 years. Frank has chose

Fixed period. The fixed period settlement option pays out proceeds over a specified period of time.

Ed purchased a policy naming his children as per capita beneficiaries. Upon his death the proceeds are paid to

His surviving children, who will share the proceeds equally. Per capita means that surviving beneficiaries share equally in the death benefits.

Failure to repay a loan or loan interest will void a life insurance policy

If the total amount due equals or exceeds the policy's cash values.

Fred owns a 40-pay life policy. He designated his wife, Ehtel, as primary beneficiary . Upon Fred's death, Ethel receives a set amount for life. Fred chose which settlement option?

Life Income Only. Life income only guarantees payment for the lifetime of the recipient. Extended term is a no forfeiture option.

Burt named Liz as his beneficiary ; however , he did not choose a settlement option. At the time of his death, who determines the option to be used to receive the benefits?

Liz the beneficiary determines which option she would like to have.

What is the additional premium cost to have the automatic premium loan provision included in a permanent policy?

Nothing. The Automatic premium loan provision is available on cash value policies only and does not require an additional premium.

A misstatement of an insured's age was not discovered until after the insured died. The policy had been in effect for 3 years. What will the insurer do to address this situation?

Pay benefits based on what past premiums would have purchased at eh correct age.

If an insured wanted to choose the Nonforfeiture option that would provide coverage for the longest period of time, then he or she should choose

Reduced Paid-up.

Reduced paid-up

Reduced paid-up provides the longest period of coverage. Extended term would provide the most protection.

When does a change in beneficiary take effect?

The date the policy owner signs the request to change the beneficiary.

If the insured outlives all of the beneficiaries named in the policy and then dies, by default who receives the death benefit?

The insured's estate

If a life insurance policy lapsed due to nonpayment of premium, then reinstatement requires

The payment of back premiums, plus interest, and proof of insurability.

Which of the following is responsible for paying the premiums due on a life insurance policy?

The policy owner.

Revocable beneficiaries

The proliferation owner may change a revocable beneficiaries at any time. This beneficiary does not have a vase tend interest in the policy. Most named beneficiaries are revocable and have no rights.

K has a $50,00 traditional whole life policy in force with $25,000 of cash values. Her outstanding loan and loan interest total $5,000. If K surrenders the policy, K will receive

$20,000. Any outstanding loans will be deducted from the face amount at the time of claim or from the cash values upon surrender along with any interest due. $25,000 - $5,000=$20,000.

Generally, an insurer may defer the granting of a policy loan for up to

6 months. An insurer, by law, can defer granting a policy loan for up to 6 months.

Sylvia was the insured and owner of a policy that named her husband as the beneficiary. Upon her husband's death, she decided to change the beneficiary designation to her best friend since she has no close living relatives. The insurance company will

Accept the beneficiary change.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds

Alices' estate

What happens if a policy owner exercises the free look?

All premiums and any policy fee paid for the policy must be refunded to the owner within 30 days from the date that the insurer is notified of the cancellation.

What will cause the time period of the fixed amount settlement option to be extended?

An increase in interest credited.

When is the earliest a beneficiary designation can be made?

At the time of policy application

Alice is the insured, Bill is the primary beneficiary , and Claire is the contingent beneficiary. Bill dies, then Alice dies, so who receives the policy proceeds?

Claire. Since Claire outlived Bill and Alice, then Claire is next in line to receive the policy proceeds.

Contractual Provisions

Contractual provisions explain what the contract consists of, what duties and responsibilities the parties to the contract have, how the policy works, and basically spell out the agreement between the policy owner and the insurance company.