Life Provisions
Policy Riders
Added to a policy and ride along on the basic life policy. Only have value when attached to a policy.
Cost of Living Rider
Address inflation and provides increases in the amount of insurance protection without requiring the insured to provide evidence of insurability and is designed to keep up with inflation.
Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT
Interest Only
Reinstatement Provision
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions ?
Policy Loan Provision
found only in policies that contain cash value, policy owner is allowed to borrow an amount equal to the available cash value. (Outstanding loans at time of death, will be deducted from death benefit).
The purpose of the ________ Period clause is to avoid an unintentional lapse of a life insurance policy.
grace
K pays on a $20,000 20- Year Endowment policy for 10 years and dies from an automobile accident How much will the insurance company pay the beneficiary ?
$20,000 death benefit
Extended Term
- Cash values buy single premium term insurance - Same amount of insurance as old policy - Only for a stated term of time - Default option selected by the insurer
Dividends
-Paid only on participating policies. -when purchased from an insurance company, policyholders are eligible to receive dividends.
5 Options of Receiving Dividends
-Take Cash Dividends -Apply Dividends against premium pmts -Allow Dividends to accumulate interest -Buy Paid Up Additions (whole life policy) -Purchase one year term insurance
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
50,000
additional death benefits
A Cost of Living rider gives the insured
Whole life and Increasing term
A Return of Premium Life insurance policy is
Waiver of Premium
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Cash value provision
A policy loan is made possible by?
Assigns the policy
A whole life insurance policy owner does NOT have the right to
Reinstatement Provision
Allows a lapsed policy to be put back in force. If policy owner elects to reinstate the policy, they will have to provide evidence of insurability, pay all back premiums with interest and may be required to repay any outstanding loans.
Guaranteed Insurability Rider
Allows the insured to purchase additional coverage at specific future dates, without the evidence of insurability, the new premiums will be calculated only on the person's attained age.
Variable Life
Allows the policy owner to have level premiums and also choose from a selection of investment options
Waiver of Premium Rider
Allows the policyowner to waive premium payments during a disability and keeps the policy in force. It does not provide cash payments to the policyowner. The disability must be total and permanent and have sustained through the waiting period (90 days or 6 months). After a certain age (65), the waiver of premium rider is void.
What does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise
3 Non-Forfeiture Options
Cash Surrender, Reduced Paid Up, & Extended Term
Automatic Premium Loan Provision
Commonly added to contracts with cash value at no additional charge, prevents unintentional lapse of a policy due to the nonpayment of premiums.
The full face amount
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
When an issuer issues a policy that refuses to cover certain risk
Exclusion
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
Incontestable Clause
Prevents the insurance company from denying a claim because of incorrect information or a concealment of facts after the policy has been in force for two years.
Purpose of Grace Period
Protect the policyholder against an unintentional lapse of the policy. (If the insured dies during this period the benefit is payable, however past due premiums will be deducted from the death benefit).
Suicide Provision
Protects insurance companies against people using suicide for a quick payment of the death benefit. If the insured commits suicide within the first 2 years, death benefit will not be issued, but WILL ONLY return paid premiums.
these provisions require proof of insurability after a policy has lapsed?
Reinstatement
Cash Surrender
Take the cash
is blinded in an accident
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
Non Forfeiture Options
These are rights the policy owner has in a policy with cash value if they no longer wish to continue the policy as originally purchased.
Exclusions
Types of risks the policy owner will not cover.
Most common exclusions found in life insurance policies:
War, Aviation (non commercial pilot), Hazardous Occupation or Hobbies, Commission of a Felony, and Suicide.
Void the policy only if it is discovered during the Contestable period and proven to be material
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
A Term Life rider offers the insured
additional life coverage
Misstatement of Age or Sex Provision
allows the insurance company to adjust the policy at any time due to misstatement of age or gender. In the event of a claim, the insurance company is allowed to adjust the death benefit or premium to the correct age or gender
Free Look Provision
allows the policy owner, a free look at the policy for a specific number of days. Free look period starts when the policy owner receives the policy from the insurance company in the mail, or is delivered by the insurance agent.
Variable Whole Life Insurance
both an insurance and securities product
Reduced Paid-Up
cash value used as a single premium payment to fully pay up policy with a reduced face amount. No premiums will no longer be due and continue to gain cash value.
Grace Period Provision
period of time after the premium payment is due, usually 30 days
