Policy Riders, Provisions, Options, and Exclusions

what are the two types of policy assignment?

-absolute assignment -collateral assignment

what three riders increase the death benefit?

-accidental death & dismemberment -guaranteed insurability -return of premium

what are the three most common types of exclusions?

-aviation -hazardous occupations or hobbies -war or military service

what are the five settlement options?

-cash payment -life income (similar to annuity) -interest only -fixed period -fixed amount (CLIFF)

the family term rider includes who?

-insured -insured's spouse -insured's children

in how many days must the beneficiary die after the insured in order for the common disaster clause to be applied?

14 to 30 days.

what is the life income with period certain option?

a lifetime income with guaranteed installment period. if the insured dies prior to the installment period, the payments will be given to the beneficiary until the period has expired.

what is indemnity?

a principle of reimbursement on which insurance is based.

what is the fixed period installments settlement option?

a specified period of years is selected and equal installments are paid to the recipient.

which rider decreases the death benefit?

accelerated benefits

what is long term care coverage?

accelerated benefits used to take care of the insured's health care expenses resulting from being in a nursing home.

at what age of the insured does the guaranteed insurability rider expire?

age 40

when are policy loans available?

in whole life policies where there is cash value.

what is the life income option?

installment payments are guaranteed for as long as the recipient lives. recipient cannot outlive the benefit payments.

what is the main benefit of reinstating a policy?

insured will retain all the values that were established at the insured's issue age.

what triggers the settlement options?

insured's death or when they get to age 100.

what is the one-year term option?

insurer uses dividends to purchase additional insurance in the form of one year term insurance, that increases the overall policy death benefit.

what does the insurer do once the insured dies and they misrepresented their age on the policy?

insurer will adjust the policy to what their actual age is for the policy they had and provide that death benefit to the beneficiary.

what does the automatic premium loan do?

loan used to prevent unintentional lapse of a policy.

what does NAIC stand for?

national association of insurance commissioners

can a policy that has been surrendered be reinstated?

no!

does the policy owner need to name a beneficiary in order for the policy to be valid?

no!

in a joint and survivor payout does the survivor get the full benefit?

no, just their half.

what is the insuring clause?

the basic agreement between the insurer and the insured.

what does the results clause exclude?

the death benefit if the insured is killed as a result of an act of war.

what is the primary beneficiary?

the first person who has claim to the death benefit.

if the insured dies during the grace period will any unpaid premium be deducted from the death benefit?

yes!

will you be charged if you surrender your policy early?

yes.

what does the status clause exclude?

all causes of death while the insured is on active duty.

what is the reinstatement provision?

allows a lasped policy to be put back in force.

what is guaranteed insurability rider?

allows the insured to purchase additional coverage at a specified future dates or events without evidence of insurability for an additional premium.

what is the free look?

allows the policy owner a specified number of days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium.

what is NAIC?

an organization composed of insurance commissioners from all states and jurisdictions formed to resolve insurance regulatory issues.

what happens if the applicant misrepresents their age on the application?

as long as it is not over two years, the premiums will be adjusted to reflect the correct age of the applicant.

what is the extended term option?

automatic nonforfeiture option with the same face amount and shorter term coverage.

what is accidental death rider?

pays some of the multiple of the face amount (principle) upon the accidental death of the insured. death must occur within 90 days of the accident.

what is accidental death and dismemberment rider?

pays the principle for accidental death and pays a percentage of that amount.

what triggers nonforfeiture options?

policy surrender or lapse

what is the living needs rider?

provides payment for some of the death benefit to the insured if diagnosed with a terminal illness that will result in death within two years.

which nonforfeiture option gives you the longest coverage?

reduced paid up. goes all the way up to age 100.

what must the insurer do if the insured died during a period of time for which the premium has been paid?

refund any unearned premium.

if the insured commits suicide before the period of time stipulated in the contract, what will the beneficiary receive?

refund of the premiums.

what are dividends?

return of excess premiums.

what happens to the death benefit if there are no living beneficiaries or no beneficiaries listed at all?

the death benefit will go to the insured's estate.

what is revocable beneficiary?

the policy owner can change the beneficiary at any time without notifying the beneficiary.

what is irrevocable beneificiary?

the policy owner cannot change the beneficiary without written consent from the beneficiary.

what happens to the installments if the recipient dies prior to the end period in the fixed period installments settlement option?

the remaining installments will go to the beneficiary.

what is the contingent beneficiary?

the second person who has claim to the death benefit if the primary beneficiary dies.

what is an assignment?

transfer of rights to policy ownership.

what is the children's term rider?

one premium for all children. allows to children to be on the policy for a specific amount of time or until a certain age (18 or 21).

what is the fixed amount installments settlement option?

pays a fixed, specified amount in installments until the proceeds are exhausted.

what is the waiver of monthly deductions rider?

pays all monthly deductions while the insured is disabled after a 6 month waiting period.

if the insured commits suicide after the period of time stipulated in the contract, what will the beneficiary receive?

the entire death benefit.

what are the six dividend options?

-cash payment -reduction of premium -accumulation at interest (paid to insured) -paid up additions -paid up insurance -one year term policy

who are the four parties to a life insurance policy?

-insured (could be the same as the policy owner) -policy owner (could be the same as the insured) -insurance company -beneficiary

what does the entire contract consists of?

-policy -copy of application -any riders or amendments

what is the max time for a reinstatement?

3 years after the policy has lapsed.

when does the waiver of premium rider become activated?

6 months after the policy owner/insured becomes disabled and they will be refunded those six months.

what are nonforfeiture options?

certain guarantees written into the policy that cannot be forfeited by the policy owner.

what are provisions?

characteristics of an insurance contract.

who does the common disaster clause protect?

contingent beneficiary.

what is accelerated benefit rider?

early payment for some of the death benefit given to the insured for qualifying medical expenses.

which nonforfeiture option gives you the best death benefit?

extended term. insurer matches the death benefit from the old whole life policy.

what is the principle?

face value of the policy. original amount invested before the earnings.

what is the common disaster clause?

if the insured and the primary beneficiary died in a common disaster it is presumed that the primary beneficiary died first, so the proceeds will be paid to either the contingent beneficiary or to the insured's estate.

what is the uniform simultaneous death law?

if the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the primary beneficiary died first.

what is the return of premium rider?

if the insured dies prior to a given age then the original principle amount plus the amount equal to all premiums previously paid will go to the beneficiary.

what is the payor benefit rider?

if the payor (parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age (usually 21). only for juvenile policies.

are dividends taxable when paid to the policy owner?

no.

if a policy has been surrendered for its cash value can it be reinstated?

no.

what are options?

offers on ways to invest or distribute a sum of money available in a life policy.

what are riders?

things that are added to the policy to modify provisions that already exist. written modifications to a policy.

what are exclusions?

types of risks the policy will not cover.

waiver of monthly deductions can only be used on what type of policy?

universal life and variable universal life.

waiver of cost insurance can only be used on what type of policy?

universal life.

what is the waiver of premium rider?

waives the premium for the policy if the insured becomes totally disabled.

when does the waiver of premium rider expire?

when the insured/policy owner reaches age 65.

when does the free look period start?

when the policy owner receives the policy.

what is absolute assignment?

when the policy owner transfer all rights of ownership to another person or entity. this is permanent.

what is collateral assignment?

when the policy owner transfers partial rights to another person. this is temporary.

what is the paid up addition option?

when there is no dividend option chosen on the policy, the amount of the dividend is put towards the whole life policy.

when transferring over ownership of a policy does the policy owner have to notify the insurer?

yes in writing

does the policy owner have the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer?

yes!

will the policy owner have to pay back all back premiums plus interests and possibly any outstanding loans and interest when reinstating a policy?

yes!