10.1 insurance

Spouse/other-insured term riders are used to purchase insurance on a spouse or someone other than the original person. Examples include:

*A child term rider-used to purchase term insurance on a life of a child *A family term rider-combines the spouse and the children rider for temporary coverage on the family.

Riders can be used to enhance or add benefits to the policy, or they can be used

to take benefits away from the policy. Riders that add benefits generally require the payment of additional premium.

Disclosures When a policy or certificate containing an accelerated benefit provision is applied for or delivered, the producer is responsible for providing the applicant a summary of coverage that includes

*a brief summary of the accelerated benefit and definitions of the conditions or occurrences triggering payment of the benefit *an explanation of any effect of the payment of an accelerated benefit on the cash value, accumulation account, death benefit, premium payments, and any loans or liens. When an accelerated benefit option is exercised, the insurer must provide to the policy holder or certificate holder and any irrevocable beneficiary an illustration that *numerically demonstrates any effect the payment of the benefit will have on the cash value, accumulation account, death benefit, premium payments, and any loans or liens *includes a statement that receipt of accelerated benefit payments may adversely affect the recipients eligibility for Medicaid or other government benefits or entitlements, that benefits may be taxable and that assistance should be sought from a personal tax advisor.

Living benefits provision Long-term care LTC insurance which reimburses health and social service expenses incurred in a convalescent or nursing home facility, can be marketed as a rider to life insurance policies. LTC rider benefits are similar to those found in a LTC policy. The benefit structure includes the following

*there are elimination periods of 10-100 days *benefit periods are three to five years or longer *prior hospitalization for at least three days may be required *benefits may be triggered by impaired activities of daily living *levels of care include skilled, intermediate, custodial, and home health care In addition, certain optional benefits also may be provided such as adult day care, cost-of-living protection , hospice care, and others.

garth has a 100,000 whole life insurance policy that has been in effect for 10 years. The policy includes a double indemnity rider. Garth jumps off a bridge and dies. How much will the policy pay

100,00 because the multiple indemnity rider excludes edeath resulting from suicide, but the base policy's suicide exclusion has expired

tammy has a total of 10,000 loan and interest outstanding against her 100,000 policy. The policy has a double indemnity rider. Tammy is killed in an automobile accident. How much will the policy pay?

190,000

Accelerated death benefits are received income tax-free as long as the insured is terminally ill. This provision is given without an increase in premium.

Accelerated death benefits are received income tax-free as long as the insured is terminally ill. This provision is given without an increase in premium.

Accidental death or double indemnity coverage is uually limited to age 60, 65 or in few cases age 70

Accidental death and dismemberment insurance AD&D this also provides benefits for death due to an accident, or for the loss of one or more hands feet arms legs or loss of sight. The principal sum would be paid for death or loss of two or more of the primary parts; the capital sum is paid for loss of one of the primary parts.

Substitute Insured Rider

Although it seems unusual to allow for the substitution of insured in life insurance, the substitute insured rider actually does permit a change of insureds. This rider is also known as an exchange privilege rider. The ability to substitute or exchange insureds is desirable, for instance, in business-owned life insurance, when a key employee or business executive is insured for the benefit of the corporation. If this employee terminates employment or retires, the insurance can be switched over to apply to the employee's replacement, subject to evidence of insurability. This way, the policy can continue (rather than be terminated and a new policy issued0 with the same face amount, and premiums can be calculated on the basis of the new insured's age, sex, and other factors.

Accidental Death (double indemnity)

An accidental death benefit ADB rider may be added to a life insurance policy. This benefit is sometimes referred to as double indemnity because it provides double the face amount of the policy if the insured dies due to an accident. An additional premium will be charged for this benefit To be covered, death must occur within 90 days of an accident. The basic purpose of this restriction is to make sure that the accident is the only cause of death.

An income under the disability income rider continues for the length of the disability. However, a waiting period is required by most companies to ensure that the disability is, in fact, permanent by the company's definition and total as determined by a company approved physician.

An income under the disability income rider continues for the length of the disability. However, a waiting period is required by most companies to ensure that the disability is, in fact, permanent by the company's definition and total as determined by a company approved physician.

Additional insureds

Coverage for a spouse may be obtained to cover the extra expenses of child care and home-related costs by purchasing some sort of family term insurance. This insurance may also be used to protect dependent parents. A term policy can be added to policy to provide this coverage.

Payment will not be made by an insurer if death results from certain causes including

Illeagal activities War Aviation activities (except passenger travel on scheduled or commercial airlines Where an accident was involved in conjunction will illness, disease, or mental infirmity

Guaranteed insurability

Many insurance companies now offer a guaranteed-insurability option GIO also known as guaranteed insurability benefit GIB which allows a policy holder to purchase specified amounts of additional insurance without evidence of insurability. The new insurance is issued at standard rates on the basis of the insureds attained age when the option is exercised. In most cases this benefit allows an insured to purchase additional insurance coverage at three-year intervals beginning with the policy anniversary nearest the insured 25th birthday and terminating with the anniversary nearest the insureds 40th birthday. The amount of additional insurance that may be purchased on each of the specified dates is equal to the face of the original policy or 10000 whichever is less. Some insurers provide additional option dates at other important periods in the insureds life such as marriage or the birth of a child.

which of the following riders requires proof of insurability of the policyowner as well as of the insured?

Payor rider

Cost of living

Some companies offer their applicants the ability to guard against the eroding effects of inflation. A cost of living COL or cost of living adjustment COLA rider can provide increases in the amount of insurance protection without requiring the insured to provide evidence of insurability. the amount of increase is tied to an increase in an inflation index, most commonly the consumer price index CPI. Depending on the type of base policy, these riders can take several forms.

There are two approaches to the LTC rider concept

The generalized or independent approach recognizes the LTC rider as independent from the life policy because the benefits paid to the insured will not affect the life policy's face amount or cash value. The integrated approach links the LTC benefits paid to the life policy's face amount and or cash value.

The purpose of a cost of living rider is to

increase the death benefit to keep pace with inflation tied to the CPI. No proof of insurability is required. Premium is based on attained age.

A waiver

is a type of rider that is used to exclude benefits and for which no premium is charged. For example, waiver may be attached to apolicy that excludes benefits for death by a specified cause such as a particularly hazardous hobby.

The living benefit or living needs rider combines life insurance and LTC benefits drawing on the life insurance benefits to generate LTC benefits. In a sense its like borrowing from the life insurance ot pay LTC benefits. Under the LTC option up to 70-80% of the policy's death benefit may be used to offset nursing home expenses. Under the terminal illness option, 90-95% of the death benefit may be used to offset medical expenses. Of course, payment of LTC benefits reduces the face amount of the life policy.

The living benefit or living needs rider combines life insurance and LTC benefits drawing on the life insurance benefits to generate LTC benefits. In a sense its like borrowing from the life insurance ot pay LTC benefits. Under the LTC option up to 70-80% of the policy's death benefit may be used to offset nursing home expenses. Under the terminal illness option, 90-95% of the death benefit may be used to offset medical expenses. Of course, payment of LTC benefits reduces the face amount of the life policy.

Return of cash value

The return of cash value rider is similar to the return of premium rider in that it is merely an additional amount of term insurance that is equal to the cash value at any point while effective. Buying it, the policy owner is simply getting additional term insurance. In reality, this rider does not return the cash value; it pays an additional amount of insurance equal to the cash value.

Waiver of premium

The waiver of premium rider found in a life insurance contract states that if an insured becomes permanently and totally disabled during the term of the policy, premium payments will be waived during the period of disability. The contract will remain in force just as if the premiums were paid. An additional premium is charged for this benefit, and it is subject to a waiting period (typically three to six months) if the insured is still totally disabled after this period premiums are waived retroactively from the date of disability. Usually the insured and the policy owner are the same. Some life insurance contracts stipulate that disability must occur prior to a specified age, such as age 60 or 65. The additional premium paid for this benefit does not increase the face amount of the policy nor the policy's cash value.

Payor rider

This rider or provision amy be added to a life insurance contract which provides for the continuance of insurance coverage on the life of a juvenile in the event of the death or total disability of the individual responsible for the payment of the premiums a parent or guardian. This benefit may be added for an additional premium and is also referred to as the payor clause. This benefit provides that premiums will be waived until the insured attains a specified age or the maturity date of the contract, whichever is earlier, in the event that the payor dies or becomes totally disabled.

Disability income rider

This rider waives premium payments while the policy owner is totally disabled and pays a specified maount each month (income) to the policy owner while the disability continues. Under the disability income rider, the company guarantees the insured policy owner a regular monthly income for as long as the insured remains totally and permanently disabled. The amount of the income is usually based on the face amount of the policy-for instance X per month, per 1000 of coverage. Example: if a policy owner has the disability income rider on a 100,000 policy and the company guaranteed 10 per month on each 1000 of coverage, the policy owner will receive 1000 per month.

Return of Premium

This rider was developed primarily as a sales tool to enable the agent to say for example, In addition to the face amount payable at your death, we will return all premiums paid if you die within the first 20 years" The rider is simply an increasing amount of term insurance that always equals the total of premiums paid at any point during the effective years. In reality the rider does not return premium but pays an additional amount at death that equals the premiums paid up to that time, as long as death falls within the time specified in the rider. By purchasing this rider, the policy owner is buying term insurance and is charged for it accordingly.

Waiver of cost of insurance universal life policies

This rider, also found in universal life insurance policies, will pay the minimum amount of premium to keep the policy in force if the insured becomes permanently and totally disabled. When the average premium payment is calculated there would be enough premiums to not only cover the cost of insurance but also to contribute in part, towards cash value accumulation.

Effect on death benefit

Whatever amount is withdrawn will be deducted from the face amount when death occurs.

A rider also can refer to a term policy that is attached to a permanent policy to provide

additional coverage

riders

are special policy provisions that attach to the policy, or "ride" it.