4 Life insurance Policies Provisions, options and riders

what are the key characteristics of whole life insurance?

-level premiums -level death benefits -cash value -living benefits

Special Features of Term Policys. Most term policies are:

-renewable -convertible -renewable and convertible

reduced paid up option

-under this option the cash value is used to purchase a paid up whole life policy -the new whole life policy will have a smaller or reduced face amount from the original policy >but there will not be anymore premium payment due and it will continue to gain cash value

Extended term option

-under this option, the cash value is used to purchase a term policy. -the new term policy will have the same face value amount as the original whole life policy and will last for a set of time based on the amount the cash value available used > and there will not be any additional premium payments due.

Waiver of premium rider

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

what are the 2 types of policy assignments?

1) Absolute assignment 2) Collateral assignment

What are the 3 basic types of term insurance?

1) level term insurance 2)increasing term insurance 3)decreasing term insurance

what are 3 basic whole life insurance?

1) straight whole life 2)limited pay whole life 3)single premium whole life

SOOO when receiving dividends, what are the 5 options?

1) take dividends in cash 2) apply dividends against premium payments 3) allow dividends to accumulate interest 4) buy paid up additions (which is a whole life policy) 5) purchase one year term insurance

What are the most common exclusions in life insurance policies?

- war -aviation - non-commercial pilot -hazardous occupation or hobbies -commission to a felony -suicide

Cost of living rider

-addresses inflation by automatically increasing the amount of insurable without evidence of insurability. side note; the face value of the policy may increase by the cost-of-living factor tied to an inflation index such as the consumer price index

Policy riders

-are added to a policy and ride along, on the basic life insurance policy. >riders only have value when attached to a policy. they have no independent value. >they are added to help people customize their insurance policies for their individual needs -- unlike policy provision, policy riders are NOT free; their cost is added to the life insurance policy premium.

what are the 3 options for non-forfeiture options?

-cash surrender -reduce paid-up -extended term

Misstate of anger or sex provision

BECAUSE the age and sex are important factors in figuring the premiums that will be charged for a life insurance policy, this provision allows the insurance company to adjust the policy at any time due to a misstatement of age or gender. side note; In the event of a claim the insurance company is allowed to adjust the death benefit or the premium to the correct age or gender.

Decreasing term policies

Feature a level premium and a death benefit that decreases each year. Primarily used when the amount of protection needs to decrease over a period of time.

Level Death benefit:

guaranteed and remains level for the entire lifetime of the policy

Term policies...

Provide for thegreatest amount of coverage for the lowest premiums. provides what is known as pure death protection. if the insured dies during the policy term the policy pays a death benefit to the beneficiary. if the policy is cancelled or expires prior to the insureds death, nothing is payable. with term policies, there is no cash value or any living benefits available.

CASH SURRENDER OPTION?

TAKE THE CASH!

what is an example of decreasing term policy?

a most common use is to insure the payment of a mortgage. the policy amount decreases as the outstanding mortgage loan balance decreases each year. side note; in a decreasing term policy, the death benefit will be zerooo dollars at the end of the policy term.

single premium whole life

a one time lump sump payment is made, which will provide a level death benefit to the insured at age 100. the policy is completely paid up and will generate cash value immediately.

Convertible

a term policy that is convertible allows the policy owner the right to convert the coverage to a permanent whole life insurance policy without evidence of insurability. the premium for the new whole life permanent policy will be based only on the insureds current attained age.

Renewable:

a term policy that is renewable allows the policy owner the right to renew the coverage at the expiration date. without evidence of insurability. the premiums for the new term policy will be based only on the insureds current attained age.

Reinstatement provision

allows a lapsed policy to be put back in force >if the 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 persons attained age.

free look provision

allows the policy owner, a free look at the policy for a specific number of days. this period starts when the policy owner receives the policy from the insurance company in the mail, or is delivered by an insurance agent.

straight whole life

also called "continuous premium whole life," is a basic whole life policy, where the policy owner pays a fixed premium for the time the policy is issues until the insureds death or age 100.

What is Whole life ?

also called as permanent life insurance, these are policies that remain in effect to age 100 as long as the premium is paid. - also it provides lifetime protection and it includes a savings element known as cash value.

Non-forfeiture options

because permanent whole life insurance policies has cash value and the policy owner wants to surrender the policy, because he does not want it anymore, he must make a decision on what he would like to do with his cash value

cash value:

created by the accumulation of premiums is scheduled to equal the face amount of the policy when the insured reaches age 100

Dividends

dividends are paid only on participating policies. when the policy owner purchases the policy from a participating insurance company, they are eligible to receive dividends

Increasing term policies

feature level premiums and a death benefit that increases each year. > the amount of increase is usually set at a specific amount or percentage

Level premiums:

for whole life policies are based on the age of the individual, when originally purchased. therefore, the premium remain the same throughout the entire life of the policy.

Policy loan provision

is found only is policies that contain cash value >it is allowed to borrow an amount equal to the available cash value -if there are any outstanding loans at the time of the insureds death, the death benefit will be reduced by the amount of the outstanding loan

What is Term Life?

is temporary life insurance provided for a specific period of time. it is also known as pure life insurance. it is also temporary protection because it only provides coverage for a specific period of time.

insuring clause

is the insurance companies agreement and promise to pay the death benefit

collateral assignment

it involves a transfer of partial rights to another person; this is usually done in order to secure a loan -it is a temporary assignment -once the debt or loan is repaid the rights are returned to the policy owner.

absolute assignment:

it involves transferring all rights of ownership to another person or entity -it is a permanent and total transfer to all of the policy rights -the new policy owner does not need to have an insurable interest in the insured

Level term insurance

it is the most common type of temporary protection.

what is the purpose of grace period provision?

it is to protect the policy holder against an unintentional lapse of the policy. if the insured dies during this period the benefit is payable however any past due premiums will be deducted from the death benefits.

what does the word "level" refer too?

it refers to the death benefit that does not change throughout the life of the policy.

Suicide provision

of a life insurance policy protects insurance company against people using suicide for a quick payment of the death benefit. - if the insured commits suicide within the first 2 years, the insurance will not pay the death benefit

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.

what is rights of ownership?

the assignment provision specifies the policys owners right to transfer ownership of the policy.

Automatic Premium Loan Provision

the automatic premium loan provision is commonly added to contracts with cash value at no additional charge -this is a special type of loan that prevents unintentional lapse of a policy due to the non-payment of premiums

Entire contract provision

the entire contract provision stipulates that the policy and a copy of the application along with any riders or amendments make up the entire contract

grace period provision

the period of time after the premium payment due. the grace period is usually 30 days.

consideration clause

the policy owners promise to make premium payments

Most insurance companies impose a six month waiting period from the time of a disability. The coverage remains in force until the insured is able to return to work.. so what happens if the insured is not able to return to work????

the premiums will continue to be waived by the insurance company. side note; the waiver of premium rider usually expires when the insured reaches age of 65.

Exclusion

they are types of risk that an insurance policy will not cover

Standard policy provision

while there is NOT a set standard of policy provision in life insurance, the standard policy provisions adopted by the (NAIC), the national association of insurance commissioners does not create uniformity amongst life insurance policies.

Living benefits:

with a whole policy, a policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered. cash value is also referred to as non-forfeiture values.