8 The individual life insurance contract

The term for a fee charged to the insured when a policy or annuity is exchanged for its cash value is

When a policy is surrendered in exchange for its cash value, a surrender fee is assessed.

Title page of the policy and the insured's beneficiaries

Although the named beneficiaries are important, it is information NOT contained within the first several pages of the policy which is known as the TITLE PAGE.

Time when payments of premiums can be changed

The frequency of premium payments can be changed on the policy's anniversary date, provided that the payment is not less than a minimum amount that the insurer requires.

Paid-up addition option dividend use/purpose

With the paid-up additions option, the dividends are used to purchase a single premium, additional permanent policy. Paid-up addition option uses the dividend to purchase a smaller amount of the same type of insurance as the original policy.

Non-medical application

An application on which all the questions, including medical history questions are completed by non-medical people, such as the applicant and the agent, is considered non-medical.

Large amounts of insurance

Usually a non-medical application will be accepted if the amount of insurance applied for is a nominal amount. For larger amounts, however, the insurer will usually require some sort of medical examination by a professional.

Options and Fixed period installments option

Fixed period installments option is not one of the dividend options.

Clause from the company that promises to pay

The insuring clause contains the company's promise to pay.

Accumulation at interest option and taxation

The interest credited under this option is TAXABLE, whether or not the policy-owner receives it.

In underwriting health and disability insurance, two major considerations that have the potential to affect the proposed insured's' probability of experiencing a loss are

The two major considerations, "probability of disability" and the "average severity of the disability," have the potential to affect the proposed insured's probability of experiencing a loss. Therefore, a "Special Questionnaire" to obtain more specific and detail information will most often be used

Reduced paid-up option

With the reduced paid-up option, no further premium payments are required to continue the policy to the normal maturity date (age 100). However, the face amount is reduced to equal the amount the cash value will purchase as a single premium.

Ownership of cash value in a policy even if the policy lapses or is surrendered

Because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policyowner. Nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered. The cash value in a policy belongs to the insured even if the policy lapses or is surrendered. Nonforfeiture is clause in an insurance policy that allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse. The nonforfeiture clause may only be in effect for a limited period of time, and may only kick in after the policy has been active for several years.

Education of applicant in application

Education is not an underwriting factor nor is it information included on the application.

Lamar owns a $50,000 whole life policy. At age 47 Lamar decides to cancel his policy and exercise the extended term option with the policy's cash value. He will receive a term policy with the face value of

The face of the term policy would be the same as the face amount provided under the whole life policy. In this case 50K.

Mis-reprentations and when they do not become an issue for the insured

The insurer cannot contest the statements or misrepresentations contained on the application if the policy was in force for more than two years.