Chapter 3 | Life Policy Provisions, Riders & Options
The common disaster clause states that..`
If the insured and the primary beneficiary died in a common disaster, it is presumed that the primary beneficiary died first and the proceeds will be paid to the continengent bene or the estate.
The family term rider...
Incorporates the spouse term rider along with the childrens term rider in a single rider
If the insured dies during a period of time for which the premium has been paid, the...
Insurer must refund any unearned premium along with policy proceeds.
Options offer...
Insurers and insureds ways to invest or distribute a sum of money available in a life policy.
Although the dividends are not taxable the...
Interest on the dividend is taxable
When a reduced paid up nonforfeiture option is chosen, what happens to the face amount of the policy...
It is reduced to the amount of what the cash value would buy as a single premium
Benefits designated to a minor will either be paid to the....
Minors guardian, or paid to trustee of the minor if the trust is the named beneficiary, or paid as directed by a court.
A table showing the nonforfeiture values for the next 20 years...
Must be included in the policy
NAIC
National Association of Insurance Commissioners, an organization composed of insurance commissioners from all states and jurisdictions formed to resolve insurance regulatory issues
The first dividend could be paid as early as the first policy anniversary but must occur....
No later than the end of the third policy year
Transfer of the life insurance policy does..
Not change the insured or amount of coverage, it only changes who has the policy ownership rights
With the accumulation at interest option, the interest is...
Not taxable since it remains inside the insurance policy
With a childrens term rider, there is...
One premium for all children
The results clause...
Only excludes the death benefit if the insured is killed as a result of an act of war
The policy loan option is found...
Only in policies that contain cash value.
A rider attached to a life insurance policy that provides coverage on the insureds family members is called...
Other insured rider
Nonfamily insureds are...
Other riders that are available to insure somebody who is not a member of the insureds family
Collateral assignment is the...
Partial and temporary transfer of rights
Dividends are paid only on...
Participating policies
LTC coverage provide for the...
Payment of part of the death benefit, in order to take care of the insureds health care expenses which are incurred in a nursing or convalescent home
Lump sum...
Payment of the entire benefit in one sum
The waivere of monthly deductions rider....
Pays all monthly deductions while the insured is disabled after a 6 month waiting period.
Entire contract =
Policy + Copy of application + any riders or amendments
The payor benefit rider is...
Primarily used with juvenile policies; otherwise it functions like the waiver of premium rider
The policy owner may name more than one...
Primary beneficiary
The living needs rider...
Provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness (that will result in death within 2 years)
Paid up addition options uses the dividend to .....
Purchase a single premium policy in addition to the face amount of the permanent policy
The two types of policy assignment are....
1.) Absolute Assignment 2.) Collateral Assignment
The maximum time limit for reinstatement is usually....
3 years after the policy has lapsed.
Most insurers impose...
A 6 month waiting period from the time of disability until the first premium is waived.
The reinstatement provision allows...
A lapsed policy to be put back in force.
The insurer may defer requetsts for other loans for....
A period up to 6 months; however loan requests for payment of due premiums must be honored immediately.
Minor....
A person under legal age
Activities of daily living (ADLs)...
A persons essential activities that include bathing, dressing, eating, transferring, toileting, continence
Indemnity is...
A principle of reimburse on which insurance is based
The other insured rider is also known as...
A spouse term rider when the rider covers the spouse of the insured
Collateral Assignment involves...
A transfer of partial rights to another person.
The guaranteed insurability rider, allows the insured to..
Purchase additional coverage at specified future dates (usually every 3 years) or events (such as marriage or birth of a child), without evidence of insurability for an additional premium
Long Term Care coverage is often..
Purchased as a seperate policy
Misstatememt of age on the application will...
Result in adjustment of premiums or benefits
LTC coverage can also be marketed as a...
Rider to a life insurance policy
Automatiic Premium Loans is a ...
SPecial type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium
The contingent beneficiary has...
Second claim in the event that the primary beneficiary dies before the insured.
Collateral Assignment is usually done in order to.....
Secure a loan or some other transaction
The insuring clause...
Sets forth the basic agreement netween the insurer and insured
The accidental death rider pays...
Some multiple of the face amount if death is the result of an accident as defined in the policy.
Consideration....
Something of value that each party gives to the other (binding force in any contract)
Family Term =
Spouse term + Childrens term
The life income option is also known as...
Straight Life
Dividends are not...
Taxable
Waiver of premium rider...
waives the premium if the insured owner has been totally disabled for a predetermined period.
Consideration is when...
Both parties to the contract provides some value
With a fixed period settlement option...
Both the principal and interest will be liquidated over a selected period of time.
Nonforfeiture values are required...
By state law to be included in the plicy and cannot be altered by the policy owner
If a life policy allows the policy owner to make periodic additions to the face amount at standard rates, the policy includes a....
Guaranteed Insurability Rider
The life income with period certain option...
Guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments
Policy loans are only available in policies that...
Have cash value`
The return of premium rider is...
implemented by using increasing term insurance.
Paid up additions will....
increase the death benefit of the original policy by whatever amount the dibidend will buy.
Most life insurance policies have a...
level premium
If the policyowner does not choose the dividend option, the insurer will automatically use...
paid up additions to increase the death benefit of the original policy by the amount the dividend will buy.
The accidental death and dismemberment rider....
pays the principal for accidental death, and pays a percentatge of that amount (or capital sum) for accidental dismemberment
The other insured rider...
provides coverage for one or more family members other than the inured.
The two types of assignments are...
Absolute and collateral
Riders are....
Added to a policy to modify provisions that already exist.
The grace period is the period of time ....
After the premium due date that the policyowner has to pay the premium before the policy lapses.
Flexible premium policies...
Allow the policyowner to increase or decrease the premium during the policy perio
The childrens term rider...
Allows children of the insured to be added to coverage for a limited period of time for a specified amount
Term riders allow for...
An additional amount of temporary insurance to be provided on the iunsured without the need to issue another policy
With Indemnity in the event of loss...
An insurer reimburses the insureds or beneficiaries for the loss.
The reduction of premium option allows the policyholder to....
Apply policy dividends toward th next years premium.
A policy that has been surrendered....
Cannot be reinstated
Nonforfeiture options include...
Cash Surrender, Extended Term, Reduced Paid-Up.
Absolute assignment is the...
Complete and permanent transfer of ownership rights.
The incontestability clause prevents an insurer from..
Denying a claim due to statements in the application after the policy has been in force for 2 years, even if there has been a material misstatement of facts or concealment of a material fact.
With absolute assignment, the new policyowner....
Does not need to have an insurable interest in the insured
Accelerated death benefits allow the ....
Early payment of a portion of the death benefit if the insured
Accelerated benefit =
Early payment of part of death benefit to the insured from the insurer for qualifying medical expenses
The policy together with the attached application constitutes the...
Entire contract
With the extended term nonforfeiture option, the cash value will be used to purchase term insurance that will be...
Equal to the original policy for as long as the cash values will purchase
The status clause...
Excludes all causes of feath while the insured is on active duty in the military.
If an insured withdraws a portion of the face amount by the use of an accelerated benefits rider, Payable Death Benefit =
Face Amount - Amount withdrawn - Earnings lost by insurer in interest
Insurance companies cannot...
Guarantee dividends
Extended term is the...
automatic nonforfeiture option; same face amount, shorter term of coverage
The uniform simultaneous death law stipulates....
That 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
A policy will not lapse with an outstanding policy loan unless....
The amount of the loan and accrued interest exceeds the available cash value
Provisions define...
The characteristics of an insurance contract and are farily universal from one policy to the next.
The insuring clause contains..
The company's promise to pay
The amount of the premium payment will be stated in...
The consideration clause
With the one year term option, the insurance company uses...
The dividend to purchase additional insurance in the form of one year insurance that increases the overall policy death benefit.
Principal is...
The face value of the policy; the original amount invested before the earnings
The primary beneficiary has...
The first claim to the policy proceeds following the death of the insured.
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as...
The incontestability clause
If none of the beneficiaries are alive at the time of the insureds death, or if no beneficiary has been named....
The insureds estated will automatically receive the proceeds of a life insurance policy,
Total disability refers to...
The insureds inability to engage in any work.
The suicide provision in life insurance policies protects....
The insureres from individuals who purchase life insurance with the intention of committing suicide.
The premium mode is...
The manner or frequency that the policyowner pays the policy premium
The entire contract provision stipulates that...
The policy and a copy of the application, along with any riders or amendments
With Reduced paid up insurance
The policy cash value to convert to term insurance for the same face amount as the former permanent policy
The free look provision, allows...
The policyowner 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
The free look period starts when...
The policyowner receives the policy, not when the insurer issues the policy
When the fixed amount settlement option is chosen...
The policyowner sets the amount of each installment
The guaranteed insurability rider allows...
The policyowner to purchase specific amounts of additional insurance at specific dates or events without proving continued insurability
The policyowner has...
The responsibility of paying the policy premiums, and is also the person who must have an insurable interest in the insured at the time of application for the insurance.
Exlusions are..
The types of risks the policy will not cover.
The consideration clause states that....
The value offered by the insured is the premium and statements made in the application/
Assignment....
Transfer of rights of policy ownership
Absolute Assignment involves....
Transferring all rights of ownership to another person or entity.
The benefit with an accidental death rider is normally....
Two times (double indmenity) the face amount. Some policies pay triple the face amount
How long is an insurance company allowed to defer policy loan requests?
Up to 6 months
Insuacne companies may defer a policy loan request for...
Up to 6 months
The waiver of premium rider....
Waives the premium for the policy if the insured becomes totally disabled
In accidental death, death must occur...
Within 90 days of such an accident.
Paid up policies will...
accumulate cash value and pay dividends
Nonforfeiture Options....
are certain guarantees are built intol the policy that canot be forfeited by the policyowner
Nonforfeiture Options
are triggered by policy surrender or lapse