Chapter 12 Terms

interest option

A settlement option under which the insurance company invests the policy proceeds and periodically pays interest on those proceeds

waiver-of-premium provision

if the insured becomes totally disabled from bodily injury or disease before some stated age, all premiums coming due during the period of disability are waived

aviation exclusions

some insurers exclude aviation deaths other than as a fare-paying passenger on a regularly scheduled airline

automatic premium loan provision

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

entire-contract clause

the life insurance policy and attached application constitute the entire contract between the parties

irrevocable beneficiary

beneficiary cannot be changed

viatical settlement

An arrangement that allows someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when and where they are most needed, before death.

life settlement

An arrangement that allows the policyowner sell their existing life insurance policy to a third party for compensation.

paid-up additions option

Dividends are used to buy additional paid-up insurance (paid-up additions) of the same type as the original policy.

cost-of-living rider

For an increased premium, the policyowner can increase the death benefit of the policy to reflect an increase in the cost of living (based on the consumer price index).

accelerated death benefits

Policy provision that allows full or partial payment of the policy's death benefit before the insured's death if he/she becomes terminally ill.

primary beneficiary

beneficiary who is first entitled to reeve the policy proceeds on the insured's death

contingent beneficiary

receives benefit if primary beneficiary is not able to

suicide clase

the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; only refund of premiums

collateral assignment

the policyowner temporarily assigns a life insurance policy to a creditor as collateral for a loan

specific beneficiary

A benny who is designated by name or in some other manner that clearly sets him or her apart from all other parties.

reinstatement provision

A lapsed policy may be reinstated if not longer than 3-5 yrs., & proof of insurability re-established, & back premiums + interest paid.

misstatement of age or sex clause

A life policy provision that says if the insured's age or sex is discovered to be different from what was on the application an adjustment will be made to the policy's coverage based on the correct age or sex.

policy loan provision

A policy provision that describes the conditions by which a policyowner can borrow from the policy's cash value.

settlement options

Choices available to the insured/owner for distribution of insurance proceeds.

nonparticipating policy

Life Insurance that does not provide policy dividends; also called a nonpar policy

extended term insurance option

Nonforfeiture option where cash value is used to make a single premium payment on a Term Insurance Policy of the same face amount as the original policy. Original policy can be reinstated.

nonforfeiture laws

The policyholder should get something back if the policy is surrendered

participating policy

life insurance that provides policy dividends

grace period

period of 31 days to pay an overdue premium

revocable beneficiary

policy may change at any time and requires change of beneficiary form

ownership clause

policyholder possesses all contactual rights in the poly while the insured is living

reduced paid-up insurance option

Nonforfeiture option where cash value is used to make a single premium payment to purchase as much of the same type of insurance as possible. Face amount of the new policy would be less than the original policy but no further premium payments would be necessary. Policy can be reinstated.

fixed-period option

The proceeds are paid to a beneficiary over some fixed period of time.

class beneficiary

a specific person is not named but is a member of a group designated as beneficiary, such as "children of the insured", appropriate whenever the insured wishes to divide the policy proceeds equally among members of a particular group

accidental death benefit rider

often called "double indemnity," this provision pays an additional amount if death of the insured is accidental.

life income option

provides the recipient with an income that he or she cannot outlive

guaranteed purchase option

an option in a life insurance contract giving the policyholder the right to purchase additional coverage at stipulated intervals without providing evidence of insurability

change-of-plan provision

Allows policyowners to exchange their present policies for different contracts.

war clause

This generally excludes coverage for persons serving in the armed forces during the time of war, whether on the battlefield or not.

nonforfeiture options

Three options available by law to policyowners that enable them to recover a policy's cash-value upon surrender of that policy: (1) Cash, (2) Reduced Paid-Up Insurance, and (3) Extended Term Insurance.

absolute assignment

when all rights of the original owner passes to another party (parent to child)