Chapter 3

Most insurers specify a certain period of time, usually ___ to ___ days, in which death must occur in order for the Uniform Simultaneous death law to apply

14, 30

During the first __ years of the policy, an insurer may contest a claim if the insurer feels that inaccurate or misleading info was provided on the application.

2

However, the insurer must provide __ days written notice to the policy owner that the policy is going to lapse. Insurance companies may defer a policy loan request for up to __ months, unless the reason for the loan is to pay the policy premium.

30, 6

If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit. While the insurer may defer requests for other loans for a period of up to __ months, loan requests for payment of due premiums must be honored immediately.

6

Most insurers impose a ___month _______ from the time of disabiilty until the first premium is waived. If the insured is still disabled after this period, insurer will refund the premium paid by the insured from the start of the disability. Rider usually expires when insured turns 65.

6, waiting period

A person's essential activities that include bathing, dressing, eating, transfering, toileting, continence

Activities of daily living (ADLs)

Transfer of rights of policy ownership

Assignment

The ______________ has been adopted by most states to address the problem of two beneficiaries dying at the same time. In order to protect the policyowner's original intent, as well as protect the contingent beneficiary

Common Disaster Clause

The ___________ provision stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract. No statements made before the contract was written can be used to alter the contract. Neither the insurer nor the insured may change policy provision once the policy is in effect without both parties agreeing to it and the change being affixed to the contract.

Entire Contract

The purpose of this is to protect the policyholder against an unintentional lapse of the policy. If the insured dies during this period the death benefit is payable, however, any unpaid premium will be deducted from the death benefit.

Grace period

A principle of reimbusement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss

Indemnity

While there is no "standard" policy form in life insurance, the standard policy provisions adopted by the _____________ create uniformity among life insurance policies

NAIC

an organization composed of insurance commisioners from all states and jurisdictions formed to resolve insurance reglatory issues

National Association of Insurance Commissioners (NAIC)

These offer insurers and insureds ways to invest or distribute a sum of money available in a life policy

Options

The ________ option is found only in policies that contain cash value. The policyowner is entitled to borrow an amount equal to the available cash value

Policy loan

The advantage to reinstating a lapsed policy as opposed to purchasing a new one is that the policy will be restored to its orginal status and retain all the values that were established at the insured's issue age. T/F

True

Under the ___________________, it will be assumed that the primary beneficiary died first in a common disaster. This provides that the proceeds will be paid either to the contingent beneficairy or estate.

Uniform Simultaneous death law

Assignment that involves transferring ALL rights of ownership to another person/entity. This is permanent and total transfer of all policy rights. New policyowner does not need to have an insurable interest in the insured.

absolute assignment

What are the two types of policy assignments?

absolute, collateral

The _______ rider pays some multiple of the face amount if death is the result of an accident as defined in the policy. Death must occur within 90 days of such accident. The benefit is normally two times the face amount.

accidental death

Policy loans are/are not subject to income taxation?

are not

The children's term rider is based on _________

average number of children

The _____ rider allows children of the insured to be added to coverage for alimited period of time for a specified amount. Usually expires when minor reaches certain age (18 or 21)

children's term

If the policyowner has neglected to select a nonfrfeiture option, the insurer will automatically implement the _________ option in the event of termination of the original policy

extended-term

spouse term + children's term =

family term

The ___________ option pays a fixed, speicified amount in installments until the proceeds (principal and interest) are exhausted. Recipient selects a specified fixed dollar amount to be paid until ll proceeds are gone.

fixed-amount installments

The ________ period starts when the policyowner RECEIVES the policy, not when the insurer issues the policy.

free-look

The Change of insured rider is often used by businesses that have a _______ policy covering key employees.

joint life

Dividends are paid only on

participating policies

If the insured dies during a period of time for which the premium has been paid, the insurer must refund any _____________ premium along with the policy proceeds.

unearned

The _______________ rider pays all monthly deductions while the insured is disabled, after a 6 month waiting period. Rider only pays monthly deductions not full premium necessary to accumulate cash values

waiver of monthly deductions

The _______ rider waives the premium for the policy if the insured becomes totally disabled. Coverage remains in force until the insured is able to return to work. If they can never return to work, premiums will continue to be waived.

waiver of premium

The __________ provision specifies the policyowner's right to assign (transfer rights of ownership) the policy.

assignment

The ____________ is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium. This is not required but often added to contracts for no charge but a cash value.

automatic premium

Assignment that involves transfer of PARTIAL rights to another person. Usually done in order to secure a loan or transaction. This is a partial and temporary assignment of the policy rights. Once the debt/loan is repaid, the assigned rights are returned to the policy owner

collateral assignment

Something of value that each party gives to the other (binding force in any contract)

consideration

The ____________ beneficiary (aka secondary/tertiary) has second claim in the event that the primary dies before the insured. These beneficaries don't receive anything if the primary is still living at time of death of insured.

contingent

Accelerated death benefits allow the ____________ of a portion of the death benefit if the insured has any of the following conditions: -terminal illness -medical condition requirng extraordinary medican intervention to survive -medical condition that without extensive treatment limited insured's life time -inability to perform ADLS -permament residence in long term care facility -any other conditions approvided by Department of Insruance

early payment

If none of the beneficiares are alive at the time of the insured/s death, or if none have been named, the insured's _____ will automatically reieve the proceeds of a life insurance process.

estate

_____ are the types of risks that the policy will not cover. The most common are aviation, hazardous occupation, war, military service

exclusions

Under the ________ option (aka period certain), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before end of that period.

fixed-period installments

This provision allows the policyowner a specified number of days from receipt to look over the policy and if dissatisfied for any reason, return it in full refund of premium.

free-look

This is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually __ or ___ days)

grace period, 30, 31

The ________ rider allows the insured to purchase additional coverage at specified future dates (usually every 3 tears) or events (marriage, birth of child), without evidence of insurability, for an additional premium. Usually expires at ___

guaranteed insurability, 40

The ___________ clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for __ years, even if there has been a material misstatement of facts or concealment of a material fact

incontestability, 2

The ___________ sets forth the basic agreement between the insurer and the insured. States the insurer's promise to pay the death benefit upon insured's death Located on the policy face page Defines who the parties to contract are, premium to be paid, how long coverage is in force, and the amount of the death benefit

insuring clause

Although dividends themselves are not taxable, the _____ on the dividends is taxable to the policyowner when credited to the policy.

interest

With the __________ option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals. This is considered a temporary option.

interest-only

Most life insurance policies have a ______ premium, which means that the premium remains the same throughout the duration of the contract. ____ premium policies allow the policyowner to increase or decrease the premium during the policy period

level, flexible

Life-income Option: The amount of each installment paid is based on the recipient's _______ and the amount of the principal.

life expectancy

The ______________ option guarantees an income for two or more recipients for as long as they live. Most contracts provide that the surviving recipient will reeive a reduced payment after the first dies.

life income joint and survivor

The _________ option, aka straight life, provides the recipient with an income that he/she cannot outlive. Installment payments guaranteed as long as recipient lives.

life-income

The ______ rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result death within two years Many companies don't charge for this rider

living needs

Payment of the entire benefit in one sum

lump sum

A person under legal age

minor

Benefits designated to a __________ as the beneficiary will either be paid to the guardian or to the trustee of that person if the trust is the named beneficiary, or paid as directed by court. Not a good idea though.

minor

Other riders are also available to insure somebody who isn't a member of the insured's family - _______________ The substitute insured or change of insured rider doesn't permit an additional insured, but instead allows fo the change of insureds, subject to insurability. Most commonly used with key person insurance.

nonfamily insureds

Because permanent life insurance policies have cash values, certain guarantees are built into the policy that cannot be forfeited by the policy owner. Those guarantees are require dby state law to be in the policy Policyowner has to choose one of the options: cash surrender value, reduced paid up insurance, or extended term

nonforfeiture option

What are the three different options policyowners have as for how the cash value in the policy should be protected, return of premium should be inested, and how benefit payments will be paid.

nonforfeiture, dividend, settlement

The _______ rider provides coverage for one or more family members other than the insured.Usually level term insurance, attached to the base policy coering the insured.

other insured

Face amount - Amount withdrawn - earnings lost by insurer in interest =

payable death benefit

The _____ rider is primarily used with juvenile policies, otherwise, it functions like the waiver of premium rider.

payor benefit

Under life income with ________ option, the recipient is provided with the "best of both worlds" in terms of a lifetime income and a guaranteed installment period. Payments are guaranteed for lifetime of recipient and also a specified period that is guaranteed to beneficiary.

period certain

The ___________ of a life insurance policy has the right to tranfer partial or complete ownership of the policy to another person without the consent of the insurer.

policyowner

The ________ mode is the manner or frequency that the policyowner pays the policy premium. (annual, semi-annual, quarterly, monthly) If the insured selects anything besides annual, there will be an additional charge to offset the loss of earnings since the company doesn't have the entire premium at once. Also costs with more frequent billing.

premium

The _______ beneficiary has first claim to the policy proceeds following the death of the insured. The policyowner may name more than one of this type beneficiary and how the proceeds will be divided.

primary

The face value of the policy; the original amount invested before the earnings

principal

The ACIDENTAL DEATH AND DISMEMBERMENT rider (AD&D) pays the _______ (face amount) for accidental death, and pays a percentage of that amount, or a ______, for accidental dimemberment.

principal, capital sum

WIth the fixed-period option, the option doesn't guarantee payments for the life of the beneficiary, but does guarantee that all _______ will be paid out

proceeds

Define the characteristics of an insurance contract and are fairly universal from one policy to the next

provisions

Under the option of reduced paid-up insurance, the policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a _________________ from that of the former policy.

reduced face amount

A policy that has been surrendered cannot be ______

reinstated

The ____ provision allows a lapsed policy to be put back in force. The maximum time limit for this is usually ___ years after the policy has lapsed

reinstatement, 3

The ____________ rider is implemented by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a gien age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to beneficiary.

return of premium

Beneficiary designations may be either ___ or ___.

revocable, irrevocable

These are added to a policy to modify provisions that already exist

riders

____ are written modiciations attached to a policy that provide benefits not found in the original policy. Sometimes require an additional premium, but they also help tailor a policy to specific need of the insured and can be classified according to their primary purpse.

riders

Under the extended-term option, the insurer uses the policy cash value to convert to term insurance for the ___________ as the former permanent policy.

same face value

__________ are the methods used to pay the death benefits to a beneficiary upon the insured's death, or to pay the endowment benefit if the insured lives to the endowment date.

settlement options

The ____ provision in life insurance policies protects the insurers from individuals who purchase life insurance with the intention of committing suicide. There is usually a time period that the death benefit will not be paid if insured commits suicide. Beneficiary will only be entitled to refund of premiums. If suicide is committed after period of time, death benefit will be paid.

suicide

A _____________ is a fee charged to the insured when a life policy or annuity is surrendered for its cash value.

surrender charge

Upon receipt of cash surrender value, if the cash value EXCEEDS premiums paid, the excess is ______ as ordinary income.

taxable

________ allow for an additional amount of temporary insurance to be provided on the insured, without need to issue another policy. Usually attached to a whole life policy to provide greater protection at reduced cost.

term riders