Chapter 4 - Life Insurance Riders

what happens if there is a misstatement of age on the application

a misstatement of age on the application will result in adjustment of premiums or benefits

define activities of daily living or A D Ls

a person's essential activities that include bathing, dressing, eating, transferring, toileting, continence

when discussing insurance what is an assignment

a transfer of rights of policy ownership

a rider may be attached to a life insurance policy that will adjust the face amount based on a specific index, such as the consumer price index. What is this called

cost of living rider

what is the waiting period on a waiver of premium rider in life insurance policies

6 months. Most insurers impose a 6 month waiting period from the time of disability until the first premium is waived

what is a primary beneficiary

a beneficiary who has first claim to the policy proceeds after the death of the insured

define contingent beneficiary

a beneficiary who has second claim to the policy proceeds after the death of the insured. This is usually after the death of the primary beneficiary

what is an absolute assignment and how does it differ from a collateral assignment

absolute assignment is the complete and permanent transfer of ownership rights. Collateral assignment is the partial and temporary transfer of rights

when calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value

all outstanding loans and interest

characteristics of a children's term rider

allows children of the insured to be added to coverage for a limited period of time. One premium is for all children

what is a trust in regards to insurance

an arrangement in which funds or property are held by a person or corporation for the benefits of another person. Such as a trust beneficiary

what protects the insured from an unintentional policy lapse due to a nonpayment of premium

automatic premium loan.

what qualifying factors must be met in order for an insured to receive accelerated death benefits

conditions for payment form. In order for an insured to receive accelerated benefits, an insurer may require certain qualifying factors to be med under conditions for payment form

what is the extended term option

extended term is the automatic nonforfeiture option. Same face amount with shorter term coverage

which rider, when attached to a permanent life insurance policy, provided an amount of insurance on every family member

family term rider

when the policyowner specifies a dollar amount in which installments are to be paid, they have chosen which settlement option

fixed amount. Policy owner determines fixed dollar amount, insurer will determine how long the installments will be paid

what are fixed period installments

fixed period installments is a settlement option

what is the purpose of a grace period

grace periods protect policy holders from losing insurance coverage if they are late on a premium payment

at the time the insured purchased life insurance , a rider was added that allowed the purchase of additional insurance in the future with out having to prove insurability. What is this rider called

guaranteed insurability

what happens if there is no beneficiary named

if no beneficiary is named, policy proceeds go to the insureds estate

what type of insurance would be used for a return of premium rider

increasing term. The return of premium rider is achieved by using increasing term insurance.

what is the primary benefit of choosing extended term as a nonforfeiture option

it has the highest amount of insurance protection

what is synonymous with life income option

life income option is also know as straight life.

what is the NAIC

national association of insurance commissioners. It is an organization composed of insurance commissioners from all states, DC and US territories. Formed to resolve insurance regulatory issues

when a whole life policy lapses or is surrendered prior to maturity, can the cash value be used to pay back all premiums owed plus interest

no. you can't pay back all premiums owed plus interest.

when are nonforfeiture options triggered

nonforfeiture options are triggered by policy surrender or lapse

what are some examples of dividend options

paid up additions, accumulated at interest. Reduction of premium

you buy health insurance at 40. you die 3 years later in an accident. It is later discovered you were 2 years older and actually died at 45. what will the life insurance company do

pay out a reduced death benefit

when are policy loans allowed

policy loans are only available in policies that have cash value. Whole live policies

you have a 10k insurance policy. And a $200 premium due on February 1st. You die on the 28th of February. What happens

policy pays out 9,800 since you were in the 30 day grace period

what is the entire contract provision

policy. Plus. Copy of application. Any riders or amendments equals the entire contract

you have a 1,200 annual premium. You earn $300 in accumulated dividends, thus reducing next years premium to $900. what option do you have

reduction of premium. This option allows the policy holder to apply policy dividends towards the next years premium.

an insured under a life insurance policy died, the beneficiary receives the face amount plus al premiums. What is this rider

return of premium rider. Rider stipulates the death must occur prior to a certain age in order for the premium to be returned.

what is the common disaster close and who does it protect

says that if the insured and beneficiary dies in a common disaster it is presumed that the primary beneficiary died firs and the proceeds go to next in line

when are settlement options triggered

settlement options are triggered by the insured's death or age 100

which settlement option provides a single beneficiary with income for the rest of his or her life

single life option. Provides a single beneficiary with income for the rest of their life

what is the guarantee of nonforfeiture values

that the cash value will not be lost

if a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back

the balance of the loan will be taken out of the death benefit

upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does that mean

the beneficiary will only receive payments of the interest earned on the death benefit

define principal amount

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

a father has a life insurance policy on the 15 year old daughter. Policy contains the optional payor benefit rider. If the father becomes disables, what happens to the premiums

the insured premiums will be waived until she is 21

is the interest in an accumulation at interest option taxable

the interest credited under this option is taxable whether or not the policyowner receives it

what will most likely happen if you stop making payments on the cash value policy

the policy will terminate when the loan amount with interest equals or exceeds the cash value

the owner of a life insurance policy wishes to name 2 beneficiaries for the policy proceeds. What will the insurance producer say

the policyowner can specify the way the proceeds are split in the policy

true or false nonforfeiture values are required by state law to be included in the policy

true. Nonforfeiture values are required by state law to be included I the policy and cannot be altered by the policyowner. 20 nonforfeiture values must be included in the policy

true or false. With a cash surrender nonforfeiture option, funds exceeding the premium paid are taxable as ordinary income

true. The insurers surrender the policy at its current cash value. Only any excess of the value is taxable as income. Once the policyholder opts for cash surrender the policy is immediately inactive

true or false. a single life settlement option will provide income the beneficiary cannot outlive.

true. The single life option can provide a single beneficiary income for the rest of their life.

what happens under a straight life or life income settlement option

under life income or straight life settlement option, the recipient cannot outlive the benefit payments

an insured owns a life insurance policy. To be able to pay some medical bills. You withdrawal a portion of the cash balance. There is a limit on the withdrawal and the insurer charges a fee. What type of plan do you have

universal life. These policies allow to withdrawal a limited portion of the cash value, however limited and usually a charge

what is a waiver of premium rider

waiver of premium rider waives the premium for a total disability after a waiting period

define the spendthrift provision

when a life insurance policy stipulate the beneficiary will receive payments in a specified installments or for a specified number of years.

when a whole life policy lapses or is surrendered prior to maturity, can the cash value be used to purchase a single premium policy for a reduced face amount

yes. When a whole life policy pulses the cash value can be used as a single premium to purchase a completely paid up permanent policy