Chapter 7 Life Insurance Policy Premiums

assignment by policyowner

- collateral - pledging the policy as collateral for a loan. - absolute - complete change of ownership.

Time Payment of Claims

- immediately. - usually no longer than 60 days.

Levels of beneficiaries

-Primary- first -contingent or secondary - second (if no primary alive) -tertiary- third (if no primary or contingent is alive) -Estate of Insured *if no beneficiary named or alive

Fee look

-begins when the owner receives the policy -usually 10 days -policy can be returned for a full refund

modifications

-can only be made by the company -owner can request a change

Life insurance policy provisions

-free look -insuring clause -ownership rights -assignment -entire contract -modifications -consideration -payment of premium -Grace period -reinstatement -incontestability provision -misstatement of age or sex -payment of claims

Who can be a beneficiary?

-individuals -classes -trusts -minors -estates

consideration- value given by policyowner

-information in the application -premium

common disaster provisions

-insured and primary beneficiary are in common accident -both die within 30-90 days after accident -proceeds paid as if primary beneficiary died first -proceeds paid to contingent beneficiary

uniform simultaneous death

-insured and primary beneficiary are in same accident -both die in accident -assumes primary beneficiary dies first -proceeds paid to contingent beneficiary

spendthrift provision

-may be included in the policy -death benefit cannot be paid in a lump sum -death benefits cannot be claimed by creditors before payment to beneficiary -death benefits cannot be pledged by the beneficiary to a creditor -death benefits cannot be used by the beneficiary as collateral for a loan

ownership rights

-name or change the beneficiaries -Select how the death benefits will be paid (lump sum or over time) -Borrow or withdraw from the policy cash values (if any) -Receive policy dividends if a participating policy -surrender or cancel the policy -decide what to do with the policy cash values ( if any) -assign the policy values or ownership -Decide the premium payment mode

Multiple beneficiaries in the same class

-per capita- by the head (not inheritable) -per stirpes- by branch (inheritable)

Grace Period

-premium not paid by due date -usually 31 days following due date -insurance still in force -death benefit paid minus premiums due

Life Policy Exclusions

-suicide *death by suicide not covered before 2 years (time may vary) -aviation *death due to an airplane accident *does not apply if a passenger or crew member of a commercial airline -war or military service *status type- death occurs while in the military- regardless of the reason *results type- Death occurs related to the military.

The incontestability provision is usually in effect after

2 years

irrevocable

Can't be changed without Beneficiary consent

Which clause identifies the fact that the policyowner must pay something of value for the insurer's promise to pay benefits?

Consideration clause

Ginny is a revocable primary beneficiary on her mother's life insurance policy. Which of the following statements is TRUE?

Ginny will receive benefits before any other beneficiary upon her mother's death

Which clause contains the basic promise of the life insurance company to pay a specified sum of money to a beneficiary upon the death of the insured?

Insuring clause

When Tom dies, Rosemary receives the death benefit. If Rosemary had died before Tom, George would have received the benefit. Which of the following statements is TRUE?

Rosemary is the primary beneficiary and George is the contingent beneficiary

Insuring clause/provision (aka Insuring Agreement)

Summary of coverage including premium & mode of payment, death benefit, beneficiary(ies), exclusions, & promise to pay. -usually found on the first page of the policy -insurers promise to pay upon death -includes the face amount -usually signed by an officer of the company

John leaves his $300,000 estate to his 3 children to split equally according to a per capita distribution. One of his children dies before John does. Upon John's death, which of the following statements is TRUE?

The proceeds are split 2 ways between the remaining children only.

John leaves his $300,000 estate to his 3 children to split equally according to a per stirpes distribution. One of his children dies before John does. Upon John's death, which of the following statements is TRUE?

The proceeds are split 3 ways between the remaining children and the beneficiary of the deceased child's estate

The aviation exclusion eliminates coverage for all of that commercial flighte following EXCEPT

a commercial flight

entire contract

a contract in which each component of the contract is dependent on every other component -policy plus -copy of the application plus -any riders or amendments (if any)

reinstatement

a policy can be restored within a specified period of time with proof of insurability -policy has lapsed for nonpayment of premiums -up to three years following lapse -policy was not surrendered *pay all missed premiums plus interest *prove insured still insurable *done to save terms of original policy (issue age) -incontestability -usually after two years -policy can't be taken away *due to material misrepresentation -fraud

Revocable

can be changed by the owner at any time

Which clause identifies the components of the contract?

entire contract clause

All of the following are designations of beneficiaries EXCEPT

final beneficiary

misstatement of age or gender clause

if the insured's age or gender has been misstated, benefits payable under the policy will be adjusted to what the premium paid would have purchased at the correct age or gender -if the insured is older than application states (under payment) *death benefit amount reduced to correct amount premium would have purchased -if the insured is younger than the application states (over payment) *death benefit amount increased to correct amount premium would have purchased. -incontestability provision does not apply

facility of payment provision

insurer can pay someone other than beneficiary

payment of premium

premiums are due in advance

all of the following can be named beneficiaries cannot be found, under the facility of payment provisions the insurer may

select a beneficiary

Steve is the beneficiary on his spouse's life insurance policy. When they divorce, his spouse cannot remove him as a beneficiary on the policy without his written permission because

steve is an irrevocable beneficiary

Carl purchased a life insurance policy when he was 44. The insurer accidentally recorded his age as 42. When the accident is discovered in a review of the files 5 years later

the coverage will be reduced because the premium is lower than it should have been

Which of the following is allowed when policy proceeds are being paid through a spendthrift clause?

the proceeds are paid directly to the beneficiary in monthly installments

An insured and the primary beneficiary died in a car accident. Which of the following states that the primary beneficiary died first unless there is evidence to the contrary?

the uniform simultaneous death act