Life Insurance Policy Provisions, Options and Riders

Guaranteed Insurability rider

Allows the policy owner to purchase specific amounts of additional insurance at specific dates or events, without providing continued insurability.

Contingent Beneficiary

Needs to outlive the insured and primary beneficiary to get death benefit

Advantage of reinstating a policy

Original age is used for premium determination

Face of Term Policy

Same as the face amount provided under the whole life policy.

Extended Term Nonforfeiture option

Uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. Has highest amount of insurance protection

Paid-up additions

Annual dividend acts as a single premium each year to buy additional amounts of insurance

Accidental Death Rider

Pays 2 or 3 times the face amount if death is the result of an accident an occurs within 90 days of accident

Joint and survivor

Pays while either beneficiary is still living

Trustee

Person who receives the legal title of the property to be used for the benefit of the trust beneficiary

Revocable Beneficiary

Policy owner may change a revocable designation at any time and without the consent of the beneficiary

Incontestability Clause

Prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years

Reinstatement Provision

Requires policy owner to pay all overdue premiums plus interest before the policy is reinstated

Joint and 2/3 Survivor

Surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.

Payor Benefit Rider

Does not increase the death benefit, only pays the premium if the payor is disabled or dies.

Waiver of Cost of Insurance rider

Found in Universal Life policies. If insured becomes disabled, the rider allows the cost of insurance to be waived,

Life income with period Certain

Guarantees payments for the life of the recipient and specifies a guaranteed period of continued payments.

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die

Waiting period on a Waiver of Premium rider

6 months

Fixed-Period Option

A specified period of years is selected, and equal installments are paid to the recipient

Two Types of Assignments

Absolute and Collateral

Grace Period

Automatic premium loan provision is activated at the end of this

10-day free-look period

Begins when the policy is delivered. Permits the insured to return the policy for a full refund of premiums paid. Common

Other-insured rider

Useful in providing insurance for more than one family member.

Common Disaster Clause

When an insured and beneficiary die in a common accident, and the beneficiary dies before or within a specific period of time after the insured

Cost Of Living Rider

Adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living

Cash Option

Allows an insurer to send the policyholder an annual, nontaxable dividend check

Lump sum

Automatically used if policy owner dosen't choose settlement option.

Per Stirpes Class Designation

Provides distribution by family line or branch in the event a beneficiary predeceases the insured

Reduced paid-up nonforfeiture option

Provides protection until the insured reaches 100. Face amount is reduced to what the cash would buy. Covers longest period of time.

Interest earned on policy dividends

Taxable

Collateral Assignment

Transferring partial rights under the policy to another person

Payor Benefit

Allows the insurer to relieve a minor insured from premium payments if the parents die or become disabled. Only pays if the owners disabled for at least 6 months.

Reduction of premium

Allows the policyholder to apply policy dividends toward the next years premium

Policy owner

Can request changes in Premium payments, face value, loans, and policy plans. Has the ownership rights under the policy and not the insured or the beneficiary

Cash Surrender

Funds exceeding the premium paid are taxable as ordinary income

Paid-Up option

Insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. Dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy

Interest Only Option

Insurer retains policy proceeds and pays interest on the proceeds to the beneficiary at regular intervals.

Reduced Paid-Up Policy

Original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original.

Policy Reinstatement

Policy owner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.

Automatic Premium loan

Prevents the unintentional lapse of a policy due to nonpayment of the premium

Single Life

Provides beneficiary with income for the rest office/her life.

Per Stirpes

Provides distribution by family line or branch in the event a beneficiary predeceases the insured

Childrens Rider

Term insurance covering all of the children in the family, including newly born children, and are convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability. Proof of Insurability not required

Spouse Term Rider

Allows a spouse to be added for coverage. Usually Level Term insurance. Available until age 65.

Facility of Payment Clause

Allows an insurer to pay death benefits to a person that seems reasonably entitled to those benefits.

Under and extended term Nonforfeiture option policy cash value is converted to...

The same face amount as in the whole life policy

Absolute Assignment

Transfer of all ownership rights in a policy

Triple Indemnity Accidental Death Rider

Obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. Death must be accidental, occur within 90 days of the accident, not contributed by any other factors

Return of Premium Rider

Achieved by using increasing term insurance. Pays the beneficiary not only the face amount the policy but also the amount that had been paid in premiums

Irrevocable Beneficiaries

Can be changed only with the written consent of that beneficiary

Cash Value

Amount available to the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest

Accelerated Death Benefit

Death benefit received by the beneficiary will be reduced by the amount paid by the accelerated death benefit

Class Designation

Designation such as the child of the insured, or all children of the insured, or all current members of a group