Chapter 2 Insurance Exam
what is facility of payment ?
allows insurer to pay a portion of death benefit to an individual they believe is equitably entitled 1. generally paid to person paying for funeral or hospital expenses 2. payable even if not listed in contarct 3. payable to the amount of expense only
What is Guarenteed insurability?
allows you to purchase extra amounts of life insurance WITHOUT having to take a physical exam again
Return of Premium Rider?
an increasing term rider, you get death benefit amount and premiums paid
What is the least expensive mode to pay premium ?
annual most expensive is monthly
What is the policy loan provision ?
owners right to borrow, via loan, from cash value - equal to full amount of cash surrender - not avaible in first 2-3 years - fixed interest rate 4-6%, not to exeed 8% - NOT A TAXABLE EVENT - due on policy anniversary date
What are the 6 dividend options?
- Paid to policholders of mutual companies - considered a return of an overpaid Premium, NOT TAXABLE as income 6 options: OCRAPP O: one year term: buy term insurance for 1 year C: Cash R: reduce future premium A: accumulate at interest P: paid up permanent additions P: paid up option
What is the Incontestable Clause ?
- insurer may challenge material misrepresenations on an application, but only on the first 2 YEARS of policy issue - rescind policy and return premium - protects insurer
What are the 5 Death Benefit Options avaialble to a beneficiary ?
1. Lump Sum, tax free 2. fixed period, receive a # of payments over a specific time frame 3. fixed amount, get a certain amount every month 4. interest only: just take interest off it for now, which is taxable 5. life income: put it inot a single premium annuity, and get income for life
What are the 3 options available to surrender a whole life contract ?
1. Surrender for Cash: remember the premiums paid are not taxable but any interest will be taxable 2. extended level term insurance: use existing cah to purchase a paid up level term policy for a max number of days 3. paid up permanent insurance: use existing cash to buy a smaller fully paid up whole life policy, it has a smaller death benefit
What are the 5 rights from the Owners right provisions ?
1. name or change beni 2. borrow from cash value 3. receive dividends 4. select premium mode 5. assignment rights
What is the grace period ?
31 day requirement basicall you have 31 days to pay premium
What benefits or percentage is paid for a single accidental dismemberment ?
50% of the principal sum
what is the reinstatement provision ?
APPLIES TO LAPSED POLICY: - within 3-5 years - need proof insurability and premiums plus interest required - after 45 days coverage is automatic
What procedure does a Viatical Settlment use ?
Absolute assignment procedure, means transfer of all right to another party 100% of them
What is absolute and collareral assignment ?
Absolute means transferring 100% of your rights to another party, like child obtaining policy from parents collateral is trasnfering SOME but not all rights to another party, like a whole life cash value to secure loan to bank
What is in the ENTIRE CONTRACT ?
Consists of the life insurance policy itself and any riders, endorsments or amendments PLUS copy of of the original application which includes all of the applicants responses to the questions regarding there health history
What is misstatement of age/sex (gender) ?
Death benefit is ADJUSTED to reflect the benefit of the premium correctly, so if you mis state your age this provision will adjust correctly
What is the consideration clause ?
Exchange of values - application information and premium in exchange for insurers promise to pay
What is a Viatical Settlement Provider (VSP) ?
Its a company that purchases life insurance from people and they become the new owner - they name themselves as the beneficiary - responsible for the premium payment in exchange, the previous owner get a lumpsum buyout, 50-90% and the previous owner is sick and needs the money people do this instead of accelerated benefits rider because this gives more money, free from in come tax
What does Assginment mean ?
Transfer of owners rights to another party
What is Viatication ?
Viator considers a Viatication, which is giving this to a Vicatical company, VSP Viatical Settlement Broekr: he negotiates between 2 parties - no more than 2% paid to viator as compensation - 7 day window
What are some policy exclusions ?
War Suicide in first 2 years Aviation: hazardous hobbies criminal acts under influence of
What is Automatic premium Loan ?
after the grace period ends, this authorizes the insurer to borrow from the cash value to paid UNPAID premium - must be selected at time of application - must be available cash - designed to prevent uninterntional lapse of policy - creates loan against policy
what is on the insuring clause ?
appears on 1st page and provides summary of contract describes the obligation of and the promise of the insurer in exchange for a premium - promise to pay - outline scope of coverage - called insuring agreement - provides death benefit, mode of premium, beneficiaries and exclusions
What is a COLA Rider?
cost of living adjustment rider, increase death benefit based on CPI, coca cola gets more expensive over time
what is the consideration clause ?
exchange of values application information and premium in exchange for insurers promise to pay the insurers consideration is its promise
What is a Payor Rider?
if a parent dies or becomes disabled, the premium is waived until 21 you can also add guaranteed insuranbility rider: allows child to purchase future insurance without evidence of insurability
What is the insuring Clause ?
its on the 1st page and provides summary of contract - PROMISE TO PAY -outlines the scope and coverage - also called insuring agreement - provides death benefit, mode of premium, benis, and exclusions
Viatical Settlements ? and the contract disclosure
life insurance company must verify coverage upon request within 30 days. Contract disclosure: 1. buyout sum and terms of transaction 2. mode of payment 3. existing rights of contract 4. benefit may be taxable 5. 7 day free look 6. 2 witness to signature 7. may affect eligibility for public assitance
can you reinstate a policy where your surrendered ur policy ?
no
What is Waiver of Premium Rider ?
prevents policy lapse if you become disabled - not automatic, cost extra - have to be disabled for 6 months -than on the 7th month your premiums are returned`
Demutualization is ?
process whereby a mutual insurer becomes a stock company - existing policy holders are provided with shares of stock in proportion to there gross insurance premiums - often used to raise funding via the sale of stock
Spendthrift provision ?
protects benis from creditors - creditors cannot attach lien against death benefits left with insurer
What is accidental death rider ?
provides an additional death benefit if cause or death is accidental - death must occur in 90 days of accident - inexpensive, you can die after 91 days, has to be in 90 days
Accelerated Benefits Rider (living need) ?
somebody is about to die in 12-24 months or less - living benefit or terminal illness rider - you can get a percent of money in advance!! if 100k death benefit, you can get 20k before, but when they die you get 80k
what is a representation ?
statement made by an applicant in response to the application questions posed about healthy history that is true
what is a a warranty ?
statement made by an applicant or insured that is guaranteed to be absolutely true
Whats the difference between status exclusions and results exclusions for war policy exclusions ?
status: coverage not provided if member of military, REGARDLESS of cause of death results: coverage not provided if death is the direct result of a battle or mannuever
what is a waiver ?
voluntary abandonment of a right by an in issuer
Common disaster or simultaneous death act is ?
when the insured and primary beni die, and it cant be determined which one died first, its assumed the primary died first and the death benefit gets paid to the contingent beneficiary
If you want to go from whole life to term life do you need to show proof again ?
yes, but if you are going from a cheaper insurance to more expesnive term to term term to whole not required
What is the free look provision ?
you have the right to return the policy, 10 days, on the date the policy is delivered this may be called right to examine