Chapter 3 life policy provisions, riders and options

What pays the principal for accidental death, and pays a percentage of that amount (capital sum) for accidental dismemberment?

Accidental death and dismemberment rider (AD&D)

Which rider pats some multiple of the face amount if the death is the result of an accident as defined by the policy?

Accidental death rider (Usually double indemnity or triple indemnity)

Which clause was created to protect the policy-owners original intent?

Common disaster clause

What states that both parties to a contract must provide some value in order for the contract to be valid?

Consideration

Which rider addresses the inflation factor by automatically increasing the amount of insurance without evidence of insurability from the insured?

Cost of living rider

Which rider provides for the payment of part of the policy death benefit if the insured is diagnosed with terminal illness that will result in death within 2 years?

Living needs riders

What is found only in policies that contain cash value?

Policy loan

What is the manner or frequency that the policyowner pays the policy premium?

Premium mode

What is added to a policy to modified provisions that already exist?

Riders

What are written modifications attached to a policy that provide benefits not found in the original policy?

Riders (tailor policy to specific needs)

Which rider allow for additional amount of temporary insurance to the insured without the need to issue another policy?

Term rider

What sets forth the basic agreement between the insurer and the insured?

The insuring clause (insuring agreement)

True or false - because permanent life insurance policies have cash value, certain guarantees are built in that can be forfeited by policyowner?

False - cannot be forfeited by policyowner

Which policy allow the policyowner to increase or decrease the premium during the policy period?

Flexible premium

What are the 2 types of assignment provision?

1. Absolute assignment (transferring all rights) 2. Collateral assignment ( transfer partial rights, usually for loans)

What are the two types of exclusions that may be used to limit the death benefit of insured dies as a result of war?

1. Status clause (excludes all causes of death on active duty) 2. Results clause (only excludes death when killed in war)

Which forfeiture value states that the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy?

Extended term

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

Incontestability clause

Which forfeiture value states that a policy cash value is used by the insurer as a single premium to purchase a completely paid up permanent policy with reduced faced amount?

Reduced paid up insurance

What protects the insurers from individuals who purchase life insurance with the intention of committing suicide?

Suicide provision (If insured commit suicide after 2 years policy will be granted)

What stipulates when a premium is due and how often they are to be paid?

The policy

True or false -Dividends must be returned no later than the3rd policy year?

True

In a applicant misstated their age can the insurer adjust the benefits to the amount of the correct age?

Yes

What are the 3 nonforfeiture options for the policyowner?

1. Cash surrender value 2. Reduced paid up insurance 3. Extended term

Who are the parties to an insurance contract?

1. Insurer 2. Policy-owner 3. Beneficiary

What is the minimum period for nonforfeiture values?

20 years

How many level of beneficiary are there?

3 beneficiary (1.primary 2. Contingent 3. Tertiary) One has to die before the other receive benefits

What allow the early payment of a portion of the death benefit if the insured specific conditions?

Accelerated death benefits

Which provision allows the policy-owner 10 days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium?

Free look provision (starts when policy-owner receives the policy)

What is the period of time after the premium due date that policyowner has to pay the premium before the policy lapse?

Grace period (usually 30 or 31 days)

What is it called when an insurer charges higher premium as a safety margin in the event the insurer's losses are higher than expected?

Grossed up margin (Refund with dividends)

What is a premium that remains the same throughout the duration of the contract?

Level premium

What provide for the payment of part of the death benefit in order to take care of insured health care expenses, which are incurred in a nursing or convalescent home?

Long term care (LTC)

What are the guarantees required by state law to be included in permanent life insurance?

Nonforfeiture values

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

Options

Which rider provide coverage for one or more family members other than the insured?

Other insured rider 1. Family rider 2. Spouse rider 3.children rider 4. Nonfamily rider

Which rider states that if the payor becomes disabled for 6 months or dies, it will waive the premiums until a minor reaches a certain age?

Payor benefit

What defines the characteristics of an insurance contract and are fairly universal from one policy to the next?

Provisions

What allows a lapsed policy to be put back in force?

Reinstatement provision (Max time for reinstatement is 3 years)

Which rider is implemented by using increasing term insurance?

Return of premium rider

Beneficiary designations may be either revocable or irrevocable. Which one can be changed without the written consent of the beneficiary?

Revocable (Need permission from beneficiary to change irrevocable)

Under the uniform simultaneous death law which beneficiary is assumed to die first?

The first beneficiary

When the owner and the insured are not the same person, what is the insurance agreement called?

Third party ownership

Which rider states that in the event of disability if the insured, the rider waives the cost of the insurance and other expenses but does not waive cost of premium necessary to accumulate cash?

Waiver of cost of insurance (found in universal life insurance)

Which rider waived the premium for the policy if the insured becomes totally disabled?

Waiver of premium

How many days notice does the insurer have to provide the policyowner to inform he/she that the policy will lapse?

30 days

Which provision specifies the policy owners right to assign (transfer rights of ownership)?

Assignment provision

Which provision is not required but is commonly added to contracts with a cash value at no additional charge?

Automatic premium loan (Prevents the unintentional lapse of a policy by charging the interest of the policy)

What are the most common types of exclusions found in life insurance?

Aviation, hazardous occupation, war and military service

Which nonforfeiture value states that a policyowner surrenders the policy for the current cash value at a time when coverage is no longer needed or affordable?

Cash surrender value

What is a return of excess premiums?

Dividends

Which provision stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract?

Entire contract provision (Neither the insurer nor the insured can change the policy provision once in effect

What are the types of risks the policy will not cover?

Exclusions

if a policyowner fails to select a nonforfeiture value what is the default option?

Extended term

True or false- benefits paid for partial disability?

False

True or false - Benefits to a minor is usually paid to the minor?

False (guardian or trustee of minor)

True or false - a policy that has been surrendered can be reinstated?

False - cannot reinstate surrendered policies

Which rider allows the insured to purchase additional converse at specified future dates (usually 3years) or events without evidence of insurability for an additional premium?

Guaranteed insurability rider

Which rider waive the policy premiums and pay a monthly income to the insured in the event of a disability?

Waiver of premiums with disability income