10.1d Flashcards
______ life insurance policies include a provision allowing the policyowner to borrow against the policy’s cash value in the form of a loan from the life insurer, or use it as collateral on a loan, after it has been in force for a period of time, typically 3-5 years after policy issuance. Loans made against a policy’s cash value cannot exceed ______ and is not intended to be taken out in order to pay the policy’s premiums.
Cash value
the amount accumulated
Although the insurer charges interest on loans taken by the policyowner, unlike a typical bank loan, the policyowner is not required by law or by the insurer to ______. Instead, the loan is considered to be an advance on the policy’s cash value which is ultimately paid out to the policyowner upon surrender, or to the policy’s beneficiary upon the death of the policyowner, or named insured, if not the same individual.
pay back the loan to the insurer
After a specific period of time (usually 2 years, but in some states only 1 year), as long as a policy remains in force, an insurance company cannot contest the validity of a policy and must pay its death benefit, even in the event that a policyowner intentionally concealed material facts or committed other forms of fraud, with the exception of impersonation, intent to murder, or ______.
no insurable interest at time of application
The Suicide clause is designed to deter potential suicide contemplation and usually extends for the first 2 years after policy issuance. If the insured commits suicide within the first 2 years, the insurer will refund the premium paid to the policyowner, or to the designated beneficiary if the insured and policyowner are the same individual. If the insured commits suicide after the first 2 years, the insurer is obligated to ______.
pay the death benefit to the designated beneficiary
A life insurance policy is the property of the policyowner, and as such, he or she can ‘assign,’ or transfer, ownership to another individual in which the policyowner chooses. The process of transferring ownership of a life insurance policy from one policyowner to another is known as ______. The transferring policyowner is referred to as an ‘assignor,’ and the individual receiving the policy is known as the ‘assignee.’
policy Assignment
