Ch 4: Policy Provisions

Question 1

What needs to exist at the time of application for the policy owner?

Answer 1

An insurable interest

Question 2

What is third party ownership

Answer 2

When the insurance policy is owned by someone other than the insured person

Question 3

The title page

Answer 3

Policy face - Info page

Question 4

Insuring clause

Answer 4

Major promises of the company (promise to pay)

Question 5

What is consideration clause?

Answer 5

Premium payment

Question 6

What are exclusions?

Answer 6

Exclusions that may appear in insurance policies. Things that are not considered insurable. They may be stated or attached as riders.

Question 7

What is war exclusion?

Answer 7

Death benefit wont be paid under war time or military service conditions.

Question 8

What is aviation exclusion?

Answer 8

No death benefit paid if insured does while flying a plane or acting as a crew member

Question 9

What is suicide exclusion

Answer 9

Excluded from coverage during first two years that a policy is in effect. Company will return premiums paid

Question 10

One annual premium is more or less expensive than 2 semi annual payments

Answer 10

Less expensive

Question 11

When the insured cancels, what happens to premiums?

Answer 11

Company keeps more and returns less. Called short rate cancellation

Question 12

When an insurer cancels, what happens to premium?

Answer 12

Company keeps earned premium and returns unearned. Called pro rats cancellation

Question 13

What kind of cancellation happens when a company cancels and refunds the entire premium?

Answer 13

Flat cancellation, also known as when a contract is rescinded.

Question 14

What’s included in the entire contact provision?

Answer 14

The policy and the attached application (and any added riders)

Question 15

In life insurance the grace period is how long?

Answer 15

60 days

Question 16

In life insurance, if insured died within the grace period, what happens to the premium?

Answer 16

Insurer pays claim but subtracts the missed premium.

Question 17

What needs to happen in order for a reinstatement of life insurance to happen?

Answer 17

Apply for reinstatement within three years of lapsing
Provide proof of insurability
Pay all past due premiums and interest
Pay any outstanding loans on the policy

Question 18

What is an incontestability clause?

Answer 18

Prevents a company from voiding a policy for misstatements after two years. Keeps a policy from being rescinded after two years.

Question 19

Suicide provision states that if an insured dies after this many years, the insurer will pay the death benefit

Answer 19

Two years

Question 20

Viatical settlement and absolute assignment is?

Answer 20

The complete transfer by the existing owner of all rights in a life insurance policy to another person. Used for those who are terminally ill.

Question 21

Absolute assignment is also known as

Answer 21

Viatical settlement

Question 22

Who is the only party with any rights after the death of the insured?

Answer 22

The beneficiary

Question 23

Who has the right to change their beneficiary? And does the beneficiary need an insurable interest?

Answer 23

The policy owner, and no the beneficiary does not need an insurable interest

Question 24

When does the contingent (secondary) beneficiary receives the death benefit?

Answer 24

Receives the death benefit only is there is no loving primary beneficiary.

Question 25

If there is no living beneficiary when the insured dies, the death benefit is paid to?

Answer 25

Th insured’s estate.

Question 26

The class designations that means beneficiaries who are surviving share equal amounts of the death benefits. What does this describe?

Answer 26

Per-capita

Question 27

What is per stirpes?

Answer 27

Means that a deceased beneficiary would have their death benefits pass on to their children

Question 28

What’s irrevocable beneficiary?

Answer 28

Means that the policy holder is not allowed to remove them as beneficiary

Question 29

What is uniform simultaneous death act?

Answer 29

When the insured and the primary beneficiary died at the same time, but no evidence to who died first:

• they will assume the primary died first and the contingent/secondary gets the death benefits
• if primary died second, the benefit will go to the estate
• if no secondary beneficiary available, death benefit will go to insured’s estate.

Question 30

What’s the common disaster provision?

Answer 30

May be contained in a policy to protect the contingent beneficiary. Also known as survivorship provision.

• prevents benefits going to primary’s estate if the primary outlived the insured for a short time
• sets rules on how long the primary needs to live (30 or 90 days) in order to qualify for death benefits going to their estate

Question 31

What is spendthrift clause?

Answer 31

Allows the insurer to make payments to a guardian if the beneficiary is a minor.

Question 32

Who writes the uniform policy provisions?

Answer 32

NAIC

Question 33

What is free look provision?

Answer 33

The right of decision. Right to return the policy for any reason during 10 days, unless you’re 60+, you’ll get 30 days.