Ch 5: Life Insurance Policy Options & Riders Flashcards
What are the three nonforfeiture options?
Cash surrender, reduced paid-up, and extended term
What is cash surrender option?
Policy owner can request a cash payment of the cash values when the policy is surrendered. It will be reduced by any outstanding policy debt.
What is included in cash values?
Premium + interest earned
What’s the reduced paid-up insurance option?
The cash values in the policy will be used as a single premium to buy insurance of the same plan as the current policy. Longest period of protection.
What is extended term option?
When cash values is used to buy a term insurance contract for the same face amount as the original policy. Most insurance coverage
Participating policies and non participating parties. Which one receives dividends?
Participating
In a mutual company, there are policy holders, participating parties, and non-tax dividends. What are non tax dividends described as?
Refund of an over charged premium
In mutual companies, who gets the dividends and are they taxable?
They get paid out to the policy holders and are non taxable
What are the five most common dividend options?
Cash Reduce premium Accumulate at interest (taxable) Paid up additional insurance One year term
CRAPIO
What happens in a cash dividend option?
The company will issue a check for the dividend amount. Dividends uskaky paid annually after policy has been in force in a year or two.
What happens in a reduced premium dividend option?
When Policy owner uses the dividend to pay part or the premium.
What is the accumulate at interest dividend option?
The insurer keeps the dividend with this option and interest will be paid at a rate specified in the policy and compounded annually.
What’s paid-up additional insurance dividend option?
Insurer used the dividend as a single premium to buy more paid up insurance. The amount of paid up insurance is based on the amount of the dividend and the insureds attained age.
What is one year term dividend option?
Use the dividend to buy a term contract of one year duration.
What are the four settlement options?
Interest only option
Fixed period option
Fixed amount option
Life income option
What happens in an interest only settlement option?
Allows only the death benefits earnings (interest) to be paid to the beneficiary
What is fixed period settlement option?
Principal plus interest at regular intervals over a specified period of years; longer period, smaller payments, shorter period, higher payments
What is fixed amount settlement option?
Death benefit is paid in a series of fixed amount installments until proceeds plus interest are exhausted
What is life income settlement option?
Beneficiary receives a guaranteed income for life; single premium immediate annuity is purchased by company.
What is a life insurance rider?
Optional policy provisions that you pay extra for
If an insured is a total and permenant you disabled, the insured policy continues in force without further premium payment. The additional premium paid for the rider does not affect cash value. While the company is paying the premiums the policy continues in full force in every respect. What rider is this?
Waiver of premium rider
What is the accidental death rider do?
Pays double the death benefit
What does the payout benefit rider do?
The company will make the payments until the juvenile reaches a specific age (usual 21-25)
What does guaranteed insurability rider (guaranteed purchase option)?
Guarantees the opportunity to buy additional life insurance at certain or specific ages without proof of insurability.
