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ETHICS (2022 LLQP) > Ch.2: Insurnace Policy Provisions > Flashcards

Ch.2: Insurnace Policy Provisions Flashcards

1
Q

Parties to INDIVIDUAL life insurance contract (2)

A
  1. Insurer
  2. Policy Holder
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2
Q

insurer

A

life insurance co that takes on the risk and issues policy

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3
Q

policy holder

A

indicidual or legal person (i.e COrporation), who has legal ownership of the policy

  • PH can also be the life insured: ins. on own life (like me)
  • can also have insuraance on someone else life (ike a child, spouse, parent)
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4
Q

Successor policy holder

A
  • if PH is not L.I, PH may die before insured person. Ownership of policy trfd to new owner
  • person named to be new owner= successor owner
  • if none named, new owner will be estate (and therefore beneficiaries)
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5
Q

Life Insured (L.I)

A

person whose life is insured
when they die, benefit paid
also called: person insured, insured person
P.H must have insuable interest

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6
Q

Beneficiary

A

-person to receive death benefit
- has rights under ins pol but not party to it
-if several bens: clinet or rep must get legal advice to ensure their rights
-ins pay DB to most recent ben on file, or to estate
accordibg to most recent will, or court order

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7
Q

Protected Beneficiaries

A

these are preferred beneficiaries: spouse, child, grand child, parent of LI
- if protected ben– can protect policy from execution/seizure to pay debts

> > must be done in good faith!!! not just to avoid seizure<

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8
Q

Irrevocable beneficiary

A
  • Cannot change or revoke beneficiary
  • cannot make changes or borrow from policy w/o their consent
  • NOVA SCOTIA: Must also atrach to declarations (2) to insurance . 1 signed by insured and 1 signed by agent
  • irrevocable is also exempt from seizure even if not preffered ben.
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9
Q

Restriction in legilative definition of beneficiary

A

Page 42

?????

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10
Q

Loss of protection

A

Desibation of ben. From protected class ignored if only made to try avoid creditors

I.e only named protexted en wheb found out going bankrupt or somethibg

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11
Q

CONTINGENT BENEFICIARY

A
  • also called second beneficiary
  • named in case 1st ben. Dies b4 life ins.
  • if no 1st or 2nd ben and life ins. Dird, DB paid to PH or estate if PH dies after bens.
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12
Q

Group ins policies

A
  • insures a defined pool of individuals (+ spuses and dependants)
  • pool incls employees or members of a union or association w clear defined and controlled membership
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13
Q

Group ins pol. : Plan sponsor

A
  • also called group insured or group PH
  • arrange group plans
  • may be employer, union, prof. Assoc., or other entity repping group
  • group PH decides what insuranfe benefits group will get
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14
Q

Group ins. Pol: Insurer

A
  • ins co

- contracts w plan sponsor (group PH) not w each indiv. Member

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15
Q

Group ins pol: members + scop of coverage to other insured ppl

A
  • person/member whose life insured= group life insured
  • group plans typically cover members + their family
  • employer sponsored plans: basic covergae for employee mandatory
  • can apply for optional increased coverage
  • making changes: usually limited to 1x/ year or when major life change ( i.e new baby, new marriage, etc…)
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16
Q

2.2: formation of policy

A
  • common law: contract not forned till there is an agreement (meetinflg of the minds) + exchange of value ( i.e promise to make ins pol. Binding) or promusing to pay DB if premiums paid
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17
Q

Formation of pol. : Rules about forming individual ins contract

A
  • Offer and acceptance
  • offer: completion of an ins app (???)
  • acceptance: when ins co issues contract and delivers contract
  • under comm. law: tender of delivery by insurer is its offer to show will insure risk ,,not binding contract - bc only official whenninsured accepts policy on delivery ?????
    ??????
    Not sure i understand this oart
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18
Q

Formation of pol. : TEMP INSURANCE

A
  • may get temp ins if can answer no to 3-4 temp ins qs to confirm good health
  • seperate ins agreement w limited ins coverage, usually 90 days
  • expires once policy approved/ declined
  • seperate terms and conditions
  • if insured dies before underwriting complete or pol. Issued—> ins. Pays DB
  • amount of temp ins cov. Usually lesser of face ampunt being applied for or max set by insurer
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19
Q

Formation of pol: Changes in insurability

A
  • risk disclosed in initial app and underwritten by ins co has changed
  • if any change,policy wont take effect , eve if delivered and paid for
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20
Q

Formation of Pol: approval of app by insurer

A
  • if ins makes ins offer,notifies app and delivers policy
  • policy tendered may incl changes from when applied (i.e diff underwriting classificstion, exclusions, diff premium amt, etc… )
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21
Q

Formstion of policy: Delivery of policy

A
  • if no physical delivery req + already paid, policy sent direct to app
  • pol. not in force until delivery req. met and 1st premium paid, in effective as of effective date
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22
Q

Term and termination of policy

A
  • policy can be anulled or cancelled by owner or by insurer

- may also expire

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23
Q

Term and termination of policy: Recission: 10 day free look

A

Uner CLHIA:

  • gives customer 10 days to review policy and can change their mind and cancel for full refund (policy anulled) , w/0 penalty
  • for seg funds: 2 business days recission right
  • CLHIA: Cdn life + health ins. Ass.
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24
Q

Term and termination of policy: Surrender

A

PH can surrender policy anytime– complete termination of rights for PH and Ben

Indiv life policy = unilateral contracts

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25
Q

Term and termination of policy: Expiry or termination

A
  • policy may terminate according to its terms
  • guaranteed renewable and convertibe term policies= age limits , cannot renew after certain age , policy eventualy expires
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26
Q

Termination by insurer

A

Due to:

  • fraud
  • non payment of sickness or accident ins prem
  • non payment of life ins prem
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27
Q

Termination by insurer: Fraud, misrep, concealment

A

Ins fraud=

  1. Deliberate misstatement
  2. Deliberately omit material info
  3. Obtain ins that PH or LI doesnt wualify for
    - must incl INTENT to mislead ins.
    - no incontestability period
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28
Q

Termination by insurer: Fraud, misrep, concealment

Possible outcomes:

A
  1. During app.: adjust covergae to what premium would have covered or choose not to insure at all
    - if age misstate + pol in force: insurer can amend contract + adjust coverage- unless age above age limit for policy
  2. In 2 yrs incontestability period : misrep or conceal. other than age: insurer can cancel pol.
    - after 2 yrs– canot cancel pol. (If was just honest mistake)
  3. After 2 years: can only cancel if fraud or concealment
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29
Q

Termination by insurer: insurance fraud

A

attempt to get insurance not qualifiedfor or to get better terms

Intentional deception

Insurer can cancel anytime for fraud, incl DB

30
Q

Termination by insurer: for non pay of sickness or accident ins

A
  • policy stays in force till termination notice sent
  • insurer will mail pre paid written notice of termination , termination takes effect + coverage ends 10 days after written notice
31
Q

Termination by insurer: for non pmt of life ins prem.

A
  • term and perm pol. W/o cash value will terminate, 30 days grace period
  • exceptions: if policy has cash surrender value
  • cancellation not final- insurer must reinstate pol. If;
    1 . Client applied to reinstate w/in 2 years
    2. Insurer determines ins. Still meets insurability
32
Q

Assigment of policy: Absolute assignment

A
  • absolute assigment: trf ownership of policy

- chg in ownership= disposition for tax (taxable gain)

33
Q

Assigment of policy: absolute assignee

A
  • Has all rights of orriginal PH, incl to choose new Ben. Or w/d $$$
  • some prov: assigning policy = trafficking (agaunst law)
34
Q

Assigment of policy: Collateral assignment

A
  • Perm policies w cash surender value- can be used as collateral for loan, ownership to lender, but only for colateral
  • PH can’t do anything to affect value for policy
  • if loan PAID OFF: lender releases ownership poicy back to PH
  • if insured DIES: DB used to pay of loan, if any $$ left, goes to ben.
35
Q

Product specific policy provisions

A

Provisions define and document what the policy covers and the cost

36
Q

Product specific policy provisions: indiv. Life ins

A
  • name, or description of insured + life insured
  • amoun or method to determine amount of ins payable + conditions of when payable
  • amount or method to determin amount of prem. + grace period
  • whether participating or non participating
  • conditions for policy reinstatement if lapses
  • any options (surrender for cash, obtain loan or advanced pmt, paid up / extended ins)
37
Q

Product specific policy provisions: statutory conditions

A

Pg. 58

  • requires that all policy terms and conditions must be set out in full when policy issued
  • incls: application, policy, any doc attached to ins pol when issued, any amendments
38
Q

Product specific policy provisions: reduction

A
  • death ben. that reduces in amount as life insured ages

- does not affect liability to pay DB, only amt

39
Q

Product specific policy provisions: exclusion

A
  • change in coverage

- death cause by exclusion not covered

40
Q

contractual exclusions

A
  • specified in policy
  • if imposed by law, established by court decision
  • may relate to actions that are violation of public order or ben/ins ran risk insured against —–> i.e beneficiary kills life insured
41
Q

pre existing condition exclusions

A
  • exclusions for death cased by pre exixting condition

- common under disability ins

42
Q

suicide clause

A
  • within 2st 2 yrs: wont pay if suicide

- after 2 yrs: db payable for suicide

43
Q

living benefits

A
  • policy holder can receive advance pmt of portion of DB if life insured diagnosed with terminal illness + short time left to live
  • w/d cash on tax free basis
44
Q

cash surrender value

A
  • if policy cancelled by PH, amt receive in cash = CSV

- reduced by o/s policy loans, unpaid premiums, ins pol. surrender charges

45
Q

collateral assignment vs ins policy loans

A

collateral assignment: loan security for 3rd party, no likmit on size of loan, size of loan usually % of CSV

INS POLICY LOAN: has limits created by taxation of life policy txs, too much borrowed= taxable policy gain to PH

46
Q

Riders

A
  • additional coverages added through riders

- they change existing benefits or proode additional coverages

47
Q

Group life and Health ins (GLHI)

A
  • single ins policy (master policy), covers specified group of ppl (plan members/ participants) + eligible dependents
  • Plan sponsor/ group PH/ Group ins. : contracts w insurer, determines which benefitgs will be part of policy
  • group must be clearly defined
48
Q

GLHI: PREMIUMS + COST SHARING

A 
EMPLOYER PH: 
- pays premiums
- 
rof corp/assoc PH: 
- premiums paid by members
49
Q

GLHI: types of group ins

A

L.A.ST/LT.CI.H+D

  • life ins
  • Accidental death+dismem.
  • S/T + L/T disability ( inc replacement)
  • critical illness
  • Health and dental
50
Q

GLHI: Administrative services only (ASO)

A
  • LARGE CORP FUNDS OWN BEN EFITS FOR EMPLOYEES INSTEAD OF PREMIUMS TO INSURER
  • May hire insurer to process, adjudicate, administer claims and pmts
  • not covered by prov or terr. ins statutes
51
Q

GLHI: certificates pg 63

A
  • employer gives certificate to members

-

52
Q

leaving the group

A
  • when group insured leaes group (under age 65)can convert to individual policy w/o underwriting— w/in 31 days of group coverage ending
53
Q

laws applicable to members – residence

A

law of province where GLI resides when becomes insured is law that applies to insureres rights+ obligations and rights of ben.

54
Q

Individual + Group accident and sickness insurance (IGAS)

A 
protects against:
ADDCL
- Accidental death + dismem (AD&D)
- disability specifics
-drug ins
- CI
-LTC
55
Q

IGAS: AD&D

A
  • Covers risk of insured person suffering defined physical loss/death to accident
  • has exclusions— pg.66
56
Q

IGAS: DISABILITY SPECIFICS

A
  • Covers both full an partial disability + te,p and perm reductions in income
  • ability to purchase addition al income protection
57
Q

IGAS: Drug insurance

A
  • covers expensive meds.

-

58
Q

IGAS: Critical Illness (CI)

A
  • Insures against risk of person suffering life thretening illness
  • if diagnosed w covered illness + survives a period– insurer pays ump sum amt
  • features include: Return of premoum, cancellation of policy benefit (?)
  • ## if in force for long time or no claim made– can designate beneficiary
59
Q

IGAS: Long term care (LTC)

A
  • Benefit when insured cannot safely/independently persorm daily living activities
  • may be a weekly/mon ly benefit similar to income benefit, but not income benefit bc doesnt replace income
  • some reimburse expenses for: feeding self, getting dressed, grooming/hygiene, in/out of bed, using toilet
60
Q

IGAS: TERMINATION

pg.69

A
  • PH can terminate anytime w written notice + surrender policy
  • if cancelled by insurer: 10 days written notice req
61
Q

Annuities

A

policies issued by insurers or other financial institutions where they agree to pay fixed amt to payee for specified time

62
Q

Annuities

PG.70/71

A

policies issued by insurers or other financial institutions where they agree to pay fixed amt to payee for specified time

if issue by life ins co- treated as life inss under prov/terr ins acts

deferre or immediate

can be purch as pat of registered plan ( nRRSP, TFSA, RRIF, ETC…)

63
Q

life annuity

A

durtion of pmts determined by persons life

64
Q

term certain/ fixed term annuity

A

pmts for a defined period of timw

65
Q

PARTIES (ANNUITIES)

A
  • INSURER (DEBTOR)/ ANNUITY PROVIDER
  • POLICY HOLDER/ANNUITY HOLDER
  • NAMED RECIPIENT/ ANNUITANT GRANTEE (RECEIVES PMTS)
  • BENEFICIARY
66
Q

ANNUITY POLICYHOLDER

A
  • often referred to annuitant/investor
  • ahs right to determine who pmts will be paid to
  • can designate beneficiary for remaoning pmts if any
67
Q

annuitant (life insured)

A
  • the measuring ife on which annuity based, doesnt always receive pmts
  • must be a natural person w/ a lifetime
  • if more than 1 life- after detah of 1st life, may be a 2nd or successor
68
Q

annuity: payee

A
  • sometimes called aanuity grantee
  • person thagt receives pmts
  • could be PH or not
  • for registered contracts: PH, ann., payee all same person
  • for non registered contracts: POSSIBLE to have diff pp as PH, ann., payee
69
Q

Immediate annuity

A

1ST PMT STARTS ON NEXT DEFINED PERIODIC ANNUITY FREQ. (MONTHLY, QUARTERLY, SEMI ANN., ANNUALLY

70
Q

Defferred (accumulation) ann

A
  • investm,et and accumulation income over time, payments start later—>maturity date
  • also called deffered annuity
  • during accumulation: subject to annual accrual taxation
  • registered annuities— not taxed

ETHICS (2022 LLQP) (7 decks)

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