CH3 Flashcards
What do Provisions define?
It defines the characteristics of an insurance contract
What do Options offer?
They offer insurers and insureds ways to invest or distribute a sum of money available in a life policy
What are Riders?
An addition to a policy to modify provisions that already exist
When does the free-look period start?
starts when the policyowner receives the policy
T or F
The policyowner has the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer.
T
What does Absolute Assignment involve?
It involves transferring all rights of ownership to another person or entity. This is a permanent transfer of all the policy rights.
What are the two types of policy assignments?
Absolute Assignment and Collateral Assignment
What does Collateral Assignment involve?
It involves a partial and temporary assignment of some of the policy rights.
What are the name designations when the insured chooses to “group” the beneficiaries?
per capita and per stirpes
What happens if the beneficiary is a minor?
A minor will either be paid to the minor’s guardian, or paid to the trustee of the minor
What is per capita?
It evenly distributes benefits among the living named beneficiaries.
What is a contingent beneficiary?
A beneficiary that has second claim to the death benefit. This only happens if the primary beneficiary is dead.
What do irrevocable designations need in order to be able to be changed?
A written consent of the beneficiary
What happens if there are no beneficiaries in a policy or if both beneficiaries are dead?
The policy proceeds go to the insured’s estate.
What is The Common Disaster Clause option? and who does it protect?
when added to the policy, it protects the contingent beneficiary so he/she can receive the benefits.
What is the Grace period?
is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses
What are premium modes? what happens if the policyowner selects another option other than annual?
The frequency that the policyowner pays the policy premium.
If the insured selects a premium mode other than annual, there will be an additional charge
What does The Uniform Simultaneous Death Law stipulate?
It stipulates that if the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the primary beneficiary died first.
What is the maximum time limit for a policy reinstatement?
3 years after it lapses
T or F
If the applicant’s age or gender was misstated on the application, in the event of a claim, the insurer is allowed to adjust the benefits to an amount that the premium at the correct age or gender would have purchased. The proceeds calculations should be based on the insurer’s rate at the date of policy issue.
T
What is incontestability used for?
This prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years even if the policyowner lied on the application.
T or F
Policy loans are available in policies that do not have cash value.
F
Policy loans are ONLY available in policies that have cash value (whole life).
What does the Automatic Premium Loans option prevent? is it only added to cash value policies? does it have an extra cost?
The loan prevents the unintentional lapse of a policy due to nonpayment of the premium.
Yes
No
What are some common exclusions for life insurance policy?
aviation, hazardous occupation, war and military service.
What does a status clause exclude on a military person?
Excludes death benefit of all active-duty soldiers.
What does a results clause exclude on a military person?
Excludes death benefit to all killed as a result of an act of war
What is the waiver of premium rider? Can premium payments return to normality? How long do insurers wait before waiving the first premium payment?
It waives the premium for the policy if the insured becomes totally disabled.
Yes, only if the insured is recovered from the disability.
6 months
What does the waiver of monthly deductions rider do? does it cover the full cost of the premium?
It pays all monthly deductions while the insured is disabled, after a 6-month waiting period
No, it only covers the monthly deductions
What do Accelerated death benefits allow?
It allows the early payment of part of death benefit to the insured for qualifying medical expenses
What does the disability income rider do?
in the event of disability, the insurer will waive the policy premiums and pay a monthly income to the insured
What are other riders’ name?
- spouse term rider
- children’s term rider
- family term rider
What happens if the insured withdraws any amount from the policy?
After the insured’s death, the beneficiary will receive the death benefit but only after the insurer subtracting any withdraws and interest lost.
What does the payor benefit rider do?
It is primarily used with juvenile policies (insurance written on the life of a minor). If the payor (parent) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21
What does return of premium rider do?
It provides the beneficiary with the total death benefit plus all premiums paid up to that point
What does the guaranteed insurability rider do?
it allows the insured to purchase additional coverage at specific future dates or events (such as marriage or birth of a child), without evidence of insurability, for an additional premium.
What’s a benefit of Children’s term rider?
You can add many children and maintain the same premium
What does accidental death and dismemberment rider (AD&D) do?
It pays the face amount for accidental death, and pays a capital sum, for accidental dismemberment.
When are Nonforfeiture options triggered?
Nonforfeiture options are triggered by policy surrender or lapse.
What happens if the extended-term option is chosen?
The insurer uses the policy cash value to convert from permanent to a term policy
What are dividends in life insurance?
Dividends are a return of excess premiums; therefore, not taxable when paid to the policyowner.
T or F
Under life-income (straight life) settlement option, the recipient cannot outlive the benefit payments.?
T
What does the Paid-up Option help with?
It helps the premium payments to be paid completely before age 100
