Chapter 12 Vocab (Text) Flashcards
Ownership Clause
the p/h possesses all contractual rights in the policy while the insured is living
Entire Contract Clause
states that the life insurance policy and attached application constitute the entire contract between the parties
Incontestable Clause
states that the insurer cannot contest the policy after it has been in force two years during the insured’s lifetime
Suicide Clause
states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid
Grace Period
period during which the p/h has a period for 31 days to pay an overdue premium
Reinstatement Provision
permits the owner to reinstate a lapsed policy
Misstatement of Age or Sex Clause
if the insured’s age or sex is misstated, the amount payable is the amount that the premiums paid would have purchased at the correct age and sex
Primary Beneficiary
beneficiary who is first entitled to receive the policy proceeds on the insured’s death
Contingent beneficiary
entitled to the proceeds if the primary beneficiary dies before the insured
Revocable Beneficiary
the p/h reserves the right to change the beneficiary designation without the beneficiary’s consent
Irrevocable Beneficiary
a beneficiary cannot be changed without the beneficiary’s consent
Class Beneficiary
a specific beneficiary is not named but is a member of a group designated as beneficiary
Specific Beneficiary
the beneficiary is specifically named and identified
Change of Plan Provision
allows policyholders to exchange their present policies for different contracts
War Clause
excludes payment if the insured dies as a direct result of war
Absolute Assignment
all ownership rights in the policy are transferred to a new owner
Collateral Assignment
the policyholder temporarily assigns a life insurance policy to a creditor as collateral for a loan. Only certain rights are transferred to the creditor to protect its interest and the p/h retains the remaining rights
Policy Loan Provision
allows the p/h to borrow the cash value
Automatic Premium Loan Provision
an overdue premium is automatically borrowed from the cash value after the grace period expires, provided the policy has a loan value sufficient to pay the premium
Participating Policy
the policy pays dividends
Nonparticipating Policy
a policy that does not pay dividends
Paid-Up Additions Option
the dividend is used to purchase a small amount of paid-up whole life insurance
Nonforfeiture Laws
requires insurers to provide at least a minimum nonforfeiture value to p/h who surrender their policies
Reduced Paid-Up Option
the cash surrender value is applied as a net single premium to purchase a reduced paid up policy
Extended Term Insurance Option
the net cash surrender value is used as a net single premium to extend the full face amount of the policy into the future a term insurance for a certain number of years and days
Settlement Options
refer to the various ways that the policy proceeds can be paid
Interest Option
the policy proceeds are retained by the insurer, and interest is periodically paid to the beneficiary
Fixed-Period (Income for Elected Period) Option
the policy proceeds are paid to a beneficiary over some fixed period of time
Fixed Amount (Income for Elected Period) Option
a fixed amount is periodically paid to the beneficiary
Life Income Option
installment payments are paid only while the beneficiary is alive and cease on the beneficiary’s death
Waiver of Premium Provision
if the insured becomes totally disabled from bodily injury or disease before some state age, all premiums coming due during the period of disability are waived
Guaranteed Purchase Option
gives p/h the right to purchase additional amounts of life insurance at specified times in the future without evidence of insurability
Accidental Death Benefit Rider
doubles the face amount of life insurance if death occurs as a result of an accident
Cost of Living Rider
allows the p/h to purchase one year term insurance equal to the percentage change in the consumer price index with no evidence of insurability
Accelerated Death Benefits
that allow part or all of the life insurance face amount to be paid to a chronically or terminally ill policyholder before they die
Viatical Settlement
sale of a life insurance policy by a terminally ill insured to another party, typically to investors, or investor groups who hope to profit by the insured’s early death
Life Settlement
a financial transaction by which a p/h who no longer needs or wants to keep a life insurance policy sells the policy to a third party for more than its cash value
