Chapter 18

Question 1

What is Absolute Assignment?

Answer 1

This is a policy assignment under which the assignee receives full control over the policy and full rights to its benefits.

Question 2

What happens when a policy is assigned to secure a debt?

Answer 2

The owner retains all of the rights in the policy in excess of the debt, despite the fact that the assignment is absolute in form.

Question 3

What is an Accidental Death Benefit (Multiple Indemnity) Rider?

Answer 3

This rider pays an additional sum to the beneficiary if the insured dies due to a covered accident, typically a multiple of the policy face amount.

Question 4

What is the purpose of an Accelerated Benefits Rider?

Answer 4

This rider allows the insured to receive a portion of the death benefit before death if she has a terminal illness and is expected to die within 12 months.

Question 5

What is an Assignment Clause?

Answer 5

This clause allows the right to transfer policy rights to another person or entity.

Question 6

What does the Automatic Premium Loan Provision allow?

Answer 6

It allows the insurance company to deduct the overdue premium from an insured’s cash value if a payment is missed.

Question 7

What are Cancellable Policies?

Answer 7

These are insurance contracts that the company may terminate.

Question 8

What is the Change of Beneficiary Provision?

Answer 8

This provision permits the insured to change the beneficiary as often as she wants, except for policies with an irrevocable beneficiary.

Question 9

What does the Change of Occupation Provision do?

Answer 9

It allows the insurer to reduce the policy’s maximum benefit if the insured switches to a more hazardous occupation.

Question 10

What is the Claim Forms Provision?

Answer 10

This provision specifies the formal request to an insurance company asking for a payment based on the policy’s terms.

Question 11

What is the Conformity with State Statutes Provision?

Answer 11

This provision automatically amends any insurance policy provision that conflicts with state statutes to conform with that state’s minimum requirements.

Question 12

What does the Consideration Clause state?

Answer 12

It states that a policy owner must pay a premium in exchange for the insurer’s promise to pay benefits.

Question 13

What is the Cost of Living Rider?

Answer 13

This rider allows the policy face amount to be adjusted to account for inflation based on the Consumer Price Index (CPI).

Question 14

What does the Entire Contract Provision state?

Answer 14

It states that the insurance policy, any riders, accepted amendments, and the insured’s attached application form comprise the entire contract.

Question 15

What are Exclusions in an insurance policy?

Answer 15

These are features that state the policy will not cover certain risks.

Question 16

What is the Free-Look Period?

Answer 16

This is the specified number of days that the policy owner is permitted to review the policy and return it for a refund if dissatisfied.

Question 17

What is a Grace Period?

Answer 17

This is the period after the due date of a premium during which the policy remains in force without penalty.

Question 18

What does the Guaranteed Insurability Rider allow?

Answer 18

It permits the policy owner to buy additional insurance coverage at predetermined intervals without submitting proof of insurability.

Question 19

What is the Insurance with Other Insurer Provision?

Answer 19

This provision states that benefits payable for expenses incurred will be prorated if the company accepted the risk without being notified of other coverage.

Question 20

What is the Insuring Clause?

Answer 20

This clause is the insurer’s fundamental promise to pay specified benefits to a designated person in the event of a covered loss.

Question 21

What does the Legal Actions Provision state?

Answer 21

It states that the insured cannot take legal action against the company in a claim dispute until after 60 days from submitting proof of loss.

Question 22

What is the Misstatement of Age or Sex Provision?

Answer 22

This provision allows the insurer to adjust the policy benefits if the insured’s age or sex is misstated on the application.

Question 23

What are Non-Forfeiture Options?

Answer 23

These are options that a policy owner has for their cash value if they terminate or lapse a policy that has a cash value.

Question 24

What is the Notice of Claims Provision?

Answer 24

This provision describes the policy owner’s obligation to notify the insurer of a claim within a reasonable time, typically 20 days.

Question 25

What does the Other Insurance with This Insurer Provision state?

Answer 25

It restricts the total amount of coverage to be underwritten by a company for one person to a specified maximum amount.

Question 26

What is the Payment of Claims Provision?

Answer 26

This provision specifies how and to whom claim payments are to be made.

Question 27

What does the Payor Provision do?

Answer 27

It waives future premiums for a juvenile life insurance policy if the person responsible for paying the premiums dies or becomes disabled.

Question 28

What is the Physical Examination and Autopsy Provision?

Answer 28

This provision allows the insurer to examine the insured when a claim is pending and perform an autopsy in the event of death.

Question 29

What is the Policy Face?

Answer 29

This contains a summary of the type of policy and the coverage provided, identifying the insured and the term of the policy.

Question 30

What is Proof of Loss?

Answer 30

This is a mandatory provision stating that the insured must provide a completed claim form to the insurer within a specified number of days.

Question 31

What does the Reinstatement Provision allow?

Answer 31

It allows a lapsed policy to be put back in force by providing satisfactory evidence of insurability and paying required past-due premiums.

Question 32

What is the Relation of Earnings Provision?

Answer 32

This provision states that if more than one disability policy covers the same loss of income, the total amount paid cannot exceed the insured’s monthly earnings.

Question 33

What does the Return of Premium Rider do?

Answer 33

This rider pays the total amount of premiums paid into the policy in addition to the face value if the insured dies within a specific period.

Question 34

What is the Social Security Rider?

Answer 34

This rider provides for the payment of additional income when the insured is eligible for social insurance benefits but those benefits have not yet begun.

Question 35

What is Subrogation?

Answer 35

This provision allows the insurer to assume the legal rights of the insured and take legal action against third parties that caused a covered loss.

Question 36

What does the Time Limit on Certain Defenses clause state?

Answer 36

It states that a policy becomes incontestable after it has been in force for a certain period, typically three years.

Question 37

What is the Time of Payment of Claims Provision?

Answer 37

This provision requires the insurer to pay claims immediately or within a stated number of days.

Question 38

What does the Unpaid Premiums Provision state?

Answer 38

It states that if there’s an unpaid premium due when a claim becomes payable, the amount of the premium is to be deducted from the sum payable.

Question 39

What is the Waiver of Premium Rider?

Answer 39

This rider allows the policy owner to waive premium payments during a disability but still keep the policy in force.