Chapter 3 - Insurance Provisions, Options and Riders

Question 1

Who has exclusive ownership rights to any insurance policy

Answer 1

The policyowner

Question 2

What are the two types of assignment?

Answer 2

Absolute - the assignee becomes the policyowner

Collateral - partial assignment (e.g. as collateral for loans)

Question 3

Insuring Clause (x4)

Answer 3

• Parties to the contract
• Length of coverage
• Premium to be paid
• Amount of death benefit

Question 4

Entire contract (x3)

Answer 4

• Application
• Policy
• Riders and options

Question 5

Free-look period

Answer 5

Period of time (usually 10 days) insured can reject the policy for any reason for a full refund

• Starts on the date the policy is MAILED, not delivered

Question 6

Incontestability clause

Answer 6

Insurer can only contest applications within the first two years of a policy. After two years, they surrender that right.

• Liars pray for 2 years, then they’re covered

Question 7

What are the three exceptions to the Incontestability Clause?

Answer 7

• Age
• Gender
• Identity

Question 8

What are the three typical exclusions?

Answer 8

• Noncommercial aviation
• Hazardous occupation or hobby
• War and military service

Question 9

Suicide

Answer 9

Excluded the first two years of a policy, included thereafter

Question 10

What are the five classes of beneficiaries?

Answer 10

• Individuals
• Groups (e.g. children)
• Minors
• Estates
• Trusts

Question 11

What is automatic premium coverage called?

Answer 11

Automatic Premium Loan or APL

Question 12

What is a loan against the cash value of a Universal Life policy called?

Answer 12

Partial surrender or withdrawal.

• Fees MAY be charged and interest MAY be taxable