Chapter 3 Life Insurance Policy Riders

Question 1

If the insured becomes totally disabled, the insurer will waive premiums for the duration of disability or the end of the policy whichever is first. To qualify for the waiver, the insured must be disabled and wait 3-6 months. policyowner must continue to pay premium during waiting period. Unless still disabled at 65 the waiver of premium drops then

Answer 1

Waiver of Premium

Question 2

If the Payor (policy owner) dies or becomes disabled and is unable to make the premium payments, the insurer will waive the premium payments for a specified period of time.
IE: Usually added to a juvenile policy, the payor (usually the parent) typically must show evidence of insurability before the rider can be added to the policy

Answer 2

Payor Benefit (Waiver of Payors Premium)

Question 3

In the event of total disability and after an initial waiting period (such as 6 months) premiums are waived and the insured is paid a monthly income. The monthly ______ ________ _______, is typically limited to a percentage, usually 1% of face value. The benefit from the rider does NOT reduce the death benefits paid out at death

Answer 3

Disability income benefit

Question 4

Rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability. Usually disability must occur prior to a stipulated age

Answer 4

Waiver of Cost of Insurance

Question 5

This rider may be attached to any permanent policy, interest sensitive, or term policy to provide additional insurance protection for a fixed period of time. If the need is temporary a term insurance rider is more cost effective than buying another policy
IE: Someone takes a loan out and wants additional coverage to pay the debt if death occurs before the loan is repaid

Answer 5

Term Riders

Question 6

Provides level term coverage on the life of the insured’s spouse. This rider will also provide a conversion provision permitting the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy

Answer 6

Spouse (other insured) rider

Question 7

Provides level term coverage on the life of all of the insured’s children. Usually offered at 1 premium rate and may cover newborns after 14 days of life and adopted children who can be added to the coverage without increasing the premium. Children have coverage to a specified age and are usually given the option to switch to permanent without evidence of insurability

Answer 7

Child Rider

Question 8

Combination of writing both the spouse and child rider on one policy. May be written as a policy OR rider; in the market today it is normally written as a rider

Answer 8

Family Rider

Question 9

Provides coverage on an additional insured, other than a spouse or child such as a business partner. Insurable interest must exist at the time the rider is added

Answer 9

Nonfamily Rider

Question 10

This policy normally pays double or triple the face amount if death was a result of an accident (may be called multiple indemnity rider, paying multiple times the face amount); this benefit is only payable only if death occurs before a specific age and within 90 days of the accident

Answer 10

Accidental Death Benefit (Double or Triple Indemnity)

Question 11

This rider provides a benefit in addition to the base of the policy. The rider pays 100% of the rider known as principal sum, upon accidental death. If insured suffers an accidental dismemberment(limb or eyesight) pays 50%. loss of 2 limbs or total eyesight pays 100% of the rider. Typically expires at 65

Answer 11

Accidental Death and Dismemberment

Question 12

Allows the insured to purchase state amounts of additional insurance every 3 years based on certain ages (specifically 25, 28, 31, 34, and 40) events, or specified dates without evidence of insurability up to a maximum age usually 40. Premiums based on attained age. Events allowing additional insurance to be purchased in between specific ages is marriage and the birth or adoption of a child

Answer 12

Guaranteed Insurability

Question 13

This rider uses Increasing Term insurance to provide coverage equal to the amount of premiums paid; if insured dies within the term, the beneficiary would receive the face amount of the policy plus the benefit of the rider equaling the total amount of premiums paid

Answer 13

Return of Premium

Question 14

Increasing Term insurance equal to cash value. This rider provides the payment of term insurance equal to cash value at time of death. However, this does not relive the obligation to pay loans from the claim proceeds at the time of death

Answer 14

Return of Cash Value

Question 15

The cost of living rider enables the insured to purchase more insurance each year to help offset increasing insurance needs due to inflation. The amount that can be purchased is based on increases in the cost of living index. This additional coverage is usually available at low rates and evidence of insurability need not be provided for such increases

Answer 15

Cost of Living (COL)

Question 16

Provides for an early payment of a portion of the face amount prior to death. This rider provides tax free access to policy benefits based on an insured qualifying as terminally ill (death expected within 12-24 months) or chronically ill such as permanent confinement in a nursing home, long-term care if unable to perform activities of daily living or other acute illness that requires long term care (IE: AIDS or the need for an organ transplant) DO NOT INCLUDE DISABILITY INCOME

Answer 16

Accelerated Death Benefit Rider

Question 17

Allows the early payment of a portion fo the face amount before death, should the insured become terminally ill. Typically, it is an amount equal to 50%-90% of the policy’s face amount; Upon death the early payment will be deducted from the benefit to the beneficiary. Normally provided without a premium charge because it’s an advance death benefit

Answer 17

Living Needs Rider

Question 18

Provides up to 100% of the policy benefits if the insured qualifies for a long term care benefit. Any payout is an acceleration of the life insurance death benefit, meaning it will reduce the ultimate death benefit payable to the beneficiary

Answer 18

Long Term Care Rider

Question 19

An agreement between a third party (specializing in such transactions) and a life insurance policyowner (viator) insuring the life of an individual with life-threatening or terminal illness. Normally with a life expectancy of 2 year or less

Answer 19

Viatical Settlement

Question 20

Similar to a viatical settlement in that is it the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefit. No requirement for the insured to be terminally ill in order for the settlement to occur.

Answer 20

Life Settlement