Chapter 3 Policies, provisions, options, and riders Flashcards
3 Basic Categories of Coverage
- Ordinary
- Industrial
- Group
Ordinary Insurance
Life insurance of commercial companies not issued on a weekly premium basis.
Amount of protection is usually $1,000 or more
Industrial Insurance
Provides modest benefits on relatively short benefit period.
Premiums collected on weekly or monthly basis by an agent calling at insureds home.
Group Insurance
Coverage for group of people, usually employees of a company under 1 contract.
Term Insurance (3 types)
- No cash values
- Level term
- decreasing term
- increasing term
Level Term Insurance
face value remains unchanged from the date policy comes into force until the day it expires.
Decreasing Term Life Insurance
Face value decreases in scheduled steps from the day policy comes into force until expiration.
premium remains level
Increasing Term Life Insurance
Death benefit increases periodically over the policy’s term
most term policies contain option to renew or convert, what do those terms mean?
renew- renew policy without having to show evidence of insurability
convert- choice to change term policy to whole life policy at renewal without evidence of insurability
6 variations of Permanent (whole) Life Insurance
- Straight Whole Life
- Universal Life
- Variable Life
- Adjustable Life
- Modified Life
- Family Life
whole life policies build cash value and mature at age 100
Straight Whole Life
permanent level insurance protection for whole life of policy
level premiums, level benefits, cash values
Modified Whole Life
- premiums payable during first few years
- slightly larger than rate for Term insurance
- afterward, premium is higher for remainder of life than premium for ordinary life at original age of issue but lower than rate at age attained
Are death benefits payable to the beneficiary taxable?
NO
Rights of ownership provides right to…
choose and change beneficiary determine how benefits will be dispersed right to policy loans right to policy dividends assign ownership to someone else right to cancel policy
When a life policy is reinstated does a new suicide exclusion go into effect?
NO
Suicide Clause
2 year time period, if owner commits suicide benefits will not be paid.
Transfer of ownership also know as…
new owner known as…
assignment
assignee
Accelerated Death Benefits Provision
allows insured to become their own beneficiary if they become terminally ill or suffer a life threatening condition
Nonforfeiture options include
- cash surrender
- reduced paid up
- extended term
- automatic loan
- dividend accumulations
Are policy dividends taxable income?
NO, considered a return or premiums paid.
Endowment Policies
contract for payment of face amount at end of a fixed period, at a specified age, or at insureds death
Graded Premium Whole Life
lower than normal premium rates during first few years.
premiums increase gradually each year
after preliminary period premiums level off and remain constant.
Indexed Whole Life
death benefit increases according to inflation
Limited Pay Whole Life
premium payments only made for a limited # of years
Modified Endowment (MEC)
amount owner pays during first years exceeds level that would have been payable to provide paid up future benefits in 7 years
Single Premium Whole Life
Whole Life Insurance, premium paid all at once up front.
