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LAH - 1755 > Chapter 8 - Policy Provision Options And Riders > Flashcards

Chapter 8 - Policy Provision Options And Riders Flashcards

1
Q

Entire contract clause

A

Serves to minimize any misunderstanding between policy owner and insurer. Clause states that entire contract is made up of the insurance policy itself a attached copy of the application and any attached amendments.

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2
Q

Changes or amendments to insurance contracts can only be changed by

A

Any changes must be made in writing signed by policy owner and a company official and attached policy

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3
Q

Insuring clause

A

Promise to pay amount of money to beneficiary (the face amount) to beneficiary upon submission of proof of death of the insured.

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4
Q

Promise to pay amount of money to beneficiary (the face amount) to beneficiary upon submission of proof of death of the insured.

A

Insuring clause

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5
Q

Consideration clause

A

States that the insurer promise to benefits in consideration of the premium payments.

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6
Q

States that the insurer promise to benefits in consideration of the premium payments.

A

Consideration clause

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7
Q

Premium payment clause

A

Specifies when where and how premiums are to be paid.

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8
Q

Specifies when where and how premiums are to be paid.

A

Premium payment clause

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9
Q

Grace period

A

31 days after premium due date to pay overdue payments. Policy remains in force. Death benefit less outstanding premiums will be paid.

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10
Q

31 days after premium due date to pay overdue payments. Policy remains in force. Death benefit less outstanding premiums will be paid.

A

Grace period

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11
Q

Reinstatement

A

If unable to pay outstanding premiums by the end of grace period the policy will lapse and coverage will be lost. How never policy owner is given 3 years from date of lapse.

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12
Q

If unable to pay outstanding premiums by the end of grace period the policy will lapse and coverage will be lost. How never policy owner is given 3 years from date of lapse.

A

Reinstatement

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13
Q

Requirements for reinstatement.

A

Submission of a reinstatement or application by policy owner.
Underwriting
Payments of all back premiums plus interest
Repayment of any outstanding policy loans

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14
Q

Ownership clause

A

Ultimate control of policy is the owner.
Rights are assign and transfer policy
Select and change the premium mode, beneficiary, settlement option. Receive dividends. Borrow from cash values. Recover the cash value upon termination of the policy.

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15
Q

Ultimate control of policy is the owner.
Rights are assign and transfer policy
Select and change the premium mode, beneficiary, settlement option. Receive dividends. Borrow from cash values. Recover the cash value upon termination of the policy.

A

Ownership clause

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16
Q

Third party owner ship agreement

A

Meaning the two other parties is the insured and insurer. Reason would be because of taxes particularly estate tax. Sand situation can raise for buy/sell etc

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17
Q

Meaning the two other parties is the insured and insurer. Reason would be because of taxes particularly estate tax. Sand situation can raise for buy/sell etc

A

Third party ownership agreement

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18
Q

Incontestability provision

A

Prohibits the insurance company from contesting or denying payment of claim after the policy has been in force for 2 years.

On the basis of misrepresentation concealment or even fraud

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19
Q

Prohibits the insurance company from contesting or denying payment of claim after the policy has been in force for 2 years.

On the basis of misrepresentation concealment or even fraud

A

Incontestability provision

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20
Q

Policy loan provision

A

A permanent (cash value bearing) policy in force for at least 3 years must contain some cash value which may be borrowed by the policy owner.

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21
Q

A permanent (cash value bearing) policy in force for at least 3 years must contain some cash value which may be borrowed by the policy owner.

A

Policy loan provision

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22
Q

How much can be borrowed from the cash value amount

A

The amount that can be borrowed is the amount of the current cash value less an amount corresponding to the interest charged on the loan and any outstanding indebtedness.

Ex if loan rate is 10% and no other loans outstanding them policy owner can borrow up to 90% of cash value.

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23
Q

Methods a company can use to charge a loan interest rate

A

In advance
In arrears
Fixed
Variable

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24
Q

Interest in advance - policy in advance

A

Company will charge the whole years interest immediately upon the inception of the loan regardless of whether the loan is totally repaid within the year. Generally charge lower interest.

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25
Q

Company will charge the whole years interest immediately upon the inception of the loan regardless of whether the loan is totally repaid within the year. Generally charge lower interest.

A

Interest in advance

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26
Q

Interest in arrears - policy loan

A

Company will charge the loan interest rate at the end of the year

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27
Q

Company will charge the loan interest rate at the end of the year

A

Interest in arrears

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28
Q

Fixed loan interest -policy provision

A

Company will charge owner a fixed interest loan for the life of the policy.

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29
Q

Variable loan interest.

A

Company will charge the policy owner an adjustable loan interest rate. Rate is usually tied to an index such as Moody’s corporate bond yield average index.

If loan amount and interest are not paid company will just felt both from death benefit.

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30
Q

Company will charge owner a fixed interest loan for the life of the policy.

A

Fixed loan

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31
Q

Company will charge the policy owner an adjustable loan interest rate. Rate is usually tied to an index such as Moody’s corporate bond yield average index.

If loan amount and interest are not paid company will just felt both from death benefit.

A

Variable Loan interest

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32
Q

Automatic premium Loan

A

Included in policies with cash values. Intended to prevent the lapse of a policy due to the non payment of premium. Automatically takes a loan against the policy cash value upon the end of the grace period when a premium payment is missed.

33
Q

Included in policies with cash values. Intended to prevent the lapse of a policy due to the non payment of premium. Automatically takes a loan against the policy cash value upon the end of the grace period when a premium payment is missed.

A

Automatic premium loan

34
Q

Withdrawals or partial surrenders

A

Clause allows for the withdrawal or partial surrenders of the policy cash values. Are subject to certain charges and limits on the amounts and frequency of the withdrawals. Do not generate interest charges may be subject to income taxation.

35
Q

Clause allows for the withdrawal or partial surrenders of the policy cash values. Are subject to certain charges and limits on the amounts and frequency of the withdrawals. Do not generate interest charges may be subject to income taxation.

A

Withdrawals or partial surrenders

36
Q

Assignment

A

The transfer of an individual’s rights in the policy either partially or totally

37
Q

The transfer of an individual’s rights in the policy either partially or totally

A

Assignment

38
Q

Total assignment

A

Also known as absolute assignment. Permanent and complete transfers to another person known as the assignee

39
Q

Also known as absolute assignment. Permanent and complete transfers to another person known as the assignee

A

Total assignment

40
Q

Partial assignment

A

Also known as collateral assignment. A temporary form only wherein some incidents of ownership are transferred for a specific period of time.

General in situations involving loans

41
Q

Also known as collateral assignment. A temporary form only wherein some incidents of ownership are transferred for a specific period of time.

General in situations involving loans

A

Partial assignment

42
Q

Misstatement of age.

A

Won’t cancel policy but will change the policy age to the correct age even after the incontestable period (2years)

43
Q

Free look provision

A

10 calendar days to examine and cancel for a full refund. If the insured dies within this 10 day period and the policy has not been refunded the insured will pay the death benefit to the designated beneficiary.

44
Q

10 calendar days to examine and cancel for a full refund. If the insured dies within this 10 day period and the policy has not been refunded the insured will pay the death benefit to the designated beneficiary.

A

Free look provision

45
Q

Replacement of a life insurance policy requires

A

60 days

46
Q

Typ found in term insurance this conversion option allows to convert to permanent insurance without underwriting as long as risk does not increase.

A

Policy change conversion provision

47
Q

Policy change(conversion) provision

A

Typ found in term insurance this conversion option allows to convert to permanent insurance without underwriting as long as risk does not increase.

48
Q

Serves to minimize any misunderstanding between policy owner and insurer. Clause states that entire contract is made up of the insurance policy itself a attached copy of the application and any attached amendments.

A

Entire contract clause

49
Q

Proof of death

A

Notarized death certificate

50
Q

Beneficiary provision

A

Works in conjunction with the insuring clause which promises to pay the death benefit to the named beneficiary. Beneficiaries can be specified either at the time of application or after policy is issued. After policy issues you can name a “stranger”

51
Q

Works in conjunction with the insuring clause which promises to pay the death benefit to the named beneficiary. Beneficiaries can be specified either at the time of application or after policy is issued. After policy issues you can name a “stranger”

A

Beneficiary provision

52
Q

Order of succession

A

Primary secondary or tertiary beneficiaries. Order of proceeds to be received.

53
Q

Beneficiaries can be designated

A 
Individually
By class
Estates
Trusts
Business
Minors (court appointed guardian)
54
Q

Revocable beneficiaries

A

Can be changed by the policy owner at any time for any reason. Also change amount and way proceeds will be received

55
Q

Can be changed by the policy owner at any time for any reason. Also change amount and way proceeds will be received

A

Revocable beneficiaries

56
Q

Irrevocable beneficiaries

A

Not easily changed. Only with beneficiaries consent can be changed. Deemed to have interest in the force of the policy. Proceeds of irrevocable dies will go to estate instead of next in line

57
Q

Not easily changed. Only with beneficiaries consent can be changed. Deemed to have interest in the force of the policy. Proceeds of irrevocable dies will go to estate instead of next in line

A

Irrevocable beneficiaries.

58
Q

Per capita

A

By the head. Death benefit equally shared

59
Q

Per stirpes

A

By root. Grandchildren move up to the children’s position upon death of the child.

60
Q

The uniform simultaneous death act

A

Both the insured and primary beneficiary die as a result of a common accident and undeterminable then primary beneficiary died first. Preserves intent of owner to name other beneficiaries.

61
Q

Both the insured and primary beneficiary die as a result of a common accident and undeterminable then primary beneficiary died first. Preserves intent of owner to name other beneficiaries.

A

The uniform simultaneous death act

62
Q

If no contingency beneficiary was designated the death proceeds would be payable

A

To the insured estate

63
Q

Common disaster clause

A

Further stipulates an amount of time that the primary beneficiary must outlive the insured in order to collect death benefit proceeds.

64
Q

Further stipulates an amount of time that the primary beneficiary must outlive the insured in order to collect death benefit proceeds.

A

Common disaster clause

65
Q

Spendthrift clause

A

Designated to protect the proceeds from spending habits and creditors.

66
Q

Suicide clause

A

If the insured commits suicide whether sane or insane within two years of the policy date insurance company is only liable for the return of premiums paid. After two years death benefits will be paid.

67
Q

If the insured commits suicide whether sane or insane within two years of the policy date insurance company is only liable for the return of premiums paid. After two years death benefits will be paid.

A

Suicide clause

68
Q

Military service clause

A

While on active duty or as a result of declared way company is only liable for return of premiums.

69
Q

While on active duty or as a result of declared way company is only liable for return of premiums.

A

Military clause

70
Q

Aviation clause

A

Limits the payment of aviation caused death claims as a fare paying passenger commercial airline. Flying as a student pilot stunt pilot military pilot is excluded

71
Q

Limits the payment of aviation caused death claims as a fare paying passenger commercial airline. Flying as a student pilot stunt pilot military pilot is excluded

A

Aviation clause

72
Q

Hazardous avocations and occupation

A

If death occurs in hazardous occupation or avocation then no death benefit

73
Q

Dividends are received income tax..

A

Free because they are a return of excess premium. Dividends are declared and paid annually

74
Q

Dividends can be received as CRAPO

A

Cash - form of check
Reduced premiums - used to pay a portion or entire premium due
Accumulate at interest - income taxable interest in separate account
Paid up additions - used to buy to buy additional coverage
One year term

75
Q

Nonforfeiture options

A

Are usually found in whole life are options upon lapse and are designed to protect the policy owner against the loss of the policy cash values in the event of a policy lapse

76
Q

Are usually found in whole life are options upon lapse and are designed to protect the policy owner against the loss of the policy cash values in the event of a policy lapse

A

Nonforfeiture option

77
Q

CRE NON forfeiture options

A

Cash - check in the amount of net cash value
Reduced paid up insurance- net cash value is used as a single premium to provide same type of insurance as original. Determined by attained age as well as amount of cash value
Extended term - company used net cash value to purchase term insurance.

78
Q

Cash - check in the amount of net cash value
Reduced paid up insurance- net cash value is used as a single premium to provide same type of insurance as original. Determined by attained age as well as amount of cash value
Extended term - company used net cash value to purchase term insurance.

A

CRE NON forfeiture options

LAH - 1755 (3 decks)

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