Chapter 8 - Policy Provision Options And Riders Flashcards
Entire contract clause
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.
Changes or amendments to insurance contracts can only be changed by
Any changes must be made in writing signed by policy owner and a company official and attached policy
Insuring clause
Promise to pay amount of money to beneficiary (the face amount) to beneficiary upon submission of proof of death of the insured.
Promise to pay amount of money to beneficiary (the face amount) to beneficiary upon submission of proof of death of the insured.
Insuring clause
Consideration clause
States that the insurer promise to benefits in consideration of the premium payments.
States that the insurer promise to benefits in consideration of the premium payments.
Consideration clause
Premium payment clause
Specifies when where and how premiums are to be paid.
Specifies when where and how premiums are to be paid.
Premium payment clause
Grace period
31 days after premium due date to pay overdue payments. Policy remains in force. Death benefit less outstanding premiums will be paid.
31 days after premium due date to pay overdue payments. Policy remains in force. Death benefit less outstanding premiums will be paid.
Grace period
Reinstatement
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.
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.
Reinstatement
Requirements for reinstatement.
Submission of a reinstatement or application by policy owner.
Underwriting
Payments of all back premiums plus interest
Repayment of any outstanding policy loans
Ownership clause
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.
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.
Ownership clause
Third party owner ship agreement
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
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
Third party ownership agreement
Incontestability provision
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
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
Incontestability provision
Policy loan provision
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 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.
Policy loan provision
How much can be borrowed from the cash value amount
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.
Methods a company can use to charge a loan interest rate
In advance
In arrears
Fixed
Variable
Interest in advance - policy in advance
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.
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.
Interest in advance
Interest in arrears - policy loan
Company will charge the loan interest rate at the end of the year
Company will charge the loan interest rate at the end of the year
Interest in arrears
Fixed loan interest -policy provision
Company will charge owner a fixed interest loan for the life of the policy.
Variable loan interest.
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.
Company will charge owner a fixed interest loan for the life of the policy.
Fixed loan
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.
Variable Loan interest
Automatic premium Loan
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.
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.
Automatic premium loan
Withdrawals or partial surrenders
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.
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.
Withdrawals or partial surrenders
Assignment
The transfer of an individual’s rights in the policy either partially or totally
The transfer of an individual’s rights in the policy either partially or totally
Assignment
Total assignment
Also known as absolute assignment. Permanent and complete transfers to another person known as the assignee
Also known as absolute assignment. Permanent and complete transfers to another person known as the assignee
Total assignment
Partial assignment
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
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
Partial assignment
Misstatement of age.
Won’t cancel policy but will change the policy age to the correct age even after the incontestable period (2years)
Free look provision
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.
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.
Free look provision
Replacement of a life insurance policy requires
60 days
Typ found in term insurance this conversion option allows to convert to permanent insurance without underwriting as long as risk does not increase.
Policy change conversion provision
Policy change(conversion) provision
Typ found in term insurance this conversion option allows to convert to permanent insurance without underwriting as long as risk does not increase.
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.
Entire contract clause
Proof of death
Notarized death certificate
Beneficiary provision
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”
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”
Beneficiary provision
Order of succession
Primary secondary or tertiary beneficiaries. Order of proceeds to be received.
Beneficiaries can be designated
Individually By class Estates Trusts Business Minors (court appointed guardian)
Revocable beneficiaries
Can be changed by the policy owner at any time for any reason. Also change amount and way proceeds will be received
Can be changed by the policy owner at any time for any reason. Also change amount and way proceeds will be received
Revocable beneficiaries
Irrevocable beneficiaries
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
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
Irrevocable beneficiaries.
Per capita
By the head. Death benefit equally shared
Per stirpes
By root. Grandchildren move up to the children’s position upon death of the child.
The uniform simultaneous death act
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.
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.
The uniform simultaneous death act
If no contingency beneficiary was designated the death proceeds would be payable
To the insured estate
Common disaster clause
Further stipulates an amount of time that the primary beneficiary must outlive the insured in order to collect death benefit proceeds.
Further stipulates an amount of time that the primary beneficiary must outlive the insured in order to collect death benefit proceeds.
Common disaster clause
Spendthrift clause
Designated to protect the proceeds from spending habits and creditors.
Suicide clause
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.
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.
Suicide clause
Military service clause
While on active duty or as a result of declared way company is only liable for return of premiums.
While on active duty or as a result of declared way company is only liable for return of premiums.
Military clause
Aviation clause
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
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
Aviation clause
Hazardous avocations and occupation
If death occurs in hazardous occupation or avocation then no death benefit
Dividends are received income tax..
Free because they are a return of excess premium. Dividends are declared and paid annually
Dividends can be received as CRAPO
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
Nonforfeiture options
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
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
Nonforfeiture option
CRE NON forfeiture options
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.
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.
CRE NON forfeiture options
