Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CLU 323 > Chapter 9-Policy Provisions > Flashcards

Chapter 9-Policy Provisions Flashcards

1
Q

What are the characteristics of life insurance contracts?

A
  • A life insurance policy is a contract of adhesion (written by the insurance company and can not be altered)
  • Proposed insured who complete applications are asking for an offer from the insurance company
  • Insurance companies write the contracts and chooses the language so uncertainty is settled in favor of the insured
  • After the insured accepts the offer, the insurer is bound by contract (the insured can still cancel with the free look period)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What does the face page of a policy contain?

A
  • Name of the insured and the policy owner
  • Face amount of the policy and the policy number
  • The free look provision
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are some characteristics of standard policy provisions?

A

-Certain provisions are required by state law
-Insurers may draft their own wording (subject to state approval)
-Standard provisions are not applicable to group life insurance
(some standard provisions do not apply to all policy types and do not need to be included)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are some characteristics of the grace period?

A
  • The standard grace period is 31 days
  • A policy owner is not legally required to pay premiums for coverage during the grace period
  • The insurer can deduct unpaid premiums from the death benefit if the insured dies during the grace period

(before the grace period requirement, many insurers allowed payment after the due date)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are some characteristics of late remittance offers?

A
  • Late remittance offers usually allow reinstatement without evidence of insurability
  • Late remittance offers are accepted when the insured meets any required conditions and pays the premium
  • Late remittance offers are not a requirement
  • Late remittance offers are not part of the grace period provision (does not extend grace period)
  • Late remittance offers occur after policy lapses and is at the discretion of the insurer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are some characteristics of the policy loan provision?

A
  • State law requires that policy loans are available on any policy that has a cash value
  • There is no obligation to repay principal or interest on a policy loan (borrowing is not really a loan but an advance of surrender value, which is an asset)
  • A policy loan is an advance against the cash surrender value or the death benefit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are some characteristics of the incontestable clause?

A
  • Policies are incontestable for misstatement of age, omission of medical information, concealment, or false information after the incontestable period
  • All states limit the contestable period to 2 years
  • exceptions to the incontestable period are fraudulent impersonation, intent to murder, and lack of insurable interest

(A contested policy results in the return of premiums paid)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When is the divisible surplus provision applicable?

A

Participating contracts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are some characteristics of the entire contract provision?

A
  • The policy and application make up the entire contract
  • No one can waive or change any provision in the policy

(no other documents may be incorporated in the policy by reference)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the requirements to reinstate a lapsed policy?

A
  • Apply for reinstatement within 3 years of default (or extended term expiration)
  • Evidence of insurability
  • Payment of past due premiums with interest
  • Reinstatement or repayment of principal and interest on policy loans
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are some characteristics of the misstatement of age or sex?

A
  • When discovered, premium or benefit is adjusted to fit the facts
  • Incontestable clause does not prevent adjustment of premium or benefit after 2 years (it only prevents legal action that would invalidate the contract)
  • Misstatement of age or sex is a material misrepresentation (but does not void the policy)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are some characteristics of level premium policies?

A
  • Policies charge more than needed to meet mortality costs at younger ages and less than needed to meet mortality costs at older ages (makes policies less affordable for younger insureds)
  • Excess premium charges at younger ages along with interests, builds cash reserves that support mortality costs at older ages

(Early policies did not return the reserves of lapsed or surrendered policies)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are some characteristics of nonforfeiture laws?

A
  • Requires Insurers to provide surrender values when level premium policies are terminated
  • Adopting modifications to the law does not affect in force policies
  • Insurers are required to provide guaranteed minimum cash values after a policy has been in force for a specified period of time (usually 3 years)
  • Insurers can use their own formulas for surrender values if the result is at least as large as the prescribed method
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What values are available under the nonforfeiture laws?

A
  • Cash surrender
  • Extended term insurance
  • Reduced paid up insurance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are some characteristics of the prohibited provision of the writing agent not being the agent of the buyer when completing the application?

A
  • If the agent represents the insurance company in completing the application, the insurance company can be charged with knowing everything the agent knows even without receiving the information from the agent
  • The agent is prevented from representing the buyer when completing the application but the agent could represent the insured in other areas
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are some prohibited policy provisions in most states?

A
  • Backdating is limited to 6 months
  • Cash value greater than the outstanding loan prohibits nonforfeiture for nonpayment of principal or interest in most states
  • Less value statutes prevent an insurer from providing settlement options that have a value less than the death benefit
  • Statute of limitations in all states restrict the time available to file a lawsuit
  • Writing agent representation prevents representing the insured during the writing of the application
17
Q

What are some characteristics of statues of limitations?

A

-Limitations are placed on the length of time available to file a lawsuit (once expired, the court will not hear a lawsuit under any circumstance)
-In some states, Insurers can reduce the statute of limitations required by state law
-A shorter statutory period for filing a lawsuit is an advantage to the insurer
-

18
Q

What are the characteristics of backdating a policy?

A
  • Backdating reduces the annual premium the policy owner will pay
  • State statues limit backdating to 6 months
  • Backdated policies are issued with earlier application dates (as if purchased at an earlier age)
  • Backdated policies require payment of premium during a period when no insurance was in force
19
Q

What are some characteristics of the suicide clause?

A
  • The clause is an optional provision
  • An insurer may elect to cover suicide on day one
  • If no suicide clause is included, then it is covered anytime during the policy
  • Generally, suicide during the first year or two is not covered
20
Q

What are some characteristics of the ownership provision?

A
  • The insured may be both the applicant and the owner of the policy
  • The provision is optional
  • The owner can change beneficiaries with or without consent of the insured
  • The owner can assign the policy with or without the beneficiary’s consent
21
Q

What are some characteristics of the assignment provision?

A
  • Assignments involve the transfer of property rights to another party and is an optional provision
  • Insurers may include a provision that assignments will not be binding on the company
  • Most insurers include provisions clearly stating the requirements of an assignment
  • An effective policy assignment can be made without assignment provisions
22
Q

What are some characteristics of the Accelerated Benefits Model Regulation?

A
  • Provision allows for payment of benefits to the insured that reduce the face amount of policy if requirements are met
  • Must be a medical condition that drastically limits life span, requires extraordinary medical intervention and continuous confinement in an eligible institution, and would result in drastically limited life span without extensive treatment
  • The purpose of the NAIC ABMR is to provide regulations and standards of disclosure for accelerated benefits provisions
  • Regulations or laws similar to the NAIC have been adopted in about half the states
  • Accelerated benefits may be provided through group and individual policies

(conditions that may qualify for accelerated benefits are AIDS, end stage renal disease, acute coronary artery disease, etc)

23
Q

What are some characteristics of waivers?

A
  • Involves voluntarily giving up a known right
  • May not be binding for the future
  • A right that has been repeatedly waived can be reasserted at any time
  • Rights that protect the public can not be waived (such as suicide)
24
Q

What are some characteristics of waiver and estoppel?

A
  • Estoppel prevents a party from asserting a defense that contradicts past words or actions if another party acted or relied on those words or actions
  • Due to similarities, some courts treat them as separate parts of the same legal theory
25
Q

What are some characteristics of the accidental death benefits provision?

A
  • An optional provision that provides additional death benefits that usually equals the face amount of the policy and results in double face value payout if death is due to an accident
  • Some provisions include a requirement that death occurs within a specified period after the accident
  • There are two types of accidental death clauses (accidental means and result)
  • The accidental means form is the more restrictive form because it requires that both the cause and result were unintentional
  • Most companies now use the accidental result form which only requires that the result was unintentional
26
Q

What are some characteristics of the guaranteed purchase option?

A
  • Allows the purchase of additional policies at stated intervals without evidence of insurability
  • Options to buy may be included during certain life events like marriage or child birth
  • New policies issued under the option are not subject to new suicide or incontestability clauses

(Unexercised options are lost)

27
Q

What are some characteristics of the waiver of premium provision?

A

-The policy remains in force if the insured becomes disabled and meets the stated contract requirements
-Most riders include a 6 month waiting period
-Usually not continued beyond age 65
-Premiums paid during waiting period are usually refunded when disability is approved
(Waived premiums are not recovered by the insurer)

28
Q

What are some of the state required policy provisions?

A
  • Divisible surplus
  • Entire contract
  • Grace period (Late remittance offer)
  • Incontestable clause
  • Misstatement of age or sex
  • Nonforfeiture provisions
  • Policy Loans
  • Reinstatement
  • Settlement options

CLU 323 (24 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions