Kaplan - Unit 5 Flashcards
Life Insurance Riders
Life Policy Riders
Add benefits to a life insurance policy at an additional premium.
Waiver of Premium
Will pay the premiums so the policyholder can continue to have coverage. The rider is available during the insured’s working years and expires between 60 and 65.
- Insured and owner are the same person
- Waives premiums as long as the insured is disabled
- Insured pays premium during the waiting period
- Company pays premiums after waiting period
- Premiums are paid during waiting period reimbursed
- Insured pays premiums when disability ends
Disability Waiver for Flexible Premium Policies
Suspends monthly cost of insurance deductions instead of waiving the premiums. Also called waiver of monthly deductions or waiver of cost of insurance.
- Cash account deductions waived
- Waiting period & standard expiration
Disability Income Rider
Provides the insured with a monthly benefit check if they become disabled. The amount is typically based on the death benefit and the industry standard is 1% of the face value.
Payor Benefit Rider
If the person responsible for the premiums on a Juvenile policy becomes disabled or dies before the child legally becomes an adult, the rest of the premiums are waived. Usually found with Juvenile policies and medical underwriting may be required.
Disability Riders
- Waiver of premium
- Waiver of cost of insurance (universal life)
- Disability income rider
- Payor rider
Accelerate Benefits Rider
Standard coverage added to a policy that enables the policyowner to apply for an advance on the death benefit proceeds during the lifetime of the insured. The insured must have a limited life expectancy or meet certain medical circumstances.
Qualifying Events for Accelerated Death Benefit Payments
- Terminal illness, with death expected within 24 months
- Serious illness, such as cancer, which would result in a reduced life expectancy
- long-term care due to the inability to perform a number of the activities of daily living
- being admitted to hospice or permanent confinement in a nursing home
- Catastrophic illness requiring extraordinary treatment, such as an organ transplant
Reduction of Death Benefit
Accelerated death benefit payments range from 25-100% of the death benefit.
Other (Additional) Insured Term Riders
Convertible term insurance for a spouse or an immediate family member of the primary insured. Also called a spouse or a children’s rider. The term provided by the rider is often convertible to permanent coverage during the effective period of the rider.
Exchange Privilege (Substitute Insured) Riders
Used to change the insured to a different person. Typically used when a business owns the policy and is also the beneficiary and the insured is a key employee. The rider switches the insured to another employee if the key employee retires or leaves the company.
Term Insurance Rider
provides coverage similar to a term insurance policy however the premium is lower than purchasing a separate policy. Can be added to a permanent policy. It expires at a certain age or number of years.
Return of Premium Rider
An increasing term rider in which the death benefit always equals the total of premiums paid for the rider and the underlying permanent policy. It does not return the actual premiums but pays an additional term benefit that equals the amount of premiums paid.
Accidental Death Benefit
Pays an extra benefit if the insured dies as the result of an accident. Sometimes referred to as double or triple indemnity because the benefit is twice or three times the amount.
Excluded caused of death:
- Illness
- Disability
- Suicide or self-inflicted injury
- War
- Commission of crimes
- Aviation activities other than a commercial flight
Expires at age 60 or 65
Accidental Death and Dismemberment (AD&D)
Supplementary Coverage that can be added to life insurance and it pays an extra benefit if the insured lives after a severe dismemberment.
The principal sum is 100% of death benefit if the insured dies upon an accident.
The capital sum is 50% of the principal sum.
