Life Insurance Clauses and Provisions Flashcards
Insuring Clause
Insurer’s basic promise to provide benefits if conditions are met
Entire Contract is only between…
Insurer and Policyholder
Entire contract consists only of…
Policy, any riders, and the application
Entire contract clarifies that statements on the application are…
Representations
Entire contract explains who can make changes to the contract:
Policyholder and top-level employee of insurer
Who cannot make changes to the entire contract?
Producers
Consideration Clause
Clarifies what’s being exchange in the contract
In the consideration clause, the consumer provides…
Premium and application
In the consideration clause, the insurer provides…
Promise to pay benefits
Incontestable Clause
Insurer has 2 years to investigate potentially false statements on an application and rescind the policy
Misstatement of Age or Gender
Let’s insurer adjust the death benefit based on incorrectly stated age or gender
The misstatement of age or gender clause is separate from the incontestable clause by…
Having no rescission and not 2 year limit
Suicide Clause
No death benefits for suicide within 2 years; insurer will refund premium to the beneficiary
Free Look Period
Give buyer a limited time to cancel and receive a total refund
Free look periods are treated as a…
Rescission
Free look periods are applicable to…
Individual purchases, not necessarily group life
Free look periods are at least…
10 days, but depends on state law
Free look period begins when…
Policy is received, not necessarily when issued
Grace Period
Typically allows insurance to stay in force for 1 month after a premium’s due date
If death occurs during grace period…
Insurer pays death benefits minus unpaid premium
Reinstatement Clause
Allows policyholder to regain insurance within 3 years after cancellation
Reinstatement requires payment of…
All premium that would’ve been due if not cancellation
Reinstatement premium is based on issue age as if…
No lapse or surrender occurred
To reinstate, must medically qualify and…
Pay off any policy loans
Reinstatement is only possible if…
Cancelled policy didn’t result in return of cash surrender value
LI Exclusions
Aviation, war, dangerous hobbies, travel to dangerous countries
Other than war, life insurance exclusions might be handled by…
Charging higher premium instead
Travel bans might be restricted by…
State law
Death from exclusions might result in…
Refund of premium to beneficiary
Dividend
Return of premium
With dividends, policyholder can choose to…
Reduce payment; reduce future premiums; increas the death benefit via pay up additions; increase cash value
Are dividends guaranteed?
Never
Settlement Options
How death benefit will be paid to beneficiary
Settlement options can be chosen by…
Owner, in advance; Beneficiary, upon insured’s death; Insurer, vie default option
Settlement options typically are…
Lump sum (default); kept with insurer until later date; kept with insurer but with periodic payments of dividends/interest; regular installment payments; convert into an annuity with regular payments for life
