Life Insurance Clauses and Provisions

Question 1

Insuring Clause

Answer 1

Insurer’s basic promise to provide benefits if conditions are met

Question 2

Entire Contract is only between…

Answer 2

Insurer and Policyholder

Question 3

Entire contract consists only of…

Answer 3

Policy, any riders, and the application

Question 4

Entire contract clarifies that statements on the application are…

Answer 4

Representations

Question 5

Entire contract explains who can make changes to the contract:

Answer 5

Policyholder and top-level employee of insurer

Question 6

Who cannot make changes to the entire contract?

Answer 6

Producers

Question 7

Consideration Clause

Answer 7

Clarifies what’s being exchange in the contract

Question 8

In the consideration clause, the consumer provides…

Answer 8

Premium and application

Question 9

In the consideration clause, the insurer provides…

Answer 9

Promise to pay benefits

Question 10

Incontestable Clause

Answer 10

Insurer has 2 years to investigate potentially false statements on an application and rescind the policy

Question 11

Misstatement of Age or Gender

Answer 11

Let’s insurer adjust the death benefit based on incorrectly stated age or gender

Question 12

The misstatement of age or gender clause is separate from the incontestable clause by…

Answer 12

Having no rescission and not 2 year limit

Question 13

Suicide Clause

Answer 13

No death benefits for suicide within 2 years; insurer will refund premium to the beneficiary

Question 14

Free Look Period

Answer 14

Give buyer a limited time to cancel and receive a total refund

Question 15

Free look periods are treated as a…

Answer 15

Rescission

Question 16

Free look periods are applicable to…

Answer 16

Individual purchases, not necessarily group life

Question 17

Free look periods are at least…

Answer 17

10 days, but depends on state law

Question 18

Free look period begins when…

Answer 18

Policy is received, not necessarily when issued

Question 19

Grace Period

Answer 19

Typically allows insurance to stay in force for 1 month after a premium’s due date

Question 20

If death occurs during grace period…

Answer 20

Insurer pays death benefits minus unpaid premium

Question 21

Reinstatement Clause

Answer 21

Allows policyholder to regain insurance within 3 years after cancellation

Question 22

Reinstatement requires payment of…

Answer 22

All premium that would’ve been due if not cancellation

Question 23

Reinstatement premium is based on issue age as if…

Answer 23

No lapse or surrender occurred

Question 24

To reinstate, must medically qualify and…

Answer 24

Pay off any policy loans

Question 25

Reinstatement is only possible if…

Answer 25

Cancelled policy didn’t result in return of cash surrender value

Question 26

LI Exclusions

Answer 26

Aviation, war, dangerous hobbies, travel to dangerous countries

Question 27

Other than war, life insurance exclusions might be handled by…

Answer 27

Charging higher premium instead

Question 28

Travel bans might be restricted by…

Answer 28

State law

Question 29

Death from exclusions might result in…

Answer 29

Refund of premium to beneficiary

Question 30

Dividend

Answer 30

Return of premium

Question 31

With dividends, policyholder can choose to…

Answer 31

Reduce payment; reduce future premiums; increas the death benefit via pay up additions; increase cash value

Question 32

Are dividends guaranteed?

Answer 32

Never

Question 33

Settlement Options

Answer 33

How death benefit will be paid to beneficiary

Question 34

Settlement options can be chosen by…

Answer 34

Owner, in advance; Beneficiary, upon insured’s death; Insurer, vie default option

Question 35

Settlement options typically are…

Answer 35

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