Life Insurance Policy Provisions

Question 1

The terms of a life insurance policy are spelled out in its ________

Answer 1

Provisions, or clauses

Question 2

Policy provisions describe how…

Answer 2

..certain common situations will be handled, as well as the rights and the obligations of the policyowner and the insurer

Question 3

This provision gives the policyowner a period of time to return a policy for any reason within 10 days of delivery and receive all premiums paid

Answer 3

Free look

Question 4

Sets forth the insurer’s promise to pay benefits upon the insured’s death. Includes what the company will pay, the death benefit amount, and to whole it will be paid

Answer 4

The insuring clause or insuring agreement

Question 5

The owner of a life insurance policy may exercise all policy rights and privileges without the consent of any beneficiary including the right to:

Answer 5

-name or change the beneficiary
-select settlement options
-borrow or withdraw policy cash values
-receive policy dividends (participating policies)
-surrender or cancel the policy
-assign or transfer ownership
-select/change the premium payment mode
-select a non-forfeiture option

Question 6

________ of life insurance is a transfer of the owner’s rights, in whole or part, to another individual or entity

Answer 6

Assignment

Question 7

Types of life insurance policy assignment

Answer 7

-collateral assignment
-absolute or permanent assignment

Question 8

Collateral assignment

Answer 8

-temporary or conditional
-does not change ownership
-most common is to pledge all or part of the death benefit as collateral for a loan

Question 9

Absolute or permanent assignment

Answer 9

-transfers all rights of ownership to another person or entity
-a parent may transfer policyownership to a daughter when she reaches 18

Question 10

The life insurance policy and a copy of the original application constitute the _____ ______

Answer 10

Entire contract

Question 11

The entire contract policy provision states:

Answer 11

“No statement shall void this policy or be used in defense of a claim under it unless contained in the application”

Question 12

The insurer may not refer to documents other than these. When denying or paying a claim

Answer 12

Entire contract

Question 13

__________ or any change made to the contract must be made in writing and agreed to by both the insurer and the policyowner

Answer 13

Endorsements

Question 14

This amendment must be signed by an executive officer of the company and cannot be authorized by an agent/producer

Answer 14

Endorsements

Question 15

A legal term meaning something of value

Answer 15

Consideration

Question 16

Necessary to form a valid contract

Answer 16

An exchange of value

Question 17

The insured’s consideration is:

Answer 17

The premium paid and the representations made in the application

Question 18

The insurer’s consideration is:

Answer 18

The promise to pay the face amount of the contract to the named beneficiary upon the death of the insured

Question 19

This provision states that premiums are due in advance- that is, on or before the date on which the next period of coverage begins

Answer 19

Payment of premium provision

Question 20

The mode of the premium payments is

Answer 20

Frequency of payment

Question 21

Premium payment amounts can either be _____, _____ ______, ______, and _______

Answer 21

Level, single payment, graded, or flexible

Question 22

Life insurance policy’s grace period lasts for a period of up to

Answer 22

31 days

Question 23

If the insured does not pay the premium on date when due, the policy will stay in force for a limited time before the coverage actually lapses, this is the policy’s _____ ______

Answer 23

Grace period

Question 24

The restoration of a lapsed policy as originally purchased

Answer 24

Reinstatement

Question 25

Permanent life policies permit ________ in nearly all cases

Answer 25

Reinstatement

Question 26

The insured will receive reinstatement and the protection of the original policy, if not surrendered for cash, if they do the following:

Answer 26

-submits an application for reinstatement within 3 years of lapse -pay all past due premiums, with interest -provides satisfactory evidence of insurability (medical exam)

Question 27

A reinstated policy usually starts a new ________ period (2 years), but it does not require a new _____ period

Answer 27

Contestability; suicide

Question 28

States that after a life insurance policy has been in effect for 2 years the company cannot claim that a statement made in the application for insurance was meant to defraud the insurer

Answer 28

Incontestability provision

Question 29

The suicide clause states that if an insured, whether sane or insane commits suicide during:

Answer 29

The first two years after a life insurance contract has been issued, teh company will only pay the premium paid by the insured, not the face amount of the policy

Question 30

Misstatement of age (sex)

Answer 30

If a deceased insured misrepresented their age, the face amount of the policy will be adjusted to an amount the premium would have purchased at the insured’s correct age, at the time of purchase

Question 31

The payment of claims provision says the insurer will pay the death benefit ______

Answer 31

Promptly

Question 32

The insurance company is generally required to pay a death claim within ____ days after receiving notification of the claim, if after 60 days interest must be paid

Answer 32

60

Question 33

Life insurance policy provisions

Answer 33

-free look -insuring clause -ownership rights -assignment -entire contract -modifications -consideration -payment of premium -grace period -incontestability -suicide -misstatement of age or sex -payment of claims

Question 34

The person or entity who will get the death benefit

Answer 34

Beneficiary

Question 35

A beneficiary is defined as a “ ______ or _____” to whom payment of life insurance policy proceeds will be made upon the death of the insured

Answer 35

Person; interest

Question 36

Life insurance beneficiaries can be designated by ______ that need not be identified by name, “my children” “my spouse”

Answer 36

Classes

Question 37

A ________ is a legal entity which can hold title to property while its managed for the benefit of others

Answer 37

Trust

Question 38

There are three parties to a trust:

Answer 38

1. The grantor 2. The trustee 3. Beneficiary

Question 39

The _____ is the individual who sets up the trust, transfers property into it, and writes the instructions as to how the trust will operate

Answer 39

Grantor

Question 40

The _______ is the party that manages the property according to the grantor’s instructions. May be an individual or another legal entity such as a bank

Answer 40

Trustee

Question 41

The __________ is the person who receives the benefits of the trust

Answer 41

Beneficiary

Question 42

Who can be a beneficiary?

Answer 42

-individuals -classes -trusts -minors -estates -charities -university/colleges

Question 43

Per capita distributions

Answer 43

Means “by the head” and divides the policy’s death benefit equally among the surviving members of the class

Question 44

The ____ ______ beneficiary designation does not transfer death proceeds below a generational level

Answer 44

Per capita

Question 45

Per stirpes distribution

Answer 45

Means “by the branch” and signifies that the children of a deceased class beneficiary are entitled to that beneficiary’s share of the proceeds

Question 46

The _______ beneficiary is the first in line to receive the policy’s death benefit

Answer 46

Primary

Question 47

The ________ beneficiary is the next in line to receive the policy’s death benefit

Answer 47

Contingent/secondary

Question 48

Third in line if the secondary beneficiary dies

Answer 48

Tertiary beneficiary

Question 49

A secondary/contingent beneficiary has no right to benefits if

Answer 49

Any primary beneficiary is still alive

Question 50

Revocable beneficiary

Answer 50

The policyowner may submit to the insurer a written request to change or revoke beneficiary designations without notice and without the beneficiaries knowledge or consent

Question 51

Policyowner’s give up their right to change a beneficiary designation

Answer 51

Irrevocable beneficiaries

Question 52

Beneficiary designation changes generally take effect on

Answer 52

The date of written request

Question 53

Allows the insurer to pay all or part of the policy’s death benefit to someone other than the designated beneficiary if the beneficiary is a minor, is deceased, or cannot be found, or someone other than the beneficiary incurred the insured’s final medical or funeral expenses

Answer 53

Facility of payment provision

Question 54

Directs that if the insured and primary beneficiary die in the same accident and its impossible to tell who died first, the primary is assumed to have died first

Answer 54

Uniform simultaneous death act

Question 55

Uniform simultaneous death act

Answer 55

-insured and primary beneficiary are in the same accident -both die in accident -assumes primary beneficiary dies first -proceeds paid to contingent beneficiary

Question 56

Common disaster provision

Answer 56

-insured and primary beneficiary are in a common accident -both die within 30-90 days after accident -proceeds paid as if the primary beneficiary dies first -proceeds paid to contingent beneficiary

Question 57

May be included in a life insurance policy requiring that the policy proceeds be paid to the beneficiary in installments of a defined amount and at a set intervals

Answer 57

Spendthrift provision

Question 58

Spendthrift provision

Answer 58

-death benefit cannot be paid in a lump sum -death benefits cannot be claimed by creditors before payment to beneficiary -death benefits cannot be pledged by the beneficiary to a creditor -death benefits cannot be used by.the beneficiary as collateral for a loan

Question 59

Exceptions that define when coverage does not apply

Answer 59

Exclusions

Question 60

Under this exclusion, death by suicide is not covered for a certain period of time after the policy goes into effect. May be 1 or 2 years

Answer 60

Suicide exclusion

Question 61

Status-type war or military service exclusion

Answer 61

Eliminates coverage for the entire period during which the insured is in the military, regardless of how the insured dies. Even if on leave, no death benefit would be paid

Question 62

Results type war or military service exclusion

Answer 62

Coverage is eliminated only if the cause of death was related to military service

Question 63

May be included if the insured engages in activities such as mountain climbing, auto racing, sky diving, or scuba diving, either for pay or recreation

Answer 63

The hazardous occupation or hobby exclusion