Life Insurance Policy Provisions, Options & Rider Flashcards
11% Chapter 5
Who can make changes in a life insurance policy?
Mutual consent of owner and insurance executive officer
When can the insurer adjust death benefits to the beneficiary?
Never
What makes up the entire contract?
The insurance policy and completed signed application
When does the free look period begin?
When the policy is delivered to the owner
How long is a free look perion for a new contract?
Not less than 10 days
How long is the free look period on a replacement contract?
Not less than 20 days
How long is the free look period on a direct response policy?
Not less than 31 days
When does a premium have to be paid?
In advance
How long is the grace period in South Carolina?
No less than 31 days
Does a grace period allow?
The payment to be received and prevent the policy from lapsing
What is the reinstatement period on a lapsed policy?
3 yrs with
Written request
Proof of insurability
Payment of back premiums are interest
What is the incontestability period?
2 years
What mistatements can lead to an adjustment of the death benefits after the incontestability periods?
Mistakement of age or gender
The insurer can adjust the benefits up or down
What are the common policy exclusions?
War
Aviation
Hazardous hobbies and occupations
Suicide provision
When does the free look perion begin and how long must it be?
When the policy is delivered
10, 21 or 31 days depending on delivery/contract type
What kind of beneficiary designation can’t be changed without their written permission?
Irrevocable beneficiary
What happens if the insured and primary benefit both die in the same accident?
Common disaster clause
The primary benefits Sherry always dies 1st
SC 120 hour (5 day) survival period
Which life insurance settlement option will result in no income taxes due?
Lump sum or cash pay out
What is the automatic non forfeiture option?
The policy owner is guaranteed access to cash
Cash surrender
Do universal life policies contain a non forfeiture option?
No
What does the automatic premium loan provision do?
Prevent the policy for lapsing incase the policy holder forgets to pay the premium
Which dividen option is automatic if none is chosen
Paid up additions
Do universal life policies have dividends?
No
What are the dividend options?
Receive dividend in cash Reduce the premium Buy one year term Buy paid up additions -default Accumulate at interest - taxable
Are dividends guaranteed and taxable?
No dividends are not guaranteed
Dividends are generally not taxed
Which non forfeiture option continues at the same face value as the original policy?
Extended term insurance option
Which policy loan option cannot be deferred for 6 months?
Automatic premium loan provision
How does the waiver of premium waiver differ from the waiver of cost of insurance writer?
The waver of premium pays the monthly premium if the Insured is disabled.
The cost of insurance rider is for UL policies and only pays the cost of insurance and expenses deducted from the policy
How does a partial surrender differ from a policy loan?
A policy loan can be paid back. A partial surrender is a payout.
4 Beneficiary options?
Individuals
Class designations
Per stripes
Per capita
What is a per capita beneficiary?
Death benefit equally divided amongst class members
What is Per Stirpes?
Cascading beneficiaries
Which rider allows the owner to add another person to the policy with term insurance?
Spouse/Other insured term
Ends at 65
Which rider allows the owner to purchase additional coverage with no medical exams and how often?
Guaranteed insurability rider
When does joint and Survivor life income payout?
Payments are made until 2nd payee or survivor dies
What are the 3 lifetime income options?
Single (straight) life - payments cease at death
Life income with period certain - payments for entire period
Joint and survivor life income - til survivor dies
