Life Insurance Policy Provisions, Options, and Riders Flashcards
This rider allows the insured to receive a portion of the death benefit if the insured has a terminal illness and is certified by a physician as expected to die within 1-2 years
Accelerated Benefit (option) Rider
Person or entity designated in a life insurance policy to receive the death proceeds
Beneficiary
Equity or savings element or whole life insurance policies
Cash Value
Beneficiary group designation (ex all my children), opposed to specifying one or more beneficiaries by name
Class Designation
Provision of the Uniform Simultaneous Death Act, which ensures a policy owner of both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary. Also states that the primary beneficiary must outlive the insured by a specified period of time in order to receive the proceeds
Common Disaster Provision
Beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured.
Contingent (Secondary) Beneficiary
Amount of premium paid by the policy owner for policy coverage or insurance protection received up to this point
Earned Premium
Also known as the loading charge, is the measure of what it costs the insurance company to operate
Expense Factor
Means the cash value will increase faster than the guaranteed rate if the insurer earns a greater return than the guaranteed rate
Excess Interest
Pays the fixed death benefit in specified installment amounts until the principal and interest are exhausted
Fixed Amount Installment Option
Concept of averaging what would be the total single premium for a policy over periodic payments.
More periodic payments = higher total premium
Fixed/Level Premium
Settlement option that pays the death benefit proceeds in equal installments over a set period of year. Dollar amount of each installment depends upon the total number of installments
Fixed Period or Periodic Certain Option
Funding option characterized by a lower premium in the early years of the contract, with premiums increasing annually for an introductory period. After the introductory period, the premium jumps to an amount higher than what the initial level premium would have been. It then remains constant for the life of the policy.
Graded Premium
Net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends.
Gross (Annual) Premium
Calculation for determine the amount of interest an insurance company can expect to earn from investing insurance premiums
Interest Factor
Death settlement option where the insurance company holds the death benefit for a period of time and pays only the interest earned to the name beneficiary. A minimum rate of interest is guaranteed, and the interest must be paid at least annually.
Interest Only Option
Beneficiary which may not be changed by the policy owner without the written consent of the beneficiary
Irrevocable Beneficiary
Settlement option that guarantees that benefits will be paid on a life-long basis to two or more people. Option may include a period certain, and the amount payable is based on the ages of the beneficiaries
Joint and Survivor Option
Death benefit settlement option which provides the beneficiary with an income that they cannot outlive. Installment payments are guaranteed for as long as the recipient lives. The amount of each installment is based on the recipients life expectancy and the amount of the principal.
Life Income Option
An agreement in which a policyholder sells or transfers ownership in all or part of the life insurance policy to a third party for compensation that is less than the expected death benefit of the policy.
Life Settlement
Death settlement option where the death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums. Considered as an automatic option for more life insurance contracts.
Lump Sum Option
Premium funding option characterized by an initial premium that is lower than it should be during an introductory period of time. After this time, the premiums will increase to an amount greater than what the initial level premium would have been and then remains level or constant for the life of the policy
Modified Premium
Demonstrates the incidence and extent of disability that may be expected from a given group of people
Morbidity Rate
Measure of the number of deaths in some population, scales to size of that population, per unit time
Mortality Rate
Measure of the number of deaths in some population, scales to size of that population, per unit time
Mortality Rate
Formula used to determine the actual cost of a policy for a policy owner. Helps the consumer compare costs of death protection between policies that will be held for ten or twenty years
Net Premium Cost Index
Premium calculation used to calculate an insurers policy reserves factoring in interest and mortality
Net (Single) Premium
Evenly distributed benefits amongst all named living beneficiaries (all living children)
Per Capita
Evenly distributed benefits amongst an insureds according to the family line, branch, or root (children and grandchildren)
Per Stirpes
Frequency in which a policy owner elects to pay premiums
Premium Mode
First beneficiary in line to receive benefit proceeds upon the death of the insured.
Primary Beneficiary
The amount actually paid as a death, surrender, or maturity benefit. In the case of the death benefit, it includes the face value plus any earned dividends less any outstanding loans and interest. If surrender benefit, the amount includes any cash value, minus surrender charges, and outstanding loans and interest. If maturity, the benefit amount includes the cash value less any outstanding loans and interest
Policy Proceeds
Money set aside (required by the states insurance laws) to pay future claims
Reserves
Beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary
Revocable Beneficiary
Optional modes of settlement provided by most life insurance policies.
Include: lump-sum cash, interest only, fixed-period, fixed-amount, and life income
Settlement Options
Policy funding option where the policy owner pays a single premium that provides protection for life as a paid-up policy
Single Premium Funding
Clause that prevents creditors from obtaining any portion of policy proceeds upon an insureds death. Also can be selected to prevent the beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over a certain period of time
Spendthrift Clause
Cost comparison calculation formula used to determine the average cost-per-thousand for a policy that is surrendered for its cash value.
Surrender Cost Index
Third beneficiary in line to receive death benefit proceeds. Will only receive benefits if both the primary and contingent beneficiaries die before the insured
Tertiary Beneficiary
Department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications
Underwriting Department
Premium that has been paid by a policy owner for insurance coverage that has not yet been provided
Unearned Premium
States that if the insured and primary beneficiary die at approximately the same time, in a common accident, with no clear evidence as to who died first, the law will assume that the primary beneficiary died first. Therefore, the death benefit proceeds are paid to the contingent beneficiary.
Uniform Simultaneous Death Act
Someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit
Viatical Settlement
Original policy owner in a viatical settlement
Viator
New third party owner in a viaticial settlement
Viatical (Viatee)
