Life Insurance Policy Provisions, Options, and Riders

Question 1

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

Answer 1

Accelerated Benefit (option) Rider

Question 2

Person or entity designated in a life insurance policy to receive the death proceeds

Answer 2

Beneficiary

Question 3

Equity or savings element or whole life insurance policies

Answer 3

Cash Value

Question 4

Beneficiary group designation (ex all my children), opposed to specifying one or more beneficiaries by name

Answer 4

Class Designation

Question 5

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

Answer 5

Common Disaster Provision

Question 6

Beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured.

Answer 6

Contingent (Secondary) Beneficiary

Question 7

Amount of premium paid by the policy owner for policy coverage or insurance protection received up to this point

Answer 7

Earned Premium

Question 8

Also known as the loading charge, is the measure of what it costs the insurance company to operate

Answer 8

Expense Factor

Question 9

Means the cash value will increase faster than the guaranteed rate if the insurer earns a greater return than the guaranteed rate

Answer 9

Excess Interest

Question 10

Pays the fixed death benefit in specified installment amounts until the principal and interest are exhausted

Answer 10

Fixed Amount Installment Option

Question 11

Concept of averaging what would be the total single premium for a policy over periodic payments.

More periodic payments = higher total premium

Answer 11

Fixed/Level Premium

Question 12

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

Answer 12

Fixed Period or Periodic Certain Option

Question 13

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.

Answer 13

Graded Premium

Question 14

Net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends.

Answer 14

Gross (Annual) Premium

Question 15

Calculation for determine the amount of interest an insurance company can expect to earn from investing insurance premiums

Answer 15

Interest Factor

Question 16

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.

Answer 16

Interest Only Option

Question 17

Beneficiary which may not be changed by the policy owner without the written consent of the beneficiary

Answer 17

Irrevocable Beneficiary

Question 18

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

Answer 18

Joint and Survivor Option

Question 19

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.

Answer 19

Life Income Option

Question 20

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.

Answer 20

Life Settlement

Question 21

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.

Answer 21

Lump Sum Option

Question 22

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

Answer 22

Modified Premium

Question 23

Demonstrates the incidence and extent of disability that may be expected from a given group of people

Answer 23

Morbidity Rate

Question 24

Measure of the number of deaths in some population, scales to size of that population, per unit time

Answer 24

Mortality Rate

Question 25

Measure of the number of deaths in some population, scales to size of that population, per unit time

Answer 25

Mortality Rate

Question 26

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

Answer 26

Net Premium Cost Index

Question 27

Premium calculation used to calculate an insurers policy reserves factoring in interest and mortality

Answer 27

Net (Single) Premium

Question 28

Evenly distributed benefits amongst all named living beneficiaries (all living children)

Answer 28

Per Capita

Question 29

Evenly distributed benefits amongst an insureds according to the family line, branch, or root (children and grandchildren)

Answer 29

Per Stirpes

Question 30

Frequency in which a policy owner elects to pay premiums

Answer 30

Premium Mode

Question 31

First beneficiary in line to receive benefit proceeds upon the death of the insured.

Answer 31

Primary Beneficiary

Question 32

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

Answer 32

Policy Proceeds

Question 33

Money set aside (required by the states insurance laws) to pay future claims

Answer 33

Reserves

Question 34

Beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary

Answer 34

Revocable Beneficiary

Question 35

Optional modes of settlement provided by most life insurance policies.

Include: lump-sum cash, interest only, fixed-period, fixed-amount, and life income

Answer 35

Settlement Options

Question 36

Policy funding option where the policy owner pays a single premium that provides protection for life as a paid-up policy

Answer 36

Single Premium Funding

Question 37

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

Answer 37

Spendthrift Clause

Question 38

Cost comparison calculation formula used to determine the average cost-per-thousand for a policy that is surrendered for its cash value.

Answer 38

Surrender Cost Index

Question 39

Third beneficiary in line to receive death benefit proceeds. Will only receive benefits if both the primary and contingent beneficiaries die before the insured

Answer 39

Tertiary Beneficiary

Question 40

Department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications

Answer 40

Underwriting Department

Question 41

Premium that has been paid by a policy owner for insurance coverage that has not yet been provided

Answer 41

Unearned Premium

Question 42

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.

Answer 42

Uniform Simultaneous Death Act

Question 43

Someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit

Answer 43

Viatical Settlement

Question 44

Original policy owner in a viatical settlement

Answer 44

Viator

Question 45

New third party owner in a viaticial settlement

Answer 45

Viatical (Viatee)