Life Insurance Policy Riders, Provisions, Options, and Exclusions

Question 1

ADL

Answer 1

Activities of Daily Living

Question 2

Absolute Assignment

Answer 2

PERMANENT transfer of ALL policy ownership rights

Question 3

Indemnity

Answer 3

A principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss

Question 4

NAIC

Answer 4

National Association of Insurance Commissioners

Question 5

Entire contract

Answer 5

Policy + copy of application + any riders or amendments

Question 6

Collateral Assignment

Answer 6

Partial transfer of policy ownership rights, usually to secure a loan, etc.

Question 7

Per Capita Beneficiaries

Answer 7

Split evenly among living named beneficiaries

Question 8

Per Stripes Beneficiaries

Answer 8

Split evenly among all named beneficiaries with the amount meant for a dead beneficiary being split among his or her children

Question 9

What happens to the policy proceeds if no beneficiary is named?

Answer 9

They go to the insured’s estate

Question 10

Revocable vs Irrevocable

Answer 10

Revocable: the policyowner CAN change the beneficiary designation and borrow against the policy without the consent of the beneficiaries

Irrevocable: the policyowner CANNOT change the beneficiary designation and borrow against the policy without the written consent of the beneficiaries

Question 11

Uniform Simultaneous Death Law

Answer 11

If the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the primary beneficiary died first

Question 12

Common Disaster Clause

Answer 12

If included in a policy, it has the same effect as the Uniform Simultaneous Death Law for disasters if the death of the primary beneficiary occurs within a set number of days

Question 13

Who does the Uniform Simultaneous Death Law and the Common Disaster Clause protect?

Answer 13

The contingent beneficiary

Question 14

What does the grace period protect the policyholder from?

Answer 14

Losing insurance coverage if they are late on an premium payment

Question 15

Exclusions

Answer 15

Types of risks the policy will NOT cover

Question 16

Waiver of Premium

Answer 16

A rider that waives the premium for a total disability after a waiting period

Question 17

Children’s term rider

Answer 17

One premium for ALL children

Question 18

Double indemnity

Answer 18

Two times the face amount

Question 19

Accelerated benefit

Answer 19

Early payment of part of death benefit to the insured from the insurer for qualifying medical expenses

Question 20

What events trigger nonforfeiture options?

Answer 20

Policy surrenders or lapses

Question 21

Automatic nonforfeiture option

Answer 21

In case of surrender or lapse, the insurer automatically extends the term for the same face amount but shorter term covered by the cash value accured

Question 22

Premium dividends

Answer 22

A return of excess premiums

Question 23

Paid-up additions

Answer 23

In non-participating policies, these are the excess premiums the insurer uses to buy a paid-up whole life policy which will be paid to the beneficiary as a death benefit

Question 24

When are life insurance settlement options triggered

Answer 24

Death or age 100 of the insured

Question 25

What is another name for straight life and what does it guarantee?

Answer 25

Life-income which guarantees that the recipient cannot outlive the benefit payments

Question 26

Which rider enables the insured to purchase additional coverage without evidence of insurability?

Answer 26

Guaranteed insurability rider

Question 27

What are the three nonforfeiture options?

Answer 27

• Cash Surrender Value
• Extended Term
• Reduced Paid-Up Insurance

Question 28

Cash Surrender Value

Answer 28

Allows the policyholder to receive a lump sum cash payment if they choose to cancel their policy

Question 29

Principal sum

Answer 29

Face amount with accidental death ridter. If double indemnity, then 2x the face amount. If triple indemnity, then 3x.

Question 30

Capital sum

Answer 30

A percent of face amount with accidental dismemberment rider - usually 50%

Question 31

What happens to the premium if the Guaranteed Insurability rider is excercised?

Answer 31

It goes up commensurate with the increase in death benefit

Question 32

What are the two benefits of the Accelerated (Living) Benefit Rider?

Answer 32

• Early payment of partial death benefit
• If terminally ill and projected to die in <2 years, can be used to pay for medical treatment
• Will reduce remaining death benefit

Question 33

What are the two benefits of the Accelerated (Living) Benefit Rider?

Answer 33

• Early payment of partial death benefit
• If terminally ill and projected to die in <2 years, can be used to pay for medical treatment
• Will reduce remaining death benefit