Life Insurance Provisions Flashcards
required provisions
Insuring Clause (or Insuring Agreement)
The insurer’s basic promise to pay specified benefits
to a designated person in the event of a covered loss
Consideration Clause
A policyowner’s consideration consists of completing the application and paying
the initial premium. The amount and frequency of premium payments are contained in the
consideration clause.
Entire Contract
The insurance policy itself, any riders and endorsements/amendments, and the
application comprise the entire contract between all parties. Insurance producers cannot make
changes to a policy
entire contract provision is found at the beginning of every life insurance policy
issued
Grace Period
If an insured dies during the Grace Period of a life
insurance policy before paying the required annual premium, the beneficiary will receive the face
amount of the policy less any required premiums
Reinstatement
Permits the policyowner to reinstate a policy that has lapsed
provide proof of insurability and pays all back premiums, outstanding
loans, and interest
Incontestable Clause
The clause in a life insurance contract that prohibits the insurer from
questioning the validity of the contract after a certain period of time has elapsed.
Misstatement of Age or Sex
Allows the insurer to adjust the policy benefits if the insured’s age or sex is
misstated on the policy application
Policy Loan Provisions
Policies that have cash value also have policy loan and withdrawal provisions
These loans, with interest, cannot exceed the guaranteed cash value or the policy is no longer
in force
Any
loans with interest due at the time of death will be deducted from the insured’s policy proceeds
Automatic Premium Loans
Allows the insurer to automatically use the policy cash value to pay an
overdue premium. There is no cost for this provision.
Assignment Clause
The right to transfer policy rights to another person or entity.
- Absolute assignment
- Collateral assignment
Absolute Assignment
assignee receives full control of the policy and rights to
the policy benefits from the current policyowner
Collateral Assignment
The partial and temporary transfer of rights to another person
or entity. Collateral assignments are usually intended for securing a loan with a
creditor.
Free Look
The policyowner is permitted a certain number of days once the policy is delivered to look
over the policy and return it for a refund of all premiums paid.