Life Insurance Riders

Question 1

Benefit options to tailor a policy to the owner’s needs

Answer 1

Life insurance riders

Question 2

Waiver of premium rider

Answer 2

-one of the most common
-will pay the premiums if a policyholder becomes disabled so policyholder can continue to have coverage for the duration of the policy

Question 3

With the waiver of premium rider, the insured must be unable to work for a certain period, called the _____ ______, before the waiver takes effect. Usually 90-180 days.

Answer 3

Waiting period

Question 4

The waiver of premium rider is available during…

Answer 4

….the insured’s working years and expires between ages of 60 and 65, unless insured becomes permanently disabled before that age.

Question 5

Waiver of monthly deductions/waiver of cost of insurance

Answer 5

-disability premium waiver for flexible premium policies
-suspends the monthly cost of insurance deductions made from the cash account instead of waiving the premium payment

Question 6

Waiver of premium summary

Answer 6

-insured and owner are the same person
-waives premiums as long as the insured is disabled
-insured pays premium during the waiting period
-company pays premiums after waiting period
-premiums paid during waiting period reimbursed
-insured pays premiums when disability ends

Question 7

Waiver of cost of insurance (universal life) summary

Answer 7

-cash account deductions waived
-waiting period and standard expiration

Question 8

Disability income rider

Answer 8

-provides the insured with a monthly benefit check if they become disabled
-the benefit amount is typically based on the life insurance policy death benefit and an industry standard is 1% of the face value

Question 9

Payor benefit rider

Answer 9

-usually found with juvenile policies
-pays premiums if adult payor dies or is disabled
-requires evidence of insurability

Question 10

Disability riders

Answer 10

-waiver of premium
-waiver of cost of insurance (universal life)
-disability income rider
-payor rider

Question 11

Standard coverage added to a life insurance policy that enables the policy owner to apply for an advance on the death benefit proceeds during the lifetime of the insured. Insured must have a limited life expectancy or meet certain medical circumstances.

Answer 11

Accelerated death benefit rider

Question 12

Accelerated death benefit payment range from ____ to ____ % of the death benefit

Answer 12

25-100%

Question 13

The payment of an accelerated death benefit depends on:

Answer 13

The policy’s face value, the terms of the contract, and the state of residence

Question 14

Accelerated death benefit qualifying events

Answer 14

-terminal illness with death expected within 24 months
-serious illness which results in a reduced life expectancy
-long-term care to due inability to perform a number of ADLs
-being admitted to hospice or permanent confinement in a nursing home
-catastrophic illness requiring extraordinary treatment such as organ transplant

Question 15

Spouse rider

Answer 15

Provides convertible term insurance for a spouse or an immediate family member of the primary insured

Question 16

Family rider

Answer 16

Covers both the insured’s sudse and children to provide convertible term insurance

Question 17

Exchanged privilege (substitute insured) riders

Answer 17

Used to change the insured to a different person
-typically used when a business owns the policy and is also the beneficiary and the insured is a key employee
-switches insured to another employee if the key employee retires or leaves the company

Question 18

Other insured riders

Answer 18

-spouse
-children
-family
-exchange of insured

Question 19

The insured can add term insurance to a permanent insurance policy using

Answer 19

The term insurance rider

Question 20

Term insurance rider provides

Answer 20

Coverage similar to a term insurance policy however the premium is lower than purchasing a separate policy

Question 21

There are three term insurance riders available:

Answer 21

1. Level
2. Decreasing
3. Increasing

Question 22

Insured Term Rider

Answer 22

-added to a permanent policy
-premium lower than a separate policy
-limited time for rider
-expires at a certain age or number of years

Question 23

Return of Premium Rider

Answer 23

-increasing term insurance rider
-amount of rider equivalent to all premiums paid
-death must occur while rider is in force

Question 24

The return of premium is an _________ term rider

Answer 24

Increasing; the death benefit always equals the total of premiums paid for the rider and the underlying permanent policy

Question 25

Accidental death benefit rider

Answer 25

-death due to accident
-death must occur within 90 days of accident
-doubles or triples the face amount

Question 26

Pays an extra benefit if the insured dies as the result of an accident. Sometimes referred to as double or triple indemnity because the death benefit is 2-3 times the face amount of the policy

Answer 26

The accidental death benefit (ADB) rider

Question 27

For the accidental death benefit rider benefit rider to be payable, the insured must…

Answer 27

..die within 90 days of an accident

Question 28

The accidental death benefit (ADB) rider does not cover other causes of death like:

Answer 28

-illness
-disability
-self-inflicted injury

Question 29

The accidental death benefit rider usually expires when the insured

Answer 29

Reached age 60 or 65

Question 30

Accidental Death or Dismemberment Rider

Answer 30

-the principal sum 100% of death benefit
—paid if death due to accident
—within 90 days of accident date
-pays benefit if dismemberment occurs
—severance of feet, arms, legs or hands
—loss of sight or hearing
—paralysis
-dismemberment is the capital sum- 50% of the principal sum
-for multiple dismemberment claims max paid is principal sum

Question 31

The principal sum of an accidental death and dismemberment rider is the amount of

Answer 31

The rider and 100% of the death benefit is paid upon accidental death of the insured

Question 32

The capital sum of the accidental death and dismemberment rider is

Answer 32

50% or 1/2 of the principal sum

Question 33

Dismemberment includes:

Answer 33

-severance of legs, arms, feet, or hands
-loss of sight
-loss of hearing
-paralysis

Question 34

Guaranteed insurability rider (GIR)

Answer 34

Add life insurance up to a specified amount
-certain ages: between 25 and 40
-life events- marriage, birth, or adoption of a child
-no medical questions asked
-cost based on the insured’s attained age

Question 35

May be attached to a permanent life insurance policy and allows the owner to purchase additional life insurance at specified intervals in the future for certain amounts without having to provide evidence of insurability

Answer 35

Guaranteed insurability rider

Question 36

Options to purchase a additional life insurance with a guaranteed insurability rider may be exercised typically between..

Answer 36

…ages 25 and 40 at 3-year intervals

Question 37

Cost of living rider

Answer 37

-based on the consumer price index (CPI)
-extra coverage to keep up with inflation
-premium based on attained age
-without proof of insurability

Question 38

Riders affecting amount of death benefit

Answer 38

-insured term rider
-return of premium rider
-accidental death rider
-accidental death or dismemberment rider
-guaranteed insurability rider
-cost of living rider

Question 39

Long-Term Care rider (LTC)

Answer 39

-advance of the death benefits while insured is living
-percentage of face amount each month
-may pay for home care, assisted living, and nursing home care
-reduces death benefit payable upon death

Question 40

There are two approaches to the long-term care (LTC) rider concept

Answer 40

-independent approach
-integrated approach

Question 41

Independent approach LTC rider concept

Answer 41

Recognized the LTC benefit as independent from the life policy because the benefits paid to the insured will not affect the life policy’s face amount or cash value

Question 42

Integrated approach LTC rider concept

Answer 42

Links the LTC benefits paid to the life policy’s face amount and/or cash value