Life Policy Provisions, Riders, and Options Flashcards
The ___________ provision specifies the policy owners right to assign (transfer ownership of the policy). Must advise the insurer ________________.
Assignment; in writing
Permanent and total transfer of all policy rights. ____________ have to have Insurable interest in the insured.
Absolute assignment; does not
Transfer of partial and temporary rights of ownership. Usually done to secure a loan. Once debt is paid the rights are returned.
Collateral assignment
Policy + copy of application + any riders or amendments
Entire contract
Free look period starts when?
When the policy owner receives the policy; NOT when issued
Periods of time after the due date thay the policy owner has to pay before the policy lapses
Grace period
Provision that allows a lapsed policy to be put back in force
Reinstatement
The max time limit for reinstatement after a policy has lapsed.
Usually 3 years
If a policy holder elects to reinstate a lapsed policy they will have to provide what.
Evidence of insurability
T\F: a policy that has been surrendered cannot be reinstated.
True
Incontestability clause prevents an insurer from denying claims due to statements in the application after the policy has been in force for how long?
2 years
T/F: Misstatement if age on an application will result in an adjustment of premiums or benefits.
True
Aviation, hazardous occupation, and war/military service are the most common ___________.
Exclusions
The ______ clause excludes all causes of death while the insured is on active duty in the military.
Status
The ______clause only excludes the death benefit of the insured is killed as a result of an act of war.
Results
If the insured commits suicide within ____________ following the policy effective date the insurers liability is limited to a refund of premium.
2 years
Benefits designated to a minor will either be paid out the the minors _________ or paid to the _____\ of the minor.
Guardian, trustee
Meaning by the head, evenly benefits among the living named beneficiaries.
Per capita
Meaning by the bloodline, distributed the benefits of a beneficiary who died before the insured to that beneficiary’s heirs.
Per stirpes
The beneficiary designation that provides for levels of priority or choice.
Succession
Has first claim to the policy proceeds following the death of the insured. May be more than one.
Primary beneficiary
Has second claim to insurance proceeds in the event the primary beneficiary dies before the insured. Does not receive anything if primary is still alive at time of death.
Contingent beneficiary
Stipulates thay if the insured and primary beneficiary die in same accident and there is no sufficient evident to show who died first, policy proceeds are to be distributed as if the primary died first.
Uniform simultaneous death law
If the insured and primary beneficiary die in a common disaster (even if a number of days apart) it is presumed the the primary beneficiary died first. (Usually 14 to 30 days)
Common disaster clause
Common disaster clause protects whom?
The contingent beneficiary
Am insurer must provide ________ written notice to the policy owner that the policy is going to lapse.
30 days
Insurance companies may defer a policy loan request for up to ____________ unless the reason for the loan is to pay the policy premium
6 months
Policy loans are or are not subject to income taxation?
Are not
T/F: Policy loans are ONLY available in policies that have cash value.
True
A special type of loan that prevents the unintentional lapse of a policy due to no payment of premium.
Automatic premium loan
While the insurer may defer requests for other loan for a period of up to 6 months, loan requests for payment of due premiums must be honored __________.
Immediately
________ life policies allow partial withdrawal (surrender) of the policy cash value. Not the same as a policy loan.
Universal
Written modifications attached to a policy that provide benefits not found in the original policy.
Riders
Accelerated or living benefits riders provide for partial payment of the death benefit prior to _________________
Insureds death
Waives the premium for the policy if the insured becomes totally disabled.
Waiver of premium
With waiver of premium most insurers impose a _______________ waiting period from the time of disability until the first premium is waived. Usually expires when insured reaches age __.
6 month: 65
Premiums paid during the waiting period with a waiver of premium rider are ___________ if the insured is stilll disabled at the end of the waiting period.
Refunded
I’m the event of disability the insurer waived the policy premiums and pays a monthly income to the insured.
Disability income benefit
If the payor becomes disabled for at least 6
Months or dies the insurer resides the premiums until the minor reaches a certain age such as 21. (Also used when insured and payor are two different people)
Payor benefit
Provides coverage for one or more family members other than the insured.
Other insured rider.
Allows spouse to be added to coverage for a limited time and for a specified amount. Usually expires at age 65
Spouse term rider
Allows child to be added to coverage for a limited time and amount.
Children’s term rider
Children’s term rider : ____ premium for ___ children
One; all
children’s term rider usually expires when? And minor usually has option to ________ without providing insurability.
18 or 21; convert
Incorporates the spouse term rider along with the children’s term rider into 1.
Family term rider
Pays some multiple of the face amount of death is cause by accident
Accidental death rider
The benefit pays out two times the face amount
Double indemnity
Policy pays out three times the face value
Triple indemnity
Accidental death benefit rider usually expires at what age.
65
Pays the principal (face amount) for accidental death and pays a percentage of that amount (_________ sum) for accidental dismemberment.
AD&D. Accidental death and dismemberment
Allows the insured to purchase additional coverage at specified future dates or events without evidence of insurability, for an additional premium. Usually expired at age ##
Guaranteed insurability; 40
Rider implemented by using increasing term that at death prior to a given age all premiums previously paid are also payable.
Return of premium
Addresses inflation by increasing the amount of insurance without evidence of insurability.
Cost of living
Allow the early payment of a portion of the death benefit if the insured has terminal illness, medical condition requiring extraordinary intervention for survival, medical condition requiring extensive treatment and limits lifetime, inability to perform ADL’s, permanent condiment to LTC, or other conditions approved by sept of insurance.
Accelerated living benefit and long term care riders
Early payment of part of death benefit to insured for qualifying medical expenses.
Accelerated benefit
Provides partial payout if insured is diagnosed with a terminal illness that will result in death within 2 years.
Living needs rider
Provides benefit in order to take care of nursing/convalescent home.
Long term care
Payout from accelerated benefits rider will be _________ from face amount as well as _________ lost.
Deducted, interest
Types of ___________ riders:
- waiver of premium
- waiver of cost
- disability income
- payor benefit
Disability
Riders all affecting ________ benefit:
- accidental death
- guaranteed insurability
- cost of living
- return of premium
- accelerated (living) benefit.
Death
Guaranteed cash value that must be included in policy. Regardless of monthly payment and interest earned .
Nonforfeiture values
Nonforfeiture options are triggered by policy _______ or ________.
Surrender or lapse
Nonforfeiture option where the Policy cash value is used by insurer to purchase a completely paid up policy that has a reduced face amount from that of the former policy. Builds own cash value and remains in place until death or maturity.
Reduced paid up insurance
Nonforfeiture option here the insurer uses cash value to convert to term for th same face amount as former permanent policy.
Extended term
Automatic Nonforfeiture option; same face amount, shorter term of coverage.
Extended term
Nonforfeiture option where policyowner surrenders the policy for the current cash value. If value exceeds premiums paid, the excess is _________.
Cash surrender value
Early surrender = surrender _______
Charge
A return of excess premiums and are therefore NOT _________ as income.
dividends
Paid in participating policies as a “grossed up” premium to serve as a safety margin. Is returned to the policy owner as dividend in the event there are funds left over after expenses and interest are accounted for.
Dividends
Dividends could be paid as early as the _____ policy year. But must occur no later than the end of the _____ policy year.
first, third
Dividend option where the insurer simply sends the policyowner a check for the amount of the dividend, usually annually.
Cash payment
Dividend option where the dividend is kept in an account where it accumulates interest. Cans be withdrawn at any time.
Accumulation of interest
When dividends are used to purchase a single premium policy in addition to the Dave amount of the permanent policy.
Paid up additions
With this dividend option accumulated dividends plus interest, and then the cash value are used to pay the policy up early.
Paid up insurance
Dividend option where the dividend is used to purchase a either a one year term or additional term policy.
One-year term
Methods used to pay the benefit out upon death or endowment.
Settlement options
___________ options are triggered by the insureds death or age 100.
Settlement
Insurance contract is designed to pay proceeds in a cash lump sum unless other option is selected.
Cash payment
Payments of the principal fade amount after the insureds death are or are not taxable as income?
Are not
Settlement option known as straight life that provides the recipient with income that they cannot outlive.
Life income
Settlement option that can provide a single beneficiary income for the rest of their life.
Single life
Settlement option that guarantees an income for two or more recipients as long as they live.
Joint and survivor
Settlement option that comes in either cash or installment refund form. Guarantees that total annuity fund will be paid out to annuitant or beneficiary.
Life refund
Settlement option where the recipient is provided with the best of both worlds. Both a lifetime payments and remaining fund remaining after death are guaranteed to beneficiary for a certain time period.
Life with period certain
Settlement option where the insurance co. Retains policy proceeds and pays interest on proceeds to recipient at regular intervals. Temporary option.
Interest only
Settlement option where proceeds are paid in equal installments for a set period of years. Guarantees entire principal will be distributed.
Fixed period installments
Settlement option that pays a specified amount in installments until the proceeds are exhausted.
Fixed amount installments
________ state the rights and obligations under the contract.
Provisions
______ modify provisions.
Riders
________ specify ways to distribute policy proceeds.
Options.
Pays the policy and has complete control over the policy.
Policy owner
Usually near the front of the policy. Names parties to the contract. Length of coverage. Premium. Length of coverage. Amount of death benefit.
Insuring clause
Free look begins the day the policy is _______ if you can’t deliver face to face.
Mailed
Incontestability does or does not apply in the case of non payment of premium or in misstatement of age, gender, or identity misstatement.
Does not
Advantage of ________ may be to retain the values established at issue age.
Reinstatement
I’m order to _______\\ you must:
- apply within max time limit
- pay all back premiums and interest
- repay outstanding loans + interest
- provide proof of insurability
Reinstate
Reinstatement is or is not guaranteed.
Is not
Standard policy provisions were adopted by ______
NAIC
Interest ____________ taxable on a universal policy partial surrender or withdrawal
MAY be
Interest sensitive whole life
Universal
Waiver of cost of insurance is for disability in the case of _____________ policies only.
Universal
Waiver or monthly deductions applies to only ___________ life or variable ________ life.
Universal
The disability income rider payout is based off of what.
A percentage of the face amount
For the accidental death rider death must over within __ days of an accident
90
What happens with premium if someone wants to increase their death benefit under the guaranteed insurability rider?
Increases premium
Nonforfeiture options apply term or whole or both?
Whole
T/F. Cash surrender value is taxed as income.
True
Which Nonforfeiture option is the automatic option.
Reduced paid up
What dividend option can increase the death benefit of the existing life policy
Paid up additions
What happens to a policy’s cash value under an extended term nonforfeiture option?
The cash value is converted to the same face amount as in the whole life policy.
What are the dividend options in life insurance policies?
Cash, reduced premium, accumulation at interest, paid up additions, paid up option, and one year term
What settlement options are available in life insurance policies?
cash, life income, interest only, fixed period, fixed amount (cliff)
What is the name for a life insurance policy rider that provides coverage on the insured’s family members
other-insured rider
What nonforfeiture option provides coverage for the longest period of time
reduced paid up
What nonforfeiture option is automatically selected by the company if not chosen by the policy owner?
extended term
If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?
Lump-sum payment
If an insured consinually uses the automatic premium loan option the policy will _________ when the cash value is reduced to nothing.
Terminate
Life income joint and survivor settlement guarantee income for 2 or more for how long?
Until they die
