Life Provisions

Question 1

absolute assignment

Answer 1

assignee receives full control over the policy and full rights to its benefits

Question 2

accidental death benefit rider

Answer 2

pays an additional sum to beneficiary if insured dies due to accident. amount paid is a multiple of face amount (i.e. doubled, tripled)

Question 3

accelerated benefits rider

Answer 3

allows insured to receive death benefits before death if the insured has a terminal illness and is expected to die within 1-2 years. whatever is drawn before death will decrease the death benefit when death occurs

Question 4

accumulate interest option

Answer 4

allows policy owners to leave dividends with insurer to acclimate interest, and will be required to pay taxes on interest acclimated

Question 5

assignment clause

Answer 5

a policy owner can can transfer rights to another person

Question 6

automatic premium loan provision

Answer 6

the insurance company can automatically take out a loan for you against your cash value to cover your premium if you don’t make payment when it is due. this continues until you make a payment, or you run out of cash value

Question 7

cash option

Answer 7

allows the policy owner to cash out the dividends they receive

Question 8

cash surrender option

Answer 8

allows policy owner to receive the policy’s cash value. typically policy owner no longer has coverage

Question 9

collateral assignment

Answer 9

assignment of a policy to a creditor as security for debt

Question 10

consideration clause

Answer 10

a policy owner must pay premium in exchange for insurer’s promise to provide benefits; consists of actual application and paying initial premium

Question 11

dependent riders

Answer 11

added to additional insurers through the use of dependent riders

Question 12

dividend options

Answer 12

options a policy owner has while receiving dividend payments from an insurance company

Question 13

entire contract provision

Answer 13

states the insurance policy itself, and riders, and the application comprises the entire contract between all parties

Question 14

exclusions

Answer 14

portions of the insurance policy stating the policy will not cover certain risks

Question 15

extended term option

Answer 15

permits to policy owner to use the policy’s cash value to buy level, extended term insurance for a specified period

Question 16

free look period

Answer 16

policy owner has a set amount of days in which they can return the policy for full refund of premium

Question 17

grace period

Answer 17

period time after payment date during which the policy remains in force without penalty, typically 1 month. if policy holder dies during grace period, beneficiary receives face amount of policy minus any required premiums

Question 18

guaranteed insurability rider

Answer 18

permits policy owner to buy additional life insurance coverage at predetermined intervals w/o insurability. includes marriage and birth, w/o insurability; usually 3 years up to face amount of policy

Question 19

incontestable provision period

Answer 19

insurance company may not contest to validity of policy once policy hits 2 years

Question 20

insuring clause (agreement)

Answer 20

part of the policy in which the insurer’s agreement to pay coverage in the event of a loss

Question 21

misstatement of age/sex

Answer 21

allows insurers to adjust the benefits payable if the age/sex of the insured was misstated a the creation of the policy

Question 22

nonforfeiture options

Answer 22

options you have for your cash value if you terminate a policy with cash value

Question 23

one year term option

Answer 23

allows policy owner to exchange the dividend for additional coverage in the form of a 1-year term policy

Question 24

paid up additions option

Answer 24

allows policy owner to exchange dividend for an additional single payment of whole life policy

Question 25

payor provision

Answer 25

waives future payments for juvenile life insurance policy of the insured dies or becomes disabled

Question 26

policy loan (cash withdrawal) provisions

Answer 26

said policies must first gain cash value after a certain number of years, and these loans with interest cannot exceed the cash value. this is NOT taxable. any loan due at time of death will be deducted from insured’s policy

Question 27

reduced paid-up option

Answer 27

nonforfeiture option allows policy owner to reduce policy benefit amount and in turn stop making payments

Question 28

reduced premium payment

Answer 28

allows policy owner to return the dividend payment to the insurer in exchange for reduction in the following year’s premium payment

Question 29

reinstatement provision

Answer 29

permits policy owner to reinstate policy that has lapsed as long as policy owner provides proof of insurability and pays all back-premiums, outstanding loans, and interest

Question 30

return of premium rider

Answer 30

pays the total amount of premiums paid into the policy as well as the face value, so as long as the dies within the specified time of the policy

Question 31

suicide clause

Answer 31

policy will be voided and no benefit will be provided if the insured commits suicide within 2 years of the policy insurance

Question 32

waiver of premium rider

Answer 32

premium payments are waived by insurer if the insured becomes disabled; this is not a loan