Policy, Provisions, Options and Riders Flashcards
insuring clause
(aka insuring agreement)
insurer’s basic promise to pay benefits to PO in event of covered loss
free look
PO certain # of days once policy delivered to look over policy and return for refund of all premiums paid
consideration clause
PO must pay a premium in exchange for insurers promise to pay benefits
consists of the PO complete app. and paying initial premium. “please consider me”
grace period
period after due date of premium where policy remains in effect without penalty
what happens if PO dies during grace period
beneficiary will receive face amt of policy minus any required premiums.
typically 1 month.
reinstatement
putting lapsed policy back in force
must provide evidence of insurability and paying any past due premiums.
most states allow 3 years after lapse but some are 5-7 yrs
policy loan provisions
(aka cash withdrawal) applies to CV policies.
these policies must begin to build CV after certain amt of years.
most states 3 years
loans cannot exceed the guaranteed CV or the policy is no longer in force
Policy loan not taxable
any interest due on loan at time of death will be deducted from the insured’s policy proceeds.
automatic premium loan provision (rider)
(aka rider) allows ins. co. to automatically deduct overdue premium from insured’s CV at the end of grace period.
can continue to happen as long as you still have CV
if no CV, and no payment is made, policy will lapse.
other insureds (rider)
aka dependent riders
may be added to primary policy to cover spouse or “another insured” children or adopted children
the “incontestability period
for certain reasons such as misstatements of app, the co. may void a life ins. po. after its been in force during the insured’s lifetime, usually 1-2 more years after issue, after that, po. considered “incontestable”
assignment clause
allows right to transfer policy to another person/entity.
absolute assignment
assignee receives full control over the policy and also full rights to its benefits.
generally if po. assigned to a debt, the owner retains all rights in the policy in excess of the debt
collateral assignment
assignment to policy to creditor as security for a debt.
creditor reimbursed out of policy proceeds
the beneficiary is entitled to any excess of policy proceeds over amt due to creditor if PO dies.
accelerated benefit rider
allows insured to receive a portion of death benefit prior to death if insured has terminal illness and expect death 1-2 years.
if withdrawn, whatever amt will decrease the death benefit if death occurs.
what are the 6 common exclusions in insurance
- suicide clause
- aviation
- war/military service
- commitment of felony/illegal occupation.
- alcohol/narcotics
- hazardous occupation or hobby
