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loans cannot exceed the guaranteed CV or the policy is no longer in force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
the misstatement of age or sex provision
allows insurer to adjust po. benefits if insured age/sex misstated.
will adjust according to age
nonforfeiture options
options you have for your CV IF YOU TERMINATE policy (closing/surrending po)
what are the nonforfeiture options available
- cash surrender
- extended term option
- reduced paid-up option
what is a cash surrender nonforfeiture
PO receive policy CV.
normally, longest time life. ins. co. may defer paying CV of surrendered policy is 6 months (delayed payment provision)
what is an Extended Term Option
can use PO’s CV to buy level, extended term ins. for specified period.
no premium payments are made.
the coverage provided is = to the net death benefit of the lapsed policy
what is the reduced paid-up option of nonforfeiture
PO pays no premiums but the face amt is decreased.
dividend options
pay dividends to PO if co. operations result in divisible surplus.
dividends are a return of overcharged premiums and are NOT taxable.
typically paid on annual basis.
policy still active w/ dividends
what are some dividends options
- cash option
- reduced premiums option
- accumulate interest option
- paid-up additions option
- one-year term option.
what is the cash dividend option
take the cash
what is the reduced premiums dividend option
reduces premium payments
what is the accumulate. dividend option
allow to accumulate interest.
interest is the ONLY thing you can be charged TAX on.
what is the paid up additions dividend option
purchase single pay whole life coverage
what is the one-year term dividend option
purchase 1 year protection
what is The Guaranteed Insurability Rider
aka future increase option or cost of living increase
permits PO to buy additional perm. life ins. coverage at specific points of time in the future WITHOUT submitting proof of insurabilty.
also includes marriage/birth, w/out requiring proof of insurability
usually allowed every 3 years
no need for proof of insurability . health doesn’t matter, age does
typically issued on child’s policy, allows them to add additional Whole Life Coverage
the waiver of premium rider
allows PO to waive premium payments during disability - does not provide cash pay to PO.
disability must be permanent and total, and have sustained through the waiting period (90 days or 6 months)
at 60-65, waiver of premium rider is void.
covers the primary insured and doesn’t provide income. NOT a loan.
payor provision (rider or clause)
avail. under certain juvenile life ins. po. and provides for the waiver of future premiums if the person responsible for paying them dies or is disabled before the policy becomes fully paid or matures as a dealth claim, or as an endowment. OR the chilid reaches a specific age
Accidental Death Benefit Rider (multiple indemnity)
pays additional sum to beneficiary if the insured dies due to accident. amt paid is a multiple of the policy face amt such as a double or the triple original benefit.
the cheapest way to add a lot of coverage for a period of time
return of premium rider
pays the total amt of premiums paid into the policy in addition to the face value, as long as the insured dies w/in certain time period specified.
also returns premiums to the living insured at the end of a specified period of time, as long as the premiums have been paid.
