Standard Provisions-Individual Policies Only Flashcards
what are contractual provisions?
Contractual provisions explain what the contract consists of, what duties and responsibilities the parties to the contract have, how the policy works, and details the agreement between the policyowner and the insurance company. Provisions and clauses, unlike riders, are included in the contract for no additional charge.
Options
Provisions that provide choices which must be specified by the policyowner
Entire Contract Clause
This provision describes the parts of the life insurance contract. The entire contract consists of the policy, riders (or endorsements), amendments, and a copy of the application.
Incontestability Clause
Within the first 2 years of a policy, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud. A material misstatement is one in which the insurer would not have issued the policy had they known the true information.
Insuring Clause (Proof of Death)
The insuring clause is the insurance company’s promise to pay the policy’s death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in-force.
Specifically, the insuring clause is found on the first page of the policy and is considered the most important clause in the policy
Consideration Clause
The consideration clause specifies the amount and frequency of premium that will be paid by the owner as something of value, in exchange for which the company promises to pay, as necessary, in the future.
Changes (Modifications)
Changes or modifications must be in writing, signed by an executive officer of the insurer, approved by the policyowner, and made part of the entire contract.
A producer cannot alter, change, modify, or waive any policy provisions.
Suicide Clause
If the insured commits suicide, while sane or insane, typically within 2 years from the policy’s issue date, the insurer’s liability is limited to a refund of premium.
Owner’s Rights (Ownership Provision)
The policyowner retains all rights in the policy. Unless the insured is also the policyowner, the insured does not have rights.
Assignment
Assignment is the transfer of ownership.
absolute assignment.
The original owner, the assignor, will name a new owner, the assignee, of the policy. Since a new owner is named, this is considered a permanent assignment. The full amount of the policy is assigned, and this is referred to as a transfer of ownership.
collateral assignment,
A collateral assignment is typically used when an insurance policy becomes collateral for a loan. This is a temporary assignment until the debt is paid in full. In this case, the assignor is the original owner and the assignee is the creditor.
Misstatement of Age or Gender
If the age and/or gender of the insured have been misstated in a policy, all benefits under the policy will be provided based upon the insured’s correct age and/or gender according to the premium scale in effect at the time the policy was issued.
There is no time limit for discovery, and this provision never cancels or voids a policy.
Age and/or gender are not considered material to the policy issuance.
Free Look (Right to Examine Period)
The free look allows the policyowner a specified number of days following receipt of the policy to look it over. If dissatisfied for any reason, the owner has the right to return it for a full refund of any premiums paid. The free look period is usually 10 days, unless state law specifies otherwise.
Exclusions
Exclusions are conditions stipulated in the contract for which the insurer will not provide coverage. The insurer cannot add or alter any of the exclusions after the policy has been issued.
