UNIT 7

Question 1

FREE LOOK

Answer 1

Right to examine provision; gives the policyowner a period of time to return a policy for any reason within 10 days of delivery and receive all premiums paid. The policy will be considered null and void.

Question 2

INSURING CLAUSE

Answer 2

Sets forth the insurer’s promise to pay benefits upon the insureds death. It includes what the company will pay, the death benefit amount, and to whom it will be paid.

Question 3

OWNERSHIP RIGHTS

Answer 3

THE OWNER MAY:

• Choose and change beneficiary
• Select settlement options/nonforfeiture options
• Receive or borrow any cash values/ dividends accumulated
• cancel the policy
• Assign or transfer ownership of the policy
• Select of change the premium payment mode
• Receive policy proceeds upon maturity or endowment

Question 4

COLLATERAL ASSIGNMENT

Answer 4

(temporary or conditional)
Does not change ownership of the policy. The most common type of partial assignment is to pledge all or part of the death benefit as collateral for a loan.

Question 5

ABSOLUTE ASSIGNMENT

Answer 5

(Permanent) Transfers all rights of ownership to another person or entity. Example: a parent may transfer policy ownership to a daughter when she turns 18

Question 6

ENTIRE CONTRACT

Answer 6

The life insurance policy and a copy of the original application plus any riders or amendments.

Question 7

ENDORSEMENTS

Answer 7

Any change made to the contract.

*must be made in writing and agreed to by both the insurer and the policyowner.

This amendment must be signed by and executive officer of the company and cannot be authorize by agent/producer.

Question 8

CONSIDERATION

Answer 8

Legal term meaning something of value.

ALWAYS THINK $$$$$$$$$$$$$$$$

Question 9

GRACE PERIOD

Answer 9

If the insured does not pay the premium on date when due, the policy will stay in force for a limited time before the coverage actually lapses.

31 days

Question 10

REINSTATEMENT

Answer 10

Is the restoration of a lapsed policy as originally purchased. Permanent life policies permit reinstatement in nearly all cases. The insured will receive the protection of the original policy, if the policy has not been surrendered for cash, and they do the following;

• submits an application for reinstatement within 3 years of lapse
• pay all past due premiums, with interest
• provides satisfactory evidence of insurability (medical exam)

Premium will be the same as original. New contestability period. (2years)

Question 11

INCONTESTABILITY PROVISION

Answer 11

is provided to protect the insured. It states that after a life insurance policy has been in effect for 2 years the company cannot claim that a statement made in the application for insurance was meant to defraud the insurer.

The first 2 years are known as the contestable period.

Question 12

SUICIDE CLAUSE

Answer 12

States that if an insured, whether sane or insane, commits suicide during the first 2 years after a life insurance contract has been issued, the company will pay only the premium paid by the insured, not the face amount of the policy. Once the policy has been in effect for 2 years, and insured’s suicide will result in payment of the full-face amount of the policy. Suicide is excluded from accidental death benefits.

Question 13

MISSTATEMENT OF AGE

Answer 13

If insured is OLDER that application states, death benefit is reduced to correct premium amount. If insured is YOUNGER than application states , death benefit is increased to correct premium amount.

Question 14

PAYMENT OF CLAIMS PROVISION

Answer 14

Says the insurer will pay the death benefit PROMPTLY. The insurance company is generally required to pay a death claim within 60 days (2 months) after receiving notification of the claim. If the claim payment is made more than 60 days after notification of the claim, interest must be paid.

Question 15

GRANTOR

Answer 15

Is the individual who sets up the trust , transfers property into it, and writes the instructions as to how the trust will operate.

Question 16

TRUSTEE

Answer 16

is the party that manages the property according to the grantor’s instructions. The trustee may be an individual or another legal entity such as a bank

Question 17

THE BENEFICIARY

Answer 17

is the person who receives the benefits of the trust

Question 18

PER CAPITA

Answer 18

means “by the head” - it divides the policies death benefit equally among the surviving members of the class.

Per capita beneficiary designation does not transfer death proceeds below generation level. If the deceased child had children they would not receive proceeds upon the death of their grandparent.

Question 19

PER STIRPES

Answer 19

Means “by the branch” and signifies that the children of a deceased class beneficiary are entitled to that beneficiary’s share of the proceeds.

Question 20

PRIMARY BENEFICIARY

Answer 20

First in line to receive the policy’s death benefit

Question 21

CONTINGENT BENEFICIARY

Answer 21

Next in line to receive the policy’s death benefit if the primary beneficiary dies before the insured.

Question 22

REVOCABLE BENEFICIARY

Answer 22

Beneficiary designations can be changed , or revoked without notice and without their knowledge.

Question 23

IRREVOCABLE BENEFICIARY

Answer 23

Policyowners can give up their right to change beneficiary designation.

Can only be changed with their own written consent, however if they die before the insured, the policyowner usually has the right to name a new beneficiary.

Question 24

FACILITY PAYMENT PROVISION

Answer 24

Allows the insurer to pay all or part of the policy’s death benefit to someone other than a designated beneficiary if:

• the beneficiary is a minor, is deceased, or cannot be found
• someone other that the beneficiary incurred the insured’s final medical or funeral expenses.

Question 25

UNIFORM SIMULTANEOUS DEATH PROVISION

Answer 25

• Insured and primary beneficiary are in same accident
• Both die in accident
• Assumes primary dies first
• Proceeds paid to contingent beneficiary

Question 26

COMMON DISASTER PROVISION

Answer 26

• Insured and primary beneficiary are in common accident
• Both die within 30-90 days after accident
• Proceeds paid as if primary beneficiary died first
• Proceeds paid to contingent beneficiary

Question 27

SPENDTHRIFT PROVISION

Answer 27

May be included in a life insurance policy requiring that the policy proceeds be paid to the beneficiary in installments of a defined amount and at set intervals. The beneficiary has no right to elect a different settlement.

This clause acts to prevent creditors from attaching the policy proceeds upon the insureds death.