Unit 7: Life Insurance Policy Provisions Flashcards
Free Look
right to examine
begins when the owner receives the policy
usually no fewer than 10 days
policy can be returned for a full refund
insuring clause or agreement
usually found on the first page of the policy
insurers promise to pay upon death
includes the face amount
usually signed by an officer of the company
ownership rights
name or change the beneficiary select settlement options borrow or withdraw policy cash values receive policy dividends (participating policies) surrender or cancel the policy assign or transfer ownership select/change the premium payment mode select a nonforfeiture option
collateral
a pledge for a loan
absolute
permanent change of ownership
policy assignement
collateral
absolute
entire contract
includes:
the policy
a copy of the application
any riders or amendments
PAR
endorsements (modifications)
can only be made by the company
must be in writing
owner can request a change
owner and insurer must sign the amendment
Consideration
aka promises made (think money)
insured’s consideration-premiums and truthful statements on the application
insurer’s consideration-pay benefits at the time of the claim
payment of premium
payment of premium
-due in advance of the coverage period
mode of premium payment
- annually
- semiannually
- quarterly
- monthly
payment amount
- level
- single payment
- graded
- flexible
grace period
premium is not paid by the due date
usually 31 days following the due date
insurance is still in force
death benefit paid minus premiums due
reinstatement
policy lapsed for nonpayment of premiums up to 3 years to reinstate policy was not surrendered for cash must pay missed premiums + interest prove insurability saves original policy + issue age
incontestability
during the first two years, the policy can be contested (called contestable period)
usually after two years (incontestability provision) the policy can’t be taken away even if there is material misrepresentation or fraud
contestable ALWAYS:
- impersonation
- insurable interest
- intent to murder
suicide clause
if the insured commits suicide prior to having a policy for two years, only the premium will be paid back
after two years, the full face amount will be paid
misstatement of age or sex
if the insured is older than the application states:
-death benefit is reduced to the correct premium amount
if the insured is younger than the application states:
-death benefit is increased to the correct amount (doesn’t actually happen it usually reduces premium and refunds)
incontestability provision does not apply
time payment of claims
- immediately
- usually no longer than 60 days
life insurance policy provisions
free look
insuring clause
ownership rights
assignment
entire contract
modifications
consideration
payment of premium
grace period
reinstatement
incontestability provisions
misstatement of age or sex
payment of claims
trust - grantor
the individual who sets up the trust, transfers property into it, and writes the instructions as to how the trust will operate
trust - trustee
party that manages the property according to the grantor’s instructions.
The _____ may be an individual or another legal entity such as a bank
trust - beneficiary
person who receives the benefits of the trust
who can be a beneficiary
individuals
classes
trusts
minors
estates
charities
university/colleges
per capita, per stirpes
multiple beneficiaries in the same class
per capita - by the head (not inheritable) aka Grandma and Grandpa
per stirpes - by branch (inheritable)
Uniform Simultaneous Death Act
impossible to tell who died first
insured and primary beneficiary are in the same accident
both die in the accident
assumes the primary beneficiary dies first
proceeds paid to the contingent beneficiary
common disaster provision
insured and primary beneficiary are in the same accident
both die within 30-90 days after the accident
proceeds are paid as if the primary beneficiary died first
proceeds are paid to the contingent beneficiary
spendthrift provision
May be included in the policy:
- death benefit cannot be paid in a lump sum
- death benefits cannot be claimed by creditors before payment to the beneficiary
- death benefits cannot be pledged by the beneficiary to a creditor
- death benefits cannot be used by the beneficiary as collateral for a loan
