Unit 7 Life Insurance Policy Provisions Flashcards
free look
begins when the owner receives the policy
usually no fewer than 10 days
policy can be returned for a full refund
right to examine the policy
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 non-forfeiture option
policy assignment
the transfer of the owner’s rights to another individual agency. can be collateral or absolute
collateral assignment
a pledge for a loan
absolute assignment
permanent change
entire contract
policy
copy of the application
any riders or amendments
endorsements (modifications)
can only be made by the company
owner can request a change
consideration
insured’s: premiums and truthful statements made on the application
insurer’s: pay benefits at time of claim
payment of premium
due in advance of the coverage period
grace period
premium not paid by due date
usually 31 days following due date
insurance still in force
death benefit paid minus premiums due
reinstatement
policy lapsed for nonpayment of premiums
up to three years to reinstate
policy was not surrendered for cash
must pay missed premiums + interest
prove insurability
saves original policy + issue age
incontestability
usually after two years
policy can’t be taken away even if material misrepresentation or fraud
suicide clause
if 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 (gender)
if insured is older than application states, death benefit is reduced to correct premium amount
if insured is younger than application states, reduce premium and refund
incontestability provision does not apply
payment of claims
provision says the insurer will pay the death benefit promptly
usually no longer than 60 days
14 life insurance policy provisions
free look
insuring clause
ownership rights
assignment
entire contract
modifications
consideration
payment of premium
grace period
reinstatement
incontestability
suicide
misstatement of age or sex
payment of claims
who can be a beneficiary
individuals
classes (“my children”, “my siblings”)
trusts (consist of grantor setting up trust, trustee who manages the property, and beneficiary)
minors
estates
charities
colleges/ universities
per capita
when there is more than one person in a class, divide’s the policy’s death benefit equally among the surviving members of the class
per stirpes
signifies that the children of a deceased class beneficiary are entitled to that beneficiary’s share (inheritable)
primary beneficiary
first in line to receive the policy’s death benefit
contingent beneficiary
next in line to receive the policy’s death benefit if the primary beneficiary dies before the insured
tertiary beneficiary
receives the policy’s death benefit if no primary or contingent beneficiary alive
estate of insured
if no beneficiary is named or alive, will receive the policy’s death benefit
revocable
can be changed by the owner at any time
irrevocable
can’t be changed without beneficiary consent
loan or withdrawal from cash values requires permission of beneficiary
usually becomes revocable upon death of irrevocable beneficiary
beneficiary changes
policyowner can change the beneficiary. must notify insurer
facility of payment provision
insurer can pay someone other than beneficiary
uniform simultaneous death
insured and primary beneficiary are in same accident
both die in accident
assumes primary beneficiary dies first
proceeds paid to contingent beneficiary
common disaster provision
insured and primary beneficiary are in common accident
both die within 30-90 days after accident
proceeds paid as if the primary beneficiary died first
proceeds paid to 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 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
suicide exclusion
death by suicide not covered before two years (time may vary)
aviation exclusion
death due to a private airplane accident
does not apply if a passenger or crew member of a commercial airline
war or military service exclusion
status type - death occurs while in the military, regardless of the reason for death (never pays)
results type - death occurs related to the military (sometimes pay)
