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LOMA 311- ISTAR > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

What is a vested right?

A

a right that cannot be altered or changed without the on send of the person who owns the right.

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2
Q

define primary beneficiary

A

the party who (if alive) will receive the life insurance policy proceeds after the insured’s death. `

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3
Q

Can there be more than one primary beneficiary?

A

Yes.

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4
Q

what is a contingent beneficiary?

A

the party who will receive the policy proceeds if the primary beneficiary dies before the insured.

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5
Q

Who is a typical beneficiary for a minor

?

A

Them selves or their parents.

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6
Q

What is a class designation?

A

a beneficiary designation that identifies a certain group of people rather than naming each person.
“ie my children,”

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7
Q

Are adopted children and step children entitled to policy proceeds?

A

adopted children yes, but step children are not legal

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8
Q

Class designations can be classified as either per capita designations or per stirpes designaitons. What is a per capita beneficiary designation?

A

A class designation in which the class memebers all stand in the same relationship to the policy owner, and the class memebers who survive the insured share the proceeds evenly

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9
Q

Class designations can be classified as either per capita designations or per stirpes designaitons. What is a per Stirpes designation

A 
A class designation in which the descendants of a deceased class member take the decendents' share of the policy proceeds by representation. 
- division by family branches
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10
Q

What type of beneficiary gives the policyowner unrestricted right to change the designation during the insured’s lifetime?

A

revocable beneficiary

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11
Q

What is an irrevocable beneficiary?

A

a beneficiary whose rights to the policy proceeds are vested when the beneficiary desgination is made.

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12
Q

An irrevocable beneficiary’s vested inerest in the policy proceeds usually continues as long as what?

A

the policy is in force,
beneficiary consent in witting to a change of beneficiary
predeceases the insured.

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13
Q

True or False. In quebec, the designatioin of a policyowner’s spouse is presumed to be irrevocable unless the policy owner specifically makes it revocable

A

Tru

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14
Q

True or False, the divorce or annulment of a marrigage extinguishes the designation of the former spouse as irrevocable beneficiary

A

Tru

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15
Q

Most policies issued specify the recording method for a beneficiary change. define this

A

The policerowner is required to provide the insurer a written and signed notification of th change. Once they get this it updates the policy records with the new beneficiary.

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16
Q

Some older policies issued specify the endorsement method for changing the beneficiary. Define this

A

It is a document that is attached to a policy and that becomes a part of the contract. When a policy required the endorsement method, the policyowner must submit hyis policy to the insurer along with the beneficiary change request. the endosement is added to the policy and returned to the owner

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17
Q

What is defined under the doctrine of substantial compliance.

A

when a policyowner has done everything possible to comply with the beneficiary change proceduer set forth in the policy, but has failed because of circumstances beyond his control, the change will be considered effective.

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18
Q

Who is next in line to recieve policy proceeds if the insured, and all beneficiaries are dead?

A

The policy owner, otherwise it goes to the estate.

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19
Q

IF the insured dies and the beneficiary died shortly after where does the money go?

A

they are paid in accordance with the terms of the policy and the beneficiary designations.

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20
Q

What is a survivorship clause

A

requires the beneficiary to survive the insured for a stated number of days to be entitled to the policy proceeds.

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21
Q

Is the desgination of a policyowner’s estate is always considered to be a revocable beneficiary designaiton?

A

yes

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22
Q

Who is responsible for distributing the proceeds of a person’s estate?

A

the decedent’s personal representative.

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23
Q

How is a persons’ estate distributed?

A

in accordance to the terms of the decedent’s will, or by the provisions of the applicable intestate succession laws.

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24
Q

Define a grace period provision

A

Allows a policy owner to pay a renewal premium within a stated time following a premium due date.

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25
Q

Name some typical payment methods used for premiums

A
  1. payment by personal check
  2. Promissory Note
  3. Policy Dividends
    4.
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26
Q

What are the two qualifications for a payment with policy dividends?

A
  1. the insurer must apply policy dividends to pay a renewal premium only if the amount of dividends the insurer has is large enough to cover the full amount of the renewal premium that is due.
  2. The insurer must apply policy dividends to pay a renewal premium only if the policy woner has not chosen another policy dividend option.
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27
Q

can anyone pay the premiums

A

yes. And just becuase they did, does not give them right to the policy proceeds.

28
Q

Are insurers required to send premium due notices to the policyowners?

A

no

29
Q

define the doctrine known as estoppel.

A

Estoppel is an equitable doctrine by which someone is restrained or estopped from acting in a menner that contradicts her previous conduct.

30
Q

When is Estoppel invoked

A
  1. when one party’s conduct has misled an innocent party

2. inconsistent actions by the first party would harm the innocent partty.

31
Q

Name 3 elements that are typically necessary to create an estoppel.

A
  1. 1st party has knowledge of the facts but communicates something in a misleading way
  2. second party does not have knowledge of the facats and relies on the first party’s word
    3;. Second party would be harmed if the first party were allows to assert a claim that is inconsistent with his earlier works.
32
Q

What is a late payment offer?

A

an example of an insurer’s conditional offer to waive its right to require timely payment of a premium.

33
Q

Name three types of nonforfeiture benefits

A
  1. cash payment benefits
  2. continued insurance coverage benefits
  3. automatic nonforfeiture benefit.
34
Q

What is the Cash surrender value nonforfeiture option?

A

specifies that a policyowner who discontinues premium payments can surrender the policy and recive the policy’s cash surrender value in a lump-sum payment.

35
Q

What do you call the amount the policy owner actually receives after all the adjustments of the policy’s cash value have been made.

A

NEt cash surrender value

36
Q

What is dividend additions, (paid-up additions)

A

They are additional amount of insurance purchased using policy dividends. They have cash value

37
Q

What right is given to relieve the pressure on the insuere’s cash reserves should there be a rush of surrenders occurring a short period? (it is rarely invoked)

A

A provision that gives the insuere the right to defer payment of the policy’s cash surrender value up to 6 months.

38
Q

Policyowners are given the option of discontinuing premium payments and continuing insurance coverage as either reduced paid-up insurance or extended term insurance. Define reduced paid-up insurance nonforfeiture option,

A

The net cash surrender valye of the policy is used as a net single premium to purchase paid0up life insurance of the same plan as the original policy.

39
Q

Policyowners are given the option of discontinuing premium payments and continuing insurance coverage as either reduced paid-up insurance or extended term insurance. Define extended term insurance nonforfeiture option.

A

the policy’s net cash surrender value is used as a net single premium to purchase term insurance for the full face amount provided under the original policy- less the amount of any o/s payments- for as long a term as that net cash surrender value can provide.

40
Q

Policies that accumulate a cash value typically provide an automatic nonforfeiture benefit. What is this?

A

a specified nonforfeiture benefit that becomes effective automatically when a renewal premium is not paid by the end of the grace period and the policyowner has not elected another nonforfeiture oiption.

41
Q

What is an automatic premium loan (APL) benefit?

A

the insurer automatically pays an overdue premium by making a loan agasint the policy’s cash value if the cash value equals or exceeds the amount of the premium due.

42
Q

What is the policy loan provision?

A

gives the policyowner the right to take out a loan for an amount that does not exceed the policy’s cash value less one years’ interest on the loan.

43
Q

How does a policy loan differ from a commercial loan?

A

the policy owner is not legally obligated to repay a policy loan, although the policyowner has right to preay any part or all of the loan any time during the lifetime of the insured.

44
Q

What happens when a policy loan indebtedness is greater than the amount of the policy’s cash value?

A

the policy terminates without further value, and the insurer must give the policy owner at least 30 days to try an repay the loan.

45
Q

what is a policy withdrawal provision? (partial surrender provision)

A

permit the policyowner to reduce the amount in the policy’s cash value by withdrawing up to the amount of that value in cash.
- some policies specifiy that a withdrawal also reduces the benefit payment amount.

46
Q

Do policies limit the amount of withdraws and the number of withdrawals that are permitted each year?

A

yes, and may include a fee. But they typically do not impose interest charges on withdrawls

47
Q

Define a reinstatement pro vision

A

describes the conditions the policyowner must meet to reinstate a policy.

48
Q

What is policy reinstatement

A

the process of putting back into force a life insurance policy that has either
1. been terminated for nonpayment of premium or 2. been continued under the extended term or reduced paid-up insurance nonforfeiture option.

49
Q

Can a policy owner reinstate the policy, after they have surrended the policy for its cash value?

A

no

50
Q

Insures in some states are required to provide a period during which the policy owner may reinstate a policy that has lapsed. How long is it?

A

at least 3 years

51
Q

Reinstatement provisions typically require the policy owner to do what 4 things.

A
  1. complete reinstatement application
  2. provide satisfactory evidence
  3. pay a specified amount of money,
  4. pay any outstanding policy loan or have the policy loan reinstated when the policy is reinstated.
52
Q

Are insurers permitted to impose a new suicide exclusion period when a policy is reinstated?

A

no

53
Q

what is the payout options provision in terms of annuities?

A

it identifies each of the payout options from which the contract owner may select.

54
Q

What is An individual retirement arragements (IRA)

A

a retirement savings plan that allows individuals with taxable compensation to deposit a stated amount of that income into a savings arragement that meets federal tax laws, and thus recieves favourable federal tax tx.

55
Q

What is an individual retirement account?

A

an IRA that takes the form of a trust or custodial account set up in the united states for the exclusive benefit of a taxpayer and his beneficiaries.

56
Q

What is an individual retirement annuity.

A

An IRA that takes the form of an individual annuity issues by an insurance company

57
Q

Who can own a mutual fund account that is not established as an IRA?

A

one or more individuals

at a share holders death the mututal fund account becomes party of the shareholder’s probate estate.

58
Q

A joint ownership of a Mutual fund can take two forms. Name them

A
  1. tenancy in common

2. joint tenancy with rights of survivorhsip.

59
Q

To qualify as an IRA, who must own the mutual fund?

A

only one individual.
The shareholder can name the beneficiaries who will automatically own the accound if the applicant dies while owning the account.

60
Q

Shareholders in a mutual fund have the right to vote on what matters?

A
  1. elections of the fund’s directors
  2. approval of changes to the funds investment policies and practices
  3. approval of the fund’s investment adviser.
61
Q

Shareholds recieve how many votes for their shares?

A

one vote for each share.

62
Q

What is a redemption in terms of mutual fund shareholders?

A

ITs their right to sell their shares back into the fund. When the owner redeems shares, the fund pays the owner the net asset value (NAV) of the redeemed shares.

63
Q

How is the NAV (net asset value) of a share calculated?

A

Total asset value of the fund divided by the toal number of shares outstanding.

64
Q

How is the NAV (net asset value) of a share calculated?

A

Total asset value of the fund divided by the total number of shares outstanding.

65
Q

How is the total asset value of a fund calculated?

A

total value of all securities that the fund owns pays all other assets of the fund minus the funds total liabilities.

LOMA 311- ISTAR (15 decks)

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