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Life Insurance > 7 - Life Insurance Policy Provisions > Flashcards

7 - Life Insurance Policy Provisions Flashcards

1
Q

Free Look

what is it and what are the rules?

A
  • Policy owner can return the policy for a complete refund
  • Usually 10 days or more
  • Begins when the owner receives the policy
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2
Q

Insuring Clause

What is it?

A
  • Policy clause with a promise from the insurance company to pay
  • Includes face amount
  • Signed by an officer of the company
  • Usually found on first page of the policy
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3
Q

Ownership Rights

What does this mean and what are the rights?

A
  • The owner of the policy has the right to make changes and act upon the policy without consent from the beneficiary
    • Name or change beni
    • select settlement options
    • Borrow or withdraw cash values
    • Surrender or cancel the policy
    • Assign or transfer ownership
    • Select/change the premium payment mode
    • Select nonforfeiture options
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4
Q

Assignment

What is it and what are the 2 types?

A
  • Assigning ownership to another party
    • Collateral Assignment - temporary assignment. Ex: pledge the death benefit to a loan.
    • Absolute or Permanent - Change the owner to a child
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5
Q

Entire Contract

What makes up the entire contract?

A
  • Policy
  • Copy of application
  • Any riders or amendments
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6
Q

Endorsements

What is an endorsement and what are the rules?

A
  • Changes to the policy
  • Must be aggreed upon by insurer and policy owner
  • The agent cannot make changes only an executive officer can
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7
Q

Consideration

What is it and what does it mean for the insurer and the insured?

A
  • Consideration is the exchange of value that is agreed upon
  • Think of money
  • Insured’s consideration - Premiums and truthful statements on the application
  • Insurer’s consideration - pay benefits at the time of claim
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8
Q

Grace Period

What is it and how long does it last?

A
  • If the insured forgets or misses a payment due date there is a grace period where the policy will stay in force
  • Usually 31 days following the due date
  • If insured dies during the grace period the policy will pay out minus the premium
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9
Q

Reinstatement

What is it and what are the rules?

A
  • Reinstatment is the restoration of a lapsed policy as originally purchased.
    • Reinstated up to 3 years
    • The policy can not have been surrendered for cash
    • Must pay missed premiums plus interest
    • Prove insurability with a medical exam
    • Premium will stay the same
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10
Q

Incontestability

What is this and how long does the period last?

A
  • Incontestability starts two years after the policy is in force.
  • The first two years the company can contest any part of the application and look into the accuracy of your claims
  • After two years the company cannot contact your policy even if they have found you purposefully gave fraudulent information
  • If a policy lapsed and was reinstated, a new contestability period starts
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11
Q

Suicide Clause

A
  • Less then two years premiums are paid back
  • Over two years face value paid in full
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12
Q

Misstatement of Age

What is it and how does the policy deal with it?

A
  • Misrepresenting your age
  • If older then stated, the policy will take out the difference in the premium payments that should have been paid given your age
  • If younger, the policy will pay out more
  • Incontestability provisions do not apply
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13
Q

Payment of Claims

How quickly do insurance companies have to pay claims?

A
  • Payments are made immediately and no longer then 60 days
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14
Q

What are the 13 Life Insurance Policy Provisions?

A
  1. Free Look
  2. Insuring Clause
  3. Ownership Rights
  4. Assignment
  5. Entire Contract
  6. Modifications
  7. Consideration
  8. Payment of Premiums
  9. Grace Period
  10. Reinstatement
  11. Incontestability Provisions
  12. Misstatement of age or sex
  13. payment of claims
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15
Q

Beneficiaries

Who can be beneficiaries?

A
  • Individuals
  • Classes - “my children” “my siblings”
  • Trusts
  • Minors
  • Estates
  • Charities
  • Universities
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16
Q

Per Capita & Per Stirpes

Explain each type of beneficiary designation.

Which one is the default for insurance companies?

A
  • Per capita - insurance company default - by head so offspring do not inherit the portion
  • Per Stirpes - if mom dies then children get equal parts of moms inheritance
17
Q

Revocable vs Irrevocable

What are the differences?

A
  • Revocable
    • beneficiary can be changed without the beneficiaries consent
  • Irrevocable
    • Cannot be changed unless beneficiary gives consent
    • Usually becomes revocable after the death of the irrevocable beneficiary
18
Q

Beneficiary Changes

How does it work with life insurance?

A
  • Policyowner can change beneficiary at any time
  • Must notify the insurer
  • Typically takes effect when the written request is made

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19
Q

Uniform Simultaneous Death Act

A
  • If insured and primary beneficiary die in the same accident
  • Primary beneficiary is automatically assumed to have died first
  • So, the contingent beneficiary will receive the proceeds
20
Q

Common Disaster Provisions

Describe what this is and how it works.

A
  • Similar to Uniform Simultaneous Death Act
  • Timeframe longer 30-90 days
  • If both the insured and the primary beneficiary die within 30 -90 days from the same accident the primary beneficiary is considered to have died first
  • Proceeds paid to contingent beneficiary
21
Q

Spendthrift Provision

What is the purpose and what actions are not allowed?

A
  • Purpose is to prevent the beneficiary from overspending
  • Death benefit is paid in installments
  • Cannot be claimed by creditors before payment to beneficiary
  • Death benefit cannot be pledged by the beneficiary to creditors
  • Cannot be used as collateral for a loan
22
Q

Exclusions

What does it mean and what are the common exclusions?

A
  • Situations where coverage does not apply
    • Suicide
    • Aviation
      • all but commercial flights
    • War or Military Service
      • Status Type
        • Coverage ends for entire period of military service no matter how death occurs
      • Results Type
        • Coverage end only if death occurs due to military service
    • Hazardous Occupation or Hobby

Life Insurance (10 decks)

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