Chapter 12 Flashcards
The policyholder possesses all contractual rights in the policy while the insured is living.
Ownership clause
States that the life insurance policy and attached applications constitute the entire contract between the parties.
Entire contract clause
Possible owners under ownership clause:
Insured, beneficiary or a third party.
Owners rights: may change the beneficiary, surrender the policy, receive dividends and elect
Settlement options
Several purposes of entire contract clause:
Protects insured by preventing insurer from amending policy without knowledge or consent of the owner
Provides some protection to the insured by restricting ___ that a beneficiary might introduce in court.
Evidence
States that the insurer cannot contest the policy after it has been in force two years during the insureds lifetime.
Incontestable clause
The purpose of the incontestable clause is to protect the negotiate if the insurer tries to
Deny payment of the claim years after the policy was first issued.
States that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid.
Suicide clause
A life insurance policy also contains a ___ ____ during which the policyholder has a period of 31 days to pay an overdue premium.
Grace period
Permits the owner to reinstate a loser policy.
Reinstatement clause
Reinstatement clause requirements:
- Evidence of insurability is provided
- All overdue premiums plus interest must be paid from their respective due dates.
- any policy loan must be repaid or reinstated, with interest from the due date of the ____ ____
- policy must not have been surrendered for its cash value.
- must be reinstated within a certain period, typically to years from the dates of the lapse.
Overdue premium, 3-5
Advantages of reinstatement clause: lower premiums, no additional acquisition expenses, cash values and dividends are higher, suicide and incontestable clause may have
Expired.
If the insureds age or sex is misstated, the amount payable at death is the amount that the premiums paid would have purchased at the correct age and sex.
Misstatement if age or sex clause.
Beneficiary designation can be primary and contingent, rovocable and irrevocable, or ___ and ___ beneficiaries.
Specific and class
Beneficiary who is first entitled to receive the policy proceeds on the insureds death.
Primary beneficiary
Entitled to the proceeds if the primary beneficiary dies before the insured.
Contingent beneficiary
Means that the policyholder reserves the right to change the beneficiary designation without the beneficiary’s consent.
Revocable beneficiary
One that can not be changed without the beneficiary’s consent.
Irrevocable beneficiary
Means the beneficiary is specifically named and identified.
This means a specific person is not named but is a member of a group designated as beneficiary, such as children of the insured.
Specific, class beneficiary
Allows policy owners to exchange their present policies for different contracts.
Change of plan provision
Exclusions and limitations to life insurance policy:
Suicide clause
War clause
____ exclusion
Aviation
All ownership rights in the policy can be transferred to a new owner.
Absolute assignment
The policyholder temporarily assigns a life insurance policy to a creditor as collateral for a loan.
Collateral assignment
Allows the policyholder to borrow the cash value.
Policy loan provision.
Advantages of policy loan provision:
-low APR, no paperwork, flexibility in _____
Disadvantages:
-heavy borrowing may cause policy to lapse, amount of protection is _____
Repaying, reduced
