Chapter 12 Vocab (Text) Flashcards Preview

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Flashcards in Chapter 12 Vocab (Text) Deck (37):

Ownership Clause

the p/h possesses all contractual rights in the policy while the insured is living


Entire Contract Clause

states that the life insurance policy and attached application constitute the entire contract between the parties


Incontestable Clause

states that the insurer cannot contest the policy after it has been in force two years during the insured's lifetime


Suicide Clause

states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid


Grace Period

period during which the p/h has a period for 31 days to pay an overdue premium


Reinstatement Provision

permits the owner to reinstate a lapsed policy


Misstatement of Age or Sex Clause

if the insured's age or sex is misstated, the amount payable is the amount that the premiums paid would have purchased at the correct age and sex


Primary Beneficiary

beneficiary who is first entitled to receive the policy proceeds on the insured's death


Contingent beneficiary

entitled to the proceeds if the primary beneficiary dies before the insured


Revocable Beneficiary

the p/h reserves the right to change the beneficiary designation without the beneficiary's consent


Irrevocable Beneficiary

a beneficiary cannot be changed without the beneficiary's consent


Class Beneficiary

a specific beneficiary is not named but is a member of a group designated as beneficiary


Specific Beneficiary

the beneficiary is specifically named and identified


Change of Plan Provision

allows policyholders to exchange their present policies for different contracts


War Clause

excludes payment if the insured dies as a direct result of war


Absolute Assignment

all ownership rights in the policy are transferred to a new owner


Collateral Assignment

the policyholder temporarily assigns a life insurance policy to a creditor as collateral for a loan. Only certain rights are transferred to the creditor to protect its interest and the p/h retains the remaining rights


Policy Loan Provision

allows the p/h to borrow the cash value


Automatic Premium Loan Provision

an overdue premium is automatically borrowed from the cash value after the grace period expires, provided the policy has a loan value sufficient to pay the premium


Participating Policy

the policy pays dividends


Nonparticipating Policy

a policy that does not pay dividends


Paid-Up Additions Option

the dividend is used to purchase a small amount of paid-up whole life insurance


Nonforfeiture Laws

requires insurers to provide at least a minimum nonforfeiture value to p/h who surrender their policies


Reduced Paid-Up Option

the cash surrender value is applied as a net single premium to purchase a reduced paid up policy


Extended Term Insurance Option

the net cash surrender value is used as a net single premium to extend the full face amount of the policy into the future a term insurance for a certain number of years and days


Settlement Options

refer to the various ways that the policy proceeds can be paid


Interest Option

the policy proceeds are retained by the insurer, and interest is periodically paid to the beneficiary


Fixed-Period (Income for Elected Period) Option

the policy proceeds are paid to a beneficiary over some fixed period of time


Fixed Amount (Income for Elected Period) Option

a fixed amount is periodically paid to the beneficiary


Life Income Option

installment payments are paid only while the beneficiary is alive and cease on the beneficiary's death


Waiver of Premium Provision

if the insured becomes totally disabled from bodily injury or disease before some state age, all premiums coming due during the period of disability are waived


Guaranteed Purchase Option

gives p/h the right to purchase additional amounts of life insurance at specified times in the future without evidence of insurability


Accidental Death Benefit Rider

doubles the face amount of life insurance if death occurs as a result of an accident


Cost of Living Rider

allows the p/h to purchase one year term insurance equal to the percentage change in the consumer price index with no evidence of insurability


Accelerated Death Benefits

that allow part or all of the life insurance face amount to be paid to a chronically or terminally ill policyholder before they die


Viatical Settlement

sale of a life insurance policy by a terminally ill insured to another party, typically to investors, or investor groups who hope to profit by the insured's early death


Life Settlement

a financial transaction by which a p/h who no longer needs or wants to keep a life insurance policy sells the policy to a third party for more than its cash value