chapter 3 Flashcards
(16 cards)
What does the insuring clause in a life insurance policy promise?
To pay certain benefits
The insuring clause is fundamental in establishing the insurer’s obligation.
What does the consideration clause state?
completing the application and paying the initial premium
This clause outlines the exchange necessary for the policy to be valid.
What happens after the contestability period has expired?
The insurer will most likely pay the face amount even if the insured failed to disclose a condition
This period is typically 2 years in most policies.
What is policy loan collateral?
The insured may assign the life insurance policy to the bank as collateral for a loan
This allows the insured to leverage their policy for financial needs.
What is the purpose of the free look provision?
Allows a policyowner to return a newly issued policy within a specified period for a refund
This provision provides a trial period for the policyowner.
What is an exclusion in a life insurance policy?
A feature used to restrict coverage
An example is exclusion due to non-commercial airline aviation.
What is the purpose of the suicide clause?
To protect the insurer from adverse selection by high-risk applicants
This clause limits payouts in cases of suicide within a certain timeframe.
What does an aviation exclusion entail?
A student airplane pilot may face an aviation exclusion under an insurance policy
This may allow them to purchase insurance at a regular price despite the exclusion.
What does irrevocable beneficiary designation limit?
The policyowner’s rights to change beneficiaries without the beneficiary’s consent
This designation provides security to the beneficiary.
What triggers a long term care rider?
The insured’s inability to perform activities of daily living
This rider provides additional benefits for long-term care needs.
What happens to the listed beneficiary if the policy ownership is transferred?
The listed beneficiary stays the listed beneficiary
For example, if a son transfers ownership to his wife, the mother remains the beneficiary.
What is the common disaster provision?
Proceeds will be paid to the insured estate if both the insured and beneficiary die in a common disaster
This provision clarifies how benefits are handled in such situations.
What does the waiver of premium provision guarantee?
The insurance company will pay premiums during a period of disability after a waiting period
This ensures coverage remains in force during the insured’s disability.
What is an example of a term rider?
Children’s Term providing additional coverage for children under a life insurance policy
Term riders are often added to enhance coverage for specific needs.
What does the Accidental Death and Dismemberment (AD&D) benefit provide?
Pays benefits only if death results from a specific accident
Often associated with motor vehicle accidents.
What does the accelerated death benefit provision provide?
Advanced payment for life insurance benefits due to terminal illness
This allows insured individuals to access funds when facing terminal conditions.
