Life Insurance Policy Provisions, Options, And Riders

Question 1

Stipulate the rights and obligations of an insurance contract and are fairly universal from one policy to the next.

Answer 1

Provisions

Question 2

Modify provisions that already exist and are used to increase or decrease policy benefits and premiums.

Answer 2

Riders

Question 3

Offer insurers and insureds ways to invest or distribute a sum of money available in a life policy

Answer 3

Options

Question 4

A person’s essential activities that include bathing, dressing, eating, transferring, toileting, continence

Answer 4

Activities of daily living ( ADLs)

Question 5

Transfer of rights of policy ownership

Answer 5

Assignment

Question 6

A beneficiary who has second claim to the policy proceeds after the death of the insured (usually after the death of the primary beneficiary)

Answer 6

Contingent beneficiary

Question 7

An organization composed insurance commissioners from all 50 states , the District of Columbia and the 4 US territories formed to resolve insurance regulatory issues

Answer 7

National Association of Insurance Commissioners (NAIC )

Question 8

A beneficiary who has the first claim to the policy proceeds after the death of the insured.

Answer 8

Primary Beneficiary

Question 9

The face value of the policy; the original amount invested before the earnings

Answer 9

Principal amount

Question 10

An arrangement in which funds or propwr gu are held by a person or corporation for the benefits of another person (trust beneficiary)

Answer 10

Trust

Question 11

Involves transferring all rights of ownership to another person or entity. Is permanent and total transfer of all policy rights. New owner does not need to have insurable interest in the insured.

Answer 11

Absolute Assignment

Question 12

Partial and temporary transfer of rights; usually done to secure a loan or some other transaction and once paid, rights are returned

Answer 12

Collateral Assignment

Question 13

Entire contract =

Answer 13

Policy + copy of application + any riders or amendments

Question 14

_________ or Changes in the policy must be endorsed on or attached to the policy in writing over the signature of an executive officer of the insurer

Answer 14

Modifications

Question 15

Starts when the policyowner receives the policy (policy delivery) and they have 10 days to look over the policy can get a full refund if they are dissatisfied with anything

Answer 15

Free-look period

Question 16

Protect policyholders from losing insurance coverage if they are late on a premium payment.

Answer 16

Grace periods

Question 17

Maximum time limit for reinstatement is usually ____ _________ after the policy has lapsed.

Answer 17

3 years

Question 18

After this timeframe, a policy cannot be contested

Answer 18

2 years after has been in force

Question 19

A policy that has been surrendered cannot be:

Answer 19

Reinstated

Question 20

Misstatement of age on the application will result in

Answer 20

Adjustment of premiums or benefits

Question 21

Exclusions and Restrictions: WASH

Answer 21

W: war or military service ( status clause & results clause)
A: aviation excludes coverage for noncomericial flights or requires an additional premium for coverage
S: suicide not covered within the first 2 years but after the first 2 years it is covered
H: hazardous occupation or hobbies; no dangerous or life threatening jobs or hobbies

Question 22

Excludes all causes of death while the insured is on active duty in the military

Answer 22

Status Clause

Question 23

Only excludes the death benefit if the insured if the insured is killed as a result of an act of war ( declared or undeclared).

Answer 23

Results Clause

Question 24

Insurers must pay first-party claims within 30 days of receipt of proof of loss; after thay an interest will be assessed

Answer 24

Intereg on Life Insurance Proceeds

Question 25

Benefits designated to a minor will be paid to:

Answer 25

The minor's guardian, or to the trustee of the minor if the trust is named beneficiary, or paid as directed by a court.

Question 26

If no beneficiary is named, policy proceeds go to the insured6

Answer 26

Estate

Question 27

Meaning by the head: evenly distributed benefits among the living named beneficiaries.

Answer 27

Per Capita

Question 28

Meaning by bloodline; distributed the benefits of a beneficiary who died before the insured to that beneficiary's heirs.

Answer 28

Per Stirpes

Question 29

Has first clain to the police proceeds following the death of the insured.

Answer 29

Primary beneficiary

Question 30

Also referred as secondary or tertiary beneficiary) has second claim in the event that the primary beneficiary dies before the insured.

Answer 30

Contingent Beneficiary

Question 31

Beneficiary designations can be either

Answer 31

Revocable or irrevocable

Question 32

Can be changed (removed from or amount given changed) without the consent or knowledge of the beneficiary

Answer 32

Revocable

Question 33

May not change beneficiary designation without written consent from them.

Answer 33

Irrevocable

Question 34

Are Only available in policies that have cash value (whole life).

Answer 34

Policy loans

Question 35

Loan that prevent s the unintentional lapse of a policy due to nonpayment of the premium.

Answer 35

Automatic premium loans

Question 36

_______ _______ _______ allow the partial withdrawal or surrender of the policy cash value.

Answer 36

Universal life policies

Question 37

Written modifications attached to a policy that provides benefits not found in the original policy.

Answer 37

Riders

Question 38

Waives the premium for a rot disabilith after a waiting period.

Answer 38

Waiver of premium rider

Question 39

AKA: waiver of monthly deductions is found in Universal life insurance; waives the cost of insurance and other expenses; but does not waive the cost of premiums necessary to accumulate cash values.

Answer 39

Waiver of cost of insurance

Question 40

Primarily used with juvenile policies ( any life insurance written on the life of a minor); otherwise it functions likes the waiver of premium rider. Premium I'd waive if payor usually parent become disabled for at least 6 months or dies; until the minor turns 21.

Answer 40

Payor benefit

Question 41

Provides coverage for one or more famy members other than the insured l. Usually level term insurance. Also known as family rider.

Answer 41

Other insured rider

Question 42

If it just covers the spouse for a specific timeframes and for limited coverage usually till spouse reaches age 65.

Answer 42

Spouse term rider

Question 43

One premium for all children. Term insurance that can be added on for limited time until the children turn 18 or 21.

Answer 43

Children's Term Rider

Question 44

Equals the Spouse term plus the Children's term

Answer 44

Family term

Question 45

Pays some multiple of face amount if death is the result of an accident as defined in the policy. Death must usually occur within 90 days of an accident

Answer 45

Accidental death rider

Question 46

Benefit may pay out double or triple of face amount

Answer 46

Double indemnity or Triple indemnity

Question 47

Allows the insured to purchase additional coverage at specified future dates (usually every 3 years) or events (such as marriage or birth of a child), without evidence of insurability, for an additional premium. When exercised, additional policies are purchase at the attained age and this rider expires at age 40.

Answer 47

Guaranteed insurability Rider

Question 48

Addresses the inflation factor by automatically increasing the amount of insurance without evidence of insurability from the insured.

Answer 48

Cost of living Rider

Question 49

Usually expires at age 60. When added to a polish it provides that at death prior to a given age not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to the beneficiary. Implemented by using increasing term insurance.

Answer 49

Return of premium rider

Question 50

Equal early payment of part of death benefit to the insured from the insurer for qualifying medical expenses.

Answer 50

Accelerated living benefit

Question 51

Provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years.

Answer 51

Living Needs Rider

Question 52

Often purchased as a separate policy, can also be marketed as a rider to a life insurance policy. Provides for the payment of part of the death benefit (called accelerated benefits) in order to take care of the insured's health care expenses, which are incurred in a nursing home or convalescent home.

Answer 52

Long-term care (LTC) coverage

Question 53

Equals face amount minus amount withdrawn minus earnings lost by insurer in interest.

Answer 53

Payable Death Benefit

Question 54

Certain guarantees built into the policy that cannot be forfeited by the policyowner. Using triggered by policy surrender or lapse.

Answer 54

Nonforfeiture options

Question 55

Policy is paid up to age 100 and face amount reduces to a value that the cash value can afford. Lasts the longest.

Answer 55

Reduced-paid up insurance

Question 56

Is the automatic nonforfeitureoption; same face amount, shorter term of coverage because coverage ends when cash value is depleted.

Answer 56

Extended term

Question 57

Fee charged to the insured when a life policy or annuity is surrendered for its cash value. Usually when coverage is no longer needed or affordable.

Answer 57

Cash Surrender Value

Question 58

A return of excess premiums; therefore, not taxable when paid to the policyowner.

Answer 58

Dividends

Question 59

Dividend Options remember: DO = CRAPO

Answer 59

C: Cash R: Reduction of premium A: Accumulation at interest P: Paid-up additions O: One year term

Question 60

Check sent to the policyowner for the amount of the dividend as it declared; usually anually

Answer 60

Cash payment option

Question 61

Uses the dividend to reduce the next year's premium.

Answer 61

Reduction of premium

Question 62

Insurance company keeps the dividends in an account where it accumulates interest and the policyowner is allowed to withdraw the dividends at any time. Dividend still not taxable but interest is taxable.

Answer 62

Accumulation of interest option

Question 63

Using the dividends to pay for additional face amount value. You pay the original face amount and the dividend pays for extra amount. Automatically chosen by the insurer if the policyowner does not choose an option.

Answer 63

Paid-up Additions option

Question 64

Insurance company uses the dividend to purchase additional insurance in the form of one-year term insurance that increases the overall policy death benefit.

Answer 64

One-year term option

Question 65

Triggered by the insured's death or age 100.

Answer 65

Settlement options

Question 66

Settlement options remember: SO = CLIFF

Answer 66

C: cash lump-sum payment is paid out L: life income option based on the I individuals life expectancy I: interest only- most flexible option if you dont need the money F: fixed period installments F: fixed amount installments

Question 67

The receipt cannot outlive the benefit payments.

Answer 67

Life-income (straight life) settlement option

Question 68

Provides a single beneficiary income for the rest of his/her life. Once beneficiary dies, payments stop.

Answer 68

Single life option

Question 69

Guarantees an income for two or more recipients for as long as theh live. Surviving recipient will recieve a reduced payment after the first recipient dies.

Answer 69

Joint and survivor

Question 70

Life refund income comes in either:

Answer 70

Cash refund or an installment refund

Question 71

The recipient is provided with the best of both worlds in terms of a lifetime income and a guaranteed installment period.

Answer 71

Life income with period certain option

Question 72

Insurance company retains the proceeds and pays interest on the proceeds to the recipient (beneficiary) at regulat intervals (monthly, quarterly, semiannually or annually)

Answer 72

Interest-only option

Question 73

AKA: period certain A specified period of years is selected and equal installments are paid to the recipient.

Answer 73

Fixed period installments option

Question 74

Pays a fixed , specified amount in installments until the proceeds (principal and interest) are exhausted.

Answer 74

Fixed amount installments option