Unit 7 Life Insurance Policy Provisions

Question 1

free look

Answer 1

begins when the owner receives the policy
usually no fewer than 10 days
policy can be returned for a full refund

right to examine the policy

Question 2

insuring clause or agreement

Answer 2

usually found on the first page of the policy
insurers promise to pay upon death
includes the face amount
usually signed by an officer of the company

Question 3

ownership rights

Answer 3

name or change the beneficiary
select settlement options
borrow or withdraw policy cash values
receive policy dividends (participating policies)
surrender or cancel the policy
assign or transfer ownership
select/ change the premium payment mode
select a non-forfeiture option

Question 4

policy assignment

Answer 4

the transfer of the owner’s rights to another individual agency. can be collateral or absolute

Question 5

collateral assignment

Answer 5

a pledge for a loan

Question 6

absolute assignment

Answer 6

permanent change

Question 7

entire contract

Answer 7

policy
copy of the application
any riders or amendments

Question 8

endorsements (modifications)

Answer 8

can only be made by the company
owner can request a change

Question 9

consideration

Answer 9

insured’s: premiums and truthful statements made on the application

insurer’s: pay benefits at time of claim

Question 10

payment of premium

Answer 10

due in advance of the coverage period

Question 11

grace period

Answer 11

premium not paid by due date
usually 31 days following due date
insurance still in force
death benefit paid minus premiums due

Question 12

reinstatement

Answer 12

policy lapsed for nonpayment of premiums
up to three years to reinstate
policy was not surrendered for cash
must pay missed premiums + interest
prove insurability
saves original policy + issue age

Question 13

incontestability

Answer 13

usually after two years
policy can’t be taken away even if material misrepresentation or fraud

Question 14

suicide clause

Answer 14

if insured commits suicide prior to having a policy for two years, only the premium will be paid back
after two years the full face amount will be paid

Question 15

misstatement of age (gender)

Answer 15

if insured is older than application states, death benefit is reduced to correct premium amount

if insured is younger than application states, reduce premium and refund

incontestability provision does not apply

Question 16

payment of claims

Answer 16

provision says the insurer will pay the death benefit promptly
usually no longer than 60 days

Question 17

14 life insurance policy provisions

Answer 17

free look
insuring clause
ownership rights
assignment
entire contract
modifications
consideration
payment of premium
grace period
reinstatement
incontestability
suicide
misstatement of age or sex
payment of claims

Question 18

who can be a beneficiary

Answer 18

individuals
classes (“my children”, “my siblings”)
trusts (consist of grantor setting up trust, trustee who manages the property, and beneficiary)
minors
estates
charities
colleges/ universities

Question 19

per capita

Answer 19

when there is more than one person in a class, divide’s the policy’s death benefit equally among the surviving members of the class

Question 20

per stirpes

Answer 20

signifies that the children of a deceased class beneficiary are entitled to that beneficiary’s share (inheritable)

Question 21

primary beneficiary

Answer 21

first in line to receive the policy’s death benefit

Question 22

contingent beneficiary

Answer 22

next in line to receive the policy’s death benefit if the primary beneficiary dies before the insured

Question 23

tertiary beneficiary

Answer 23

receives the policy’s death benefit if no primary or contingent beneficiary alive

Question 24

estate of insured

Answer 24

if no beneficiary is named or alive, will receive the policy’s death benefit

Question 25

revocable

Answer 25

can be changed by the owner at any time

Question 26

irrevocable

Answer 26

can't be changed without beneficiary consent loan or withdrawal from cash values requires permission of beneficiary usually becomes revocable upon death of irrevocable beneficiary

Question 27

beneficiary changes

Answer 27

policyowner can change the beneficiary. must notify insurer

Question 28

facility of payment provision

Answer 28

insurer can pay someone other than beneficiary

Question 29

uniform simultaneous death

Answer 29

insured and primary beneficiary are in same accident both die in accident assumes primary beneficiary dies first proceeds paid to contingent beneficiary

Question 30

common disaster provision

Answer 30

insured and primary beneficiary are in common accident both die within 30-90 days after accident proceeds paid as if the primary beneficiary died first proceeds paid to contingent beneficiary

Question 31

spendthrift provision

Answer 31

may be included in the policy death benefit cannot be paid in a lump sum death benefits cannot be claimed by creditors before payment to beneficiary death benefits cannot be pledged by the beneficiary to a creditor death benefits cannot be used by the beneficiary as collateral for a loan

Question 32

suicide exclusion

Answer 32

death by suicide not covered before two years (time may vary)

Question 33

aviation exclusion

Answer 33

death due to a private airplane accident does not apply if a passenger or crew member of a commercial airline

Question 34

war or military service exclusion

Answer 34

status type - death occurs while in the military, regardless of the reason for death (never pays) results type - death occurs related to the military (sometimes pay)