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30 Cards in this Set

  • Front
  • Back
payments made to keep the policy in effect
- changes contract provisions
- increases/reduce benefits
Standard Provisions for Individual Policies
1. Insuring Clause
2. Consideration
3. Payment (Mode) of Premium
4. Grace Period
5. Reinstatement
6. Ownership
7. Assignment
8. Entire Contract
9. Incontestability
10. Conversion Option
11. Misstatement of Age or Sex
12. Modifications (Changes)
13. Right to Examine Period (Free Look)
14. Exclusions
15. Policy Loan Rate Provisions
Insuring Clause
- defines who is insured by whom
- benefit/coverage amounts
- obligations of the insurer
- risks considered for premature death
- premium payment
Payment (Mode) of Premium
- due date
- frequency of payments
- pay to who
Grace Period
- period after due date and before policy lapses
- if insured dies then benefit is payable minus premiums due
- cash value remains unchanged
- policy may be surrendered
- 3 years from start of lapse
- premiums plus interested
- proof of insurability if the policy was not surrendered for its cash value
- rights to all benefits
- can change beneficiary, assign policy, and exercise options
- transfer of ownership to another party
- two types, Collateral (Partial) and Absolute (entire face amount)
- assignment must be paid first which may reduce the settlement for the beneficiary
- insurer not responsible for the validity or effect of an assignment
- insurer cannot contest anything in the application after the policy takes effect (usually 2 years) including errors, misstatements, and even fraud
Conversion Option
allows for changing the policy type (term to cash value)
Misstatement of Age or Sex
- allows for adjustments at the time of the claim according to the corrected age or sex at the time of purchase
- never voids or cancel a policy
- incontestability clause does not apply here
Right to Examine Period (Free Look)
CA Law
- between 10 and 30 days for those < 60
- 30 days or more for those =>60
Right to Return Policy for policies <$10,000 issued between 1/1/1981 and 1/1/1990
- must contain notice regarding return policy for cancellation between 10-30 days
Right to Return for policies issued after 1/1/1990
- return policy for cancellation between 10-30 days
- premiums and fees must be refunded to the owner within 30 days of the cancellation
Doesn't Provide Coverage for
- Aviation
- Status (military) clause
- War Clause (results clause)
- Hazardous Occupation
- Suicide
Suicide Exclusion
- within two years, liability limited to only a refund of the premium
- CA law adds that after the first two years, insurer must pay the full face amount (death benefit) of the policy
Policy Loan Rate Provision
- maximum fixed rates of 8%
- variable rates based on Moody's corporate bond yield average
- loan cannot exceed available cash value
- interest not paid is added to the total debt
Provisions Prohibited by Law
- time limits on legal actions to less than 1 year after act occurs
- backdating for other than conserving the age of application (6 months max); no regulation in CA to support this
- lower settlement to be less than face amount at maturity
- designate agent as the representative of the insured
- require contract forfeiture when an outstanding loan is less than the loan value
Beneficiary Provisions
Two Types:
- Revocable - owner can change beneficiary at any time
- Irrevocable - owner can't change anything without consent of the beneficary
1. Primary
2. Contingent
3. Tertiary (usually the estate)
Designation Options
1. Individual/Named (specific)
2. Class (ie: my children)
- costly, time consuming
Per Capita
- per person
- surviving beneficiaries share equally in death benefits
Per Stirpes
- per beneficiary
- heirs of those beneficiaries who predeceased the insured will receive their portion of the claim proceeds and not have it split between living beneficiaries
- when a recipient is not to have direct access to the death benefits
- named beneficiary is a creditor
- collateral assignment to the lender covering the amount of the loan
Common Disaster Clause (simultaneous death law)
cannot be determined whether the insured or primary
beneficiary died first, the insured will be presumed to have survived the beneficiary and proceeds will
be paid to a named contingent beneficiary of the insured, or to the insured’s estate
Spendthrift Clause
- denies beneficiary right to move or transfer his/her interests in the policy proceeds
- protect beneficiary from creditors
Changed of Insured
- corporate life insurance when executive moves to the another company or retires
- authorizes changing the insured
- removes new policy loading at the time of the change
- requires proof of insurability