Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
60 Cards in this Set
- Front
- Back
|
Provisions |
Define the characteristics of an insurance contract and are fairly universal from one policy to the next. |
|
|
Riders |
Added to a policy to modify provisions that already exist |
|
|
Options |
offers insurers and insureds ways to invest or distribute a sum of money available in a life policy. |
|
|
Activities of daily Living (ADLs) |
A persons essential activities that include bathing, dressing, eating transferring, toileting, continence |
|
|
Assignment |
Transfer of rights of policy ownership |
|
|
Consideration |
Something of value that each party gives to the other (binding force in any contract) |
|
|
Indemnity |
a principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss. |
|
|
Lump Sum |
Payment of the entire benefit in one sum |
|
|
NAIC |
National association of insurance commissioners, an organization composed of insurance commissionaires from all states and jurisdictions formed to resolve insurance regulatory issues |
|
|
Principal |
the face value of the policy; the original amount invested before the earnings |
|
|
The entire contract Provision |
Policy + copy of application + any riders or amendments policy and a copy of the application, along with any riders or amendments, constitute the entire contract. -No statements made before the contract was written can be used to alter it - Neither the insurer nor the insured may change policy provisions once the policy is in effect without both agreeing to the change |
|
|
Insuring Clause (or insuring agreement) |
Sets basic agreement between insurer and the insured. - insurers promise to pay the death benefit upon the insureds death - located on the policy face page - defines who the parties to the contract are and how long coverage is in force; type of loss insured against |
|
|
Free Look |
Allows policyowners a specified number of days from receipt to look over the policy and if dissatisfied for any reason return it for a full refund of premium. - starts when the policyowner receives the policy |
|
|
Consideration |
Both parties to a contract must provide some value in order for the contract to be valid. States that the value(consideration) offered by the insured is the premium and statements made in the application. consideration given by the insurer is the promise to pay accordance with the terms of the contract -not always a separate provision but is often included in the entire contract provision |
|
|
Owners Rights |
Only the policy owner has the ownership rights under the policy and not the insured or the beneficiary. -naming and changing the beneficiary - receiving the policy's living benefits -selecting a benefit payment option -assigning the policy Has the responsibility of paying policy premiums and must have insurable interest - When the owner and the insured are not the same person, the insurance arrangement is referred to as the third-party ownership |
|
|
Assignments |
Policyowner has a right to transfer partial or complete ownership of the policy to another person without the consent of the insurer. - Owner must notify the insurer in writing of the assignment -transfer of the life insurance policy does not change the insured or amount of coverage; only changes who has the policy ownership rights - The assignment provision specifies the policyowner's right to assign the policy |
|
|
Absolute assignment |
Involves transferring all rights of ownership to another person or entity. Permanent and total transfer of all the policy rights. New policyowner does not need to have an insurable interest in the insured. |
|
|
Collateral Assignment |
Involves transfer of partial rights to another person. It is usually done in order to secure a loan or some other transaction. -Partial and temporary assignment of some of the policy rights Once the debt or loan is repaid, the assigned rights are returned to the policyowner |
|
|
Beneficiary Designation |
Beneficiary may be a person, class of persons (usually children of insured), the insured's estate or an institution or other entity such as a foundation, charity, corporation or trustee of a trust. Trusts are used in conjunction with beneficiary designations to manage life insurance proceeds for a minor or for estate tax purposes (Naming a trust as beneficiary does not avoid estate taxes). Beneficiary does not need an insurable interest in the insured. Policyowner doesn't need a beneficiary in order for the policy to be valid Benefits to a minor will be paid to the minor's guardian, or to the trustee of the minor if the trust is the named beneficiary, or paid as directed by a court. |
|
|
Designation by Class |
"my children" term can be vague if the insured has been married more than once, has adoption or has children out of wedlock. Name each individual and exact amount to be given |
|
|
Per capita |
by the head evenly distributes benefits among the living named beneficiaries |
|
|
Per Stirpes |
by the bloodline distributes the benefits of a beneficiary who died before the insured to that beneficiary's heirs. |
|
|
Primary Beneficiary |
First claim to the policy proceeds following the death of the insured. Policyowner may name more than one primary as well as how the proceeds are to be divided |
|
|
Contingent Beneficiary (secondary or tertiary) |
Second claim in the event that the primary beneficiary dies before the insured. Contingent beneficiaries do not receive anything if the primary beneficiary is still living. |
|
|
Entire contract = |
Policy + copy of appliction + any riders or amendments |
|
|
Revocable designation |
The policyowner without consent or knowledge of the beneficiary may change a revocble designation at any time |
|
|
Irrevocable designation |
May not be changed without the rwitten consent of the beneficiary. - Have vested interest in the policy - Policyowner cannot borrow against the policy's cash value (decreases policy value until repaid) |
|
|
Common Disaster |
If the insured and the primary beneficiary die at approximately the same time from common accident with no clear evidence as to who died first, the problem arises in identifying which party is eligible for death benefits. |
|
|
Uniform Simultaneous Death Law |
Protects the policyowner's original intent as well as to protect the contingent beneficiary. Stipulates that the insured and primary beneficiary died in the same accident and there is no evidence to show who died first so the proceeds will be paid to either the contingent beneficiary or the insureds estate. May take 14-40 days to apply |
|
|
Premium mode |
Manner or frequency that the policyowner pays the policy premium There will be an additional charge for premium mode to offset the loss of earnings sense the company does not have the entire premium at once additional administrative costs associated with more frequent billing If insured dies during a period of time for which the premium has been paid the insurer must refund any unearned premium along with the policy proceeds |
|
|
Grace Period |
Period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (30 or 31 days, or one month). If the insured dies during this period, the death benefit is payable; however any unpaid premium will be deducted from the death benefit. |
|
|
Reinstatement |
Allows a lapsed policy to be put back in force. Max time limit is three ears after a policy has lapsed. If the policy is reinstated the policyowner must provide proof of insurability. Required to pay all back premiums plus interest and my be required to repay any outstanding loans and interest. Policy will be restored with original sttus and retain all the values that were established at the insured's issue age. - Policy that has been surrendered cannot be reinstated |
|
|
Incontestability Clause |
Prevents an insurer from denying a claim due to statements in the application fter the policy has been in force for two years, even if there has been a material misstatement of facts or concealment of the material fact. |
|
|
Misstatement of age and gender |
If the applicant has misstated his or her age or gender on the application, in the event of a claim, the insurer is allowed to adjust the benefits to an amount that the premium at the correct age or gender would have purchased. The proceeds calculations should be based on the insurer's rate at the date of policy issue. |
|
|
Policy oans |
Only available in policies that have cash value (Whole Life) he policyowner is entitled to borrow an amount equal to the available cash value. Any outstanding loans, and accrued interest, will be deducted from the policy proceeds upon the insured’s death. The policy will not lapse with an outstanding policy loan unless the amount of the loan and accrued interest exceeds the available cash value. However, the insurer must provide 30 days' written notice to the policyowner that the policy is going to lapse. Insurance companies may defer a policy loan request for up to 6 months, unless the reason for the loan is to pay the policy premium. Policy loans are not subject to income taxation. |
|
|
Automatic Premium Loans |
is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium |
|
|
Exclusions |
the types of risks the policy will not cover. Certain exclusions are standard for all policies, while others are attached to the policy as an exclusion rider. The most common exclusions found in life insurance policies are aviation, hazardous occupation, and war and military service. |
|
|
Aviation |
Most life insurance will cover an insured as a fare-paying passenger or a pilot on a regularly scheduled airline, but will exclude coverage for noncommercial pilots, or require an additional premium for the coverage. |
|
|
Hazardous Occupations or Hobbies |
If the insured is engaged in a hazardous occupation or participates in hazardous hobbies (such as skydiving or auto racing), death that results from the hazardous occupation or hobby may be excluded from coverage. The underwriter also has the option of charging a higher premium for insuring these risks. |
|
|
War or Military Service |
Most life insurance policies issued today do not exclude military service. However, there are actually two different types of exclusions that may be used to limit the death benefit if the insured dies as a result of war, or while serving in the military. The status clause excludes all causes of death while the insured is on active duty in the military. The results clause only excludes the death benefit if the insured is killed as a result of an act of war (declared or undeclared). |
|
|
Suicide |
protects the insurers from individuals who purchase life insurance with the intention of committing suicide. Insurance policies usually stipulate a period of time during which the death benefit will not be paid if the insured commits suicide. If the insured commits suicide within 2 years following the policy effective date (issue date), the insurer's liability is limited to a refund of premium. If the insured commits suicide after the 2-year period, the policy will pay the death proceeds to the designated beneficiary the same as if the insured had died of natural causes. |
|
|
Disability Riders |
Some riders provide benefits in the event of the insured’s disability, while other riders provide for partial payment of the death benefit prior to the insured’s death, called accelerated or living benefits riders. |
|
|
Waiver of Premium |
Waiver of premium rider waives the premium for a total disability after a waiting period. waives the premium for the policy if the insured becomes totally disabled. Coverage remains in force until the insured is able to return to work. If the insured is never able to return to work, the premiums will continue to be waived by the insurance company. Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived. If the insured is still disabled after this waiting period, the insurer will refund the premium paid by the insured from the start of the disability. This rider usually expires when the insured reaches age 65. |
|
|
Total Disability |
Although this definition will differ from one policy to another, it is generally defined as the inability to engage in any work. More specifically, total disability refers to the insured's inability to perform the duties of their own occupation for the first 2 years; then any gainful employment for which the insured is reasonably suited by education, training and experience. No benefits are payable for partial disability.Policy cash values will continue to accumulate at their normal pace during the period of time that premiums are waived. In addition, if the policy is participating, the policyowner will continue to receive dividends as they are declared. (Note: this may not be true of all Universal life insurance policies; some UL policies offer "waiver of premium" or "cost of insurance deduction rider" for the mortality charges only.) |
|
|
Disability Income |
in the event of disability the insurer will waive the policy premiums and pay a monthly income to the insured. The amount paid is normally based on a percentage of the face amount of the policy to which it is attached. |
|
|
Monthly Deduction |
rider pays all monthly deductions while the insured is disabled, after a 6-month waiting period. This rider only pays the monthly deductions, and not the full premium necessary to accumulate cash values. The length of time this rider will pay monthly deductions will vary based on the age at which the insured becomes disabled. This rider is usually found in Universal Life and Variable Universal Life policies.Monthly deductions include the actual cost of insurance charges, expense charges, and costs or charges for any benefits added to the policy by rider, endorsement or amendment, and which are specified in the policy to be deducted from the account value. |
|
|
Payor Benefit |
is primarily used with juvenile policies (any life insurance written on the life of a minor); otherwise, it functions like the waiver of premium rider. If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21. This rider is also used when the owner and the insured are two different individuals. |
|
|
Other Insureds |
provides coverage for one or more family members other than the insured. The rider is usually level term insurance, attached to the base policy covering the insured. This is also known as a family rider. If the rider covers just the spouse of the insured, it can be specified as a spouse term rider, and allows the spouse to be added to coverage for a limited period of time and for a specified amount (it usually expires when the spouse reaches age 65). |
|
|
Children's Term Rider |
provide temporary life insurance coverage on all children of the family for one premium. The premium does not change on the inclusion of additional children; it is based on an average number of children. |
|
|
Family Term |
= Spouse Term + Children's Term |
|
|
Accidental Death Rider |
pays some multiple of the face amount if death is the result of an accident as defined in the policy. Death must usually occur within 90 days of such an accident. The benefit is normally two times (double indemnity) the face amount. Some policies pay triple the face amount (triple indemnity) for accidental death. Each policy specifies what will be considered accidental death. Accidental death does not include death that results from any health problem or disability. In addition, deaths that result from self-inflicted injuries, war, or hazardous hobbies or avocations are usually not covered. They would be covered under the base policy unless specifically excluded.This rider often expires at the insured’s age 65. No additional cash value is accumulated as a result of this rider. The accidental death benefits apply only to the policy’s base face amount, and not to any additional benefits that may be purchased from policy dividends. |
|
|
accidental death and dismemberment rider (AD&D) |
pays the principal (face amount) for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment. The accidental death portion is the same as that already discussed with the accidental death rider. The dismemberment portion of the rider will usually determine the amount of the benefit according to the severity of the injury. The full principal amount will usually be paid for loss of two hands, two arms, two legs or the loss of vision in both eyes. A capital amount is usually limited to half the face value and is payable in the event of the loss of one hand, arm, leg, or eye. The dismemberment can be defined differently by insurance companies, from the actual severance of the limb to the loss of use. |
|
|
Guaranteed Insurability |
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 this option is exercised, the insured purchases the additional coverage at his or her attained age. This rider usually expires at the insured's age 40.The guaranteed insurability rider is not modified or defeated by the existence of other riders. |
|
|
Return of Premium |
is implemented by using increasing term insurance. When added to a whole life policy, 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. The return of premium rider usually expires at a specified age such as age 60. |
|
|
Cost of Living Rider |
addresses the inflation factor by automatically increasing the amount of insurance without evidence of insurability from the insured. The face value of the policy may be increased by a cost of living factor tied to an inflation index such as the Consumer Price Index (CPI). |
|
|
Accelerated (Living) Benefits and Long-Term Care Rider |
early payment of part of death benefit to the insured from the insurer for qualifying medical expenses. Accelerated death benefits allow the early payment of a portion of the death benefit if the insured has any of the following conditions:A terminal illness;A medical condition that requires an extraordinary medical intervention (such as an organ transplant) for the insured to survive;A medical condition that without extensive treatment drastically limits the insured's lifetime;Inability to perform activities of daily living (ADLs);Permanent institutionalization or confinement to a long-term care facility; orAny other conditions approved by the Department of Insurance.The maximum benefit is typically a percentage of the face amount of insurance, usually 50%, but it is legal for the insurer to pay up to 100% of the death benefits before the insured dies. There may also be a dollar limit, such as $100,000. The face amount of insurance is reduced after the payments. The accelerated death benefit payout will not necessarily result in a reduction of the premium; however, premium may be waived.The Living Needs Rider 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. The purpose of this rider is to provide the insured with the necessary funds to take care of necessary medical and nursing home expenses that incur as a result of the terminal illness. Many insurance companies do not charge for this rider since it is simply an advance payment of the death benefit. The remainder of the policy proceeds are payable to the beneficiary at the time of the insured's death. |
|
|
Long-Term Care (LTC) |
which is often purchased as a separate policy, can also be marketed as a rider to a life insurance policy. These riders provide 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 or convalescent home. As with the living needs rider, payment of LTC benefits will reduce the amount payable to the beneficiary upon the insured’s death. |
|
|
Payable Death Benefit |
Face Amount - Amount withdrawn - Earnings lost by insurer in interest |
|
|
Nonforfeiture Options |
Triggered by policy surrender or lapses |
|
|
Extended term |
the automatic nonforfeiture option: same face amount, shorter term of coverage. |
