Life Insurance Policy

Front 1

Absolute assignment

Back 1

The owner of a life insurance policy may absolutely assign (transfer) all their rights of ownership to another party by executing (signing) an ‘absolute assignment’. The new owner would now have all the rights of ownership, including paying the premium, naming the beneficiary, taking a loan or taking cash surrender.

Front 2

Reduction of premiums

Back 2

A dividend option which An insured on a tight budget who has a Whole Life insurance policy written by a mutual insurer.
.For example, if the annual premium is $1,000 and the dividend is $100, the policy owner will only have pay $900 out of pocket.
A policy owner may change the dividend option at any time, even if the policy has an irrevocable beneficiary.

Front 3

dividend options

Back 3

1) cash;
2) interest;
3) apply to next premium when due;
4) paid-up additions; or
5) 1 year term insurance.

Front 4

when a life insurance premium is overdue

Back 4

1. The policy will lapse at the end of the grace period
2. Non-forfeiture provisions apply to lapsed whole life policies
3.A policy may be reinstated if certain conditions are satisfied

Front 5

Accidental Death Benefit

Back 5

1. It has a lower cost per $1,000 than does life insurance
2. It requires death to occur within a certain period of time
3. It drops off the policy automatically at a certain age, causing the overall premium to decrease

Front 6

Automatic Premium Loan Provision

Back 6

Automatic Premium Loan (APL) is a rider that can be added to any life insurance policy that has or will have a cash value. It cannot be added to Term insurance. It is usually free, but the producer or client must check this option on the application. If the policy has a cash value and the insured forgets to pay the premium when due, the policy will not lapse, since it will borrow from itself to pay the overdue premium. Remember: This is a rider, not a non-forfeiture option. However, when the insured dies, all loans are subtracted from policy proceeds, so the beneficiary's pay-out may be reduced.

Front 7

Accelerated benefits

Back 7

1.A life insurance benefit payable while the insured is still living
2.For example, if an insured has a terminal illness he may request that the insurer pay out part of his death benefit early. The insured may use the funds for any purpose, but any amount paid out will reduce the amount paid to his beneficiary upon his eventual death.
3. Accelerated benefits are not considered to be a loan and are not taxable.

Front 8

Spendthrift Clause

Back 8

The spend thrift clause prevents the beneficiary from changing the way you specified you want the proceeds to be paid when you die. For example, you specified that the proceeds be paid to your beneficiary over a 20-year period in the event of your death.

However, when you die your beneficiary would rather have the cash up front. The spend thrift clause prevents the beneficiary from commuting, assigning or transferring the proceeds to other parties in lieu of a lump sum cash payment. The proceeds must be paid out over the 20-year period as you specified.

Front 9

Material Misstatement

Back 9

The Incontestability clause states that the policy is "contestable" for the first two years for material misrepresentation by the insured on the application for insurance.

Front 10

Fixed Amount

Back 10

1. A Settlement Options provides for payments to be made in regular installments of a specified amount until the principal and interest are exhausted
When the insured dies, the beneficiary may select any one of five Settlement Options. They are: Cash; Fixed Amount (for example, the beneficiary elects to receive $1,000 a month for as long as the money lasts); Fixed Period (the beneficiary chooses to be paid out over a 20-year period); Interest (the beneficiary leaves all the proceeds with the company to accumulate additional interest), and Life Income (the beneficiary takes the policy proceeds as cash and buys a Straight Life or Pure Life Annuity).

Front 11

Family Rider (Level Term)

Back 11

1.A Life insurance rider that provides Whole Life on the primary insured and Term Life on the insured’s spouse and children
2.is the cheapest way to provide coverage for your entire family
3.When the term insurance expires, your total premium will be reduced. Further, the term coverage on your spouse and children is convertible to whole life upon expiration, without a physical exam.

Front 12

Reduced pay up

Back 12

1whole life non-forfeiture option provides lifetime coverage

Front 13

non-forfeiture options

Back 13

1) Cash surrender; 2) Reduced Paid-Up; and 3)Extended Term.

known as ‘guaranteed’ values. In other words, the cash value in the policy belongs to the policy owner and cannot be forfeited to the insurer if the policy lapses.

Front 14

Cash Surrender

Back 14

the policy owner can simply ask the insurer to send him his accumulated cash value (cash surrender), which is taxable to the extent that it exceeds the amount of premiums paid in(.non-forfeiture option )

Front 15

Extended Term

Back 15

policy owner can ask the insurer to keep his cash value and use it as a single premium to buy him a new term policy with the same face amount as his original policy for as long as the money will last (extended term) (non-forfeiture option )

Front 16

Contingent Beneficiary

Back 16

The proceeds are paid When the primary beneficiary predeceases the insured

Front 17

APL

Back 17

Automatic Premium Loan (APL) is a rider that may be added only to a cash value Life insurance policy. Although most riders cost extra, this rider is free, since it is designed to keep the policy from lapsing, which benefits both the insured and the insurer. Although the rider is free, it is not automatically added to a policy unless the owner requests it. It is not a non-forfeiture option and it cannot be added to a term policy.

It must be elected by the policyholder, even though it is usually free.
If this rider is attached and the owner fails to make a premium payment by the end of the grace period, the policy will automatically borrow from itself an amount sufficient to pay the overdue premium, so the policy will not lapse and will not go into non-forfeiture. However, the amount borrowed is a loan and will be subject to interest charges. If the insured dies with a loan outstanding, the amount of the loan, plus interest, will be subtracted from the policy proceeds.

Front 18

Life insurance policy dividends

Back 18

Mutual insurers write ‘participating’ policies, which means that their policy owners MAY receive dividends, at the discretion of the Board of Directors. If paid, such dividends are not taxable, since the IRS considers them to be a return of a premium overcharge.

Front 19

reinstatement of a lapsed Life insurance policy

Back 19

The right to apply for Reinstatement is a mandatory provision in a Life policy. If the policy lapses, the owner has the right to apply, but reinstatement is subject to underwriting and paying all back premiums due, plus interest. If an insurer approves, the original policy is reinstated, which means that future premiums will be based upon the insured’s original age. However, a policy that has been surrendered for cash may not be reinstated.

Front 20

Five settlement options

Back 20

There are five settlement options from which a beneficiary may select upon death of the insured. 1) Cash, 2) Fixed Period (proceeds, plus interest, are all paid out over a fixed period of time, say 10 years), 3) Fixed Amount (the beneficiary elects to receive $1,000 per month, plus interest, for as long as the money lasts), 4) Interest (the proceeds are left with the company to accumulate additional interest) and 5) Life Annuity (paid as long as the beneficia­ry/annuitant lives).

Front 21

All my children

Back 21

If you designate ‘all your children’ as primary beneficiaries of your life insurance policy, you have made a ‘class’ designation, rather than an individual designation. In other words, any person who can prove that they are your child would be entitled to an equal share of the proceeds upon your death.

Front 22

the owner may do all of the following without the insured's consent

Back 22

As owner of the policy, this "third party" has the right to control the policy, including the beneficiary designation, taking a loan or even surrendering the policy for cash. However, under the Doctrine of Insurable Interest, the policyholder would need the written consent of the insured to increase the policy limits.

Front 23

Payor Benefit Rider

Back 23

The payor benefit rider is like waiver of premium, except it is added to a policy written on the life of a child.

Front 24

The Incontestability Clause

Back 24

The Incontestability Clause protects the client who may have lied (misrepresentation) on the original application for life insurance. The company has two years to investigate the insured from the original date of application. If the client dies within the first two years and the insurance company can prove that he/she lied about a material fact on the original application, they can deny the claim. However, after the two-year period has elapsed, they must pay the claim even if the client lied. So, those who lied can quit worrying after two years!

Front 25

waiver of premium

Back 25

The waiver of premium rider can be added to any policy and will waive the insureds premium after a six month waiting period if the insured becomes totally disabled. During the six month period the insured is responsible for paying their premium. If, after the six months, they are still totally disabled the rider goes into effect and will pay the insured back the premium they paid during the six months and waive the ongoing premium as long as they are disabled. Waiver of premium is a rider NOT a non-forfeiture option.

Front 26

Accelerated Benefit

Back 26

Accelerated or living benefits are not treated as a loan and no interest will accrue, although any amounts paid will reduce the amount payable at death.

Front 27

Most assignments of life-insurance policies are made in

Back 27

Insured's personal or business credit

EX)Collateral Assignments, in which the insured pledges his policy to the bank as collateral for a bank loan, are very common. When the loan is paid off, the Collateral Assignment drops off. A Collateral Assignment assures the bank that if the insured dies with the loan outstanding, the bank will be paid.

Front 28

Accidental Death Benefit (ADB

Back 28

Accidental Death Benefit (ADB), sometimes called Double or Triple Indemnity, is a rider that may be attached to any life insurance policy for an extra premium charge. The additional benefits are paid only if the insured dies within 90 days of an accident. If the insured lingers beyond 90 days, the policy reverts back to single indemnity only, and the face amount without the rider is paid, since it is assumed that death resulted more from natural causes than as a result of the accident.

Front 29

An applicant for Life insurance is told that his coverage will cost $5.00 per unit per year based upon his present age, health and hobbies. If he buys a policy with a face amount of $75,000, his annual premium will be

Back 29

One unit of life insurance is $1,000 of coverage. To find the annual premium, multiply the cost per unit (or ‘rate’ per unit) X the number of units purchased. The cost per unit is $5.00 multiplied by 75 units equals an annual premium of $375.00. While rates are based primarily on age, an applicants gender, health, dangerous hobby or occupation are also rating factors. Remember, on Whole Life, the rate is determined based on the applicant’s original age and will never change.

Front 30

Credit Life

Back 30

Life insurance is the beneficiary also the policyholder

Front 31

the State Guarantee Fund

Back 31

Up to certain limits, the State Guarantee Fund protects the customers of insolvent (bankrupt) insurers. However, Surplus Lines insurers are not required to participate since they are non-admitted. Further, the Life Insurance Guarantee Fund does not cover the insolvency of insurers selling only variable life or variable annuities, since these products are considered to be securities and are sold without any guarantees.