Reading...
Play button
Play button
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;
91 Cards in this Set
- Front
- Back
|
A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury is called?
a) accelerated provision benefit b) viatical settlement benefit c) automatic premium loan provision d) waiver of maturity provision |
A) accelerated provision benefit.
The accelerated payment can be made in a lump sum or in monthly installments over a special period of time. This provision is given without an increase in premium. Some companies, however, deduct an interest charge from the proceeds paid out to make up for their lost earnings. |
|
|
Method used to pay the death benefit to a beneficiary upon the insured's death is called?
a) death benefit settlement b) settlement option c) designation option d) beneficiary provision |
B) settlement benefit
Settlement options are methods used to pay death benefits to a beneficiary upon the insured's death. |
|
|
Which is not true regarding accumulation interest?
a) the amount of interest is specified in the policy. b) the interest compounds annually. c) the dividends are taxable. d) the policyholder can withdraw dividends at any time. |
C) the dividends are taxable.
The accumulation at interest option let the policyholder withdraw at any time. The isurer keep the dividends, allowing them to compound a specified amount of interest annually. The dividends themselves are not taxable, but the interest on the dividends is taxable to the policyowner, regardless if the dividends are collected. |
|
|
Sam has taken up stunt driving as a hobby. His insurer has added a provision stipulating that loss resulting from stunt driving injuries will not be covered. What is this provision called?
a) conditional b) option c) hazard d) rider |
D) rider
Riders are attachments added to a policy when either add or delete provisions. Riders may work in favor of or against the policyholder. |
|
|
A parent who wishes to have complete control of a son's life insurance policy until the son reaches age 25 can do so through the use of which of the following?
a) payor provision b) ownership provision c) insuring clause d) consideration clause |
B) ownership provision
As owner of a policy, a parent can control the contract. |
|
|
Jason has a 50,000 20 year pay life policy which he will let lapse at the end of the forth year. The nonforfeiture option that would provide coverage for the longest period of time would be?
a) extended term b) paid-up option c) paid-up additions d) reduced paid-up |
D) reduced paid-up
The reduced paid-up nonforfeiture option would provide protection until Jason reaches 100, but the face amount is reduced to what the cash would buy. |
|
|
Melissa went to the bank to obtain a loan in order to fund the purchase of a donut shop. The bank needed more collateral than Melissa had expected. Since she owns a 250,000 life insurance policy, she decided to use it as collateral. This is possible because of what provision?
a) assignment b) insurable interest c) modification clause d) ownership provision |
A) assignment
Melissa could make a collateral assignment of her policy to the bank. |
|
|
Kate misstates her age at the time her life insurance application is taken. This mistatement may result in?
a) autmatic lapse b) recession of the policy. c) adjustment in the face amount. d) no change whatsoever. |
C) adjustment in the face amount.
In the event of Kay's death, the policy benefit would be the amount the premium paid would have purchased at the correct age, so long as her correct age did not exceed the policy's maxium age. |
|
|
Under which nonforfeiture option does the company pay the surrender value and have no further obligation to the policyowner?
a) extended term b) cash surrender c) reduced-paid up d) paid-up options |
B) cash surrender
Once the cash surrender value is paid, the contract is over. |
|
|
Which statement regarding the one year term dividend option is true?
a) the dividend is used to purchase an additional policy in the amount of the cash value. b) When the policyholder dies, the beneficiary receives both the cash value and the dividend. c) The interest on the dividend is used to purchase an additional policy. d) a new policy is in a one year format. |
A) the dividend is used to purchase an additional policy in the amount of the cash value.
With the one-year term option, the dividend itself, not the interest on the dividend, is used to purchase a one-year term insurance in the amount of the cash value. When the policyholder dies during that period, the beneficiary receives the death benefit of both the original policy and the additional one-year term policy. |
|
|
What is not true about beneficiary designation?
a) the beneficiary must have insurable interest in the insured. b) The beneficiary does not have to have insurable interest in the insured. c) the policyowner does not have to name a beneficiary in order for the policy to be valid. d) trusts can be valid beneficiaries, in order to manage life insurance proceeds for a minor. |
A) the beneficiary must have insurable interest in the insured.
A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. There is a great deal of latitude in determining the beneficiary, although none need to be designated in order for the policy to be valid. Beneficiaries range from close family members to charitable organizations; they do not have to have an insurable interest in the policyholder. |
|
|
Which of the following insurance policies allows for assignment of the contract to another individual or to an institution without first obtaining consent of the insurance company?
a) all types of insurance b) credit insurance c) life insurance d) property isurance |
C) life insurance
The assigment provision specifies the policyowners right to assign (tansfer right of ownership) the policy and the procedures that must be followed to effect the assignment. The policyowner does not need the insurer's permission to assign the policy, but they do need to advise the insurer in writing of the assignment. There are two types of assignment, absolute and collateral. |
|
|
Which is true about cash surrender?
a) the policyholder receives the original cash value of the policy. b) If the cash value exceeds premium paid, the excess is taxable as ordinary income. c) Once the policyholder opts for cash surrender, he/she is insured for a grace period of 1-month. d) It remains active for sometime after the policyholder opts for cash surrender. |
B) If the cash value exceeds premium paid, the excess is taxable as ordinary income.
The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive. |
|
|
Honus is diagnosed with an illness that will require long term treatment and medication. Honus's life insurance policy includes the accelerated benefit rider. Honus applied for money for the policy to pay for his treatment. What must the insurer provide Honus at the time of the first payment?
a) an explanation of how much of the death benefit can be accelerated. b) an explanation of how the payments affect the policy's death benefit. c) a benefit payment notice indicating the dollar amount of the payment and the dollar amount of the remaining death benefit and value. d) an explanation of how the benefit affects acculated cash value. |
C) a benefit payment notice indicating the dollar amount of the payment and the dollar amount of the remaining death benefit and value.
An explanation of how the payments affect the policy's death benefit, of how the benefit affects accumulated cash value, and how much of the policy's death benefit can be accelerated are all provided at the time the benefit is requested. |
|
|
Nonforfeiture values are required by state law. The ___ determines how to use them.
a) beneficiary b) policyowner c) insurer d) state |
B) policyowner
Nonforfeiture values are guarantees are built into the policy and cannot be altered by the policyowner. State law require nonforfeiture values to be included into every policy. The policyowner, however, is the one who assesses the options dictated by the values and determines how to use them. |
|
|
Insurance companies deny or restrict coverage for insureds that engage in certain hazardous activities that cause their risk of loss to be outside the norm used in establishing mortality rates, or would cause them to pay claims that would be against public policy. In insurance policies, these exposures that are not insurable or not included in a specific policy are found in the:
a) insuring agreement b) exclusions c) declarations d) face |
B) exclusions
"exclusions," is the part of the policy that identifies those risks that are restricted in coverage or are not covered by the policy. |
|
|
Cameron is purchasing a permanent life insurance policy with a face value of 25,000. While this is all of the insurance that he feels he can afford at this time, he wants to be sure that additional coverage will be available in the future. He should include in this policy a:
a) conversion option b) guaranteed renewal option c) non-forfeiture option d) guaranteed insurability option |
D) guaranteed insurability option.
The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability. |
|
|
Which nonforfeiture option has the highest amount of insurance protection?
a) extended term b) conversion c) decreasing term d) reduced paid-up |
A) extended term
The extended term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time. |
|
|
Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value?
a) past due premium option. b) application to reduce premium option. c) automatic premium loan option. d) mode of premium option. |
C) automatic premium loan option.
With the automatic premium loan option, if the premium is not paid out and the policy reaches the end of the grace period, the insurance company is directed to borrow the premium from the cash value as a loan to prevent the lapse. |
|
|
Abigails father dies shortly after his fifieth birthday. Abigail is the designated beneficiary. She is surprised to see that in addition to the face amount of the policy, she will also receive a refund for all of the premiums he had paid. Which rider is attached to her fathers policy?
a) premature death b) return of premium c) premium refund d) decreasing term |
B) return of premium
The return of premium rider pays the beneficiary not only the face amount of the policy but also the amount that has been paid in premiums. The rider stipulates that death must occur prior to a certain age in order for the premium amount to be returned; hence, this particular rider has an expiration date. The return of premium rider is funded by using increasing term insurance. |
|
|
Stan and Fran wanted to include their children in their whole life policy. They included a children's term rider with their spouse term rider, in order to form another,what is the name of this new rider?
a) family term b) whole family term c) inclusive term d) comprehensive term |
A) family term
A family term policy is created when a children's term rider and a spouse term rider is combined in a single rider which is attached to a whole life policy. with their spouse term rider. Under the family rider, the entire family is covered under the same policy. |
|
|
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?
a) there are no deductions taken from death benefits. b) penalty imposed for early withdrawal of the death benefit, plus the amount of earnings lost by the insurance company in interest income. c) 10% federal death benefit income tax, plus the amount of the accelerated benefit. d) amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit. |
D) amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit.
If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by the amount, plus the amount of earning lost by the insurance company in interest income. |
|
|
Which of the following is true of a childrens's rider added to an insured's permanent life insurance policy?
a) the policy only covers the natural children of the insured. b) each child covered must show evidence of insurability. c) it is term coverage that is convertible to permanent insurance or prior to the child reaching maxium coverage age. d) it is permanent insurance. |
C) it is term coverage that is convertible to permanent insurance or prior to the child reaching maxium coverage age.
Children's rider are term insurance covering all of the children in the family, including newly born children, and are convertible to permanent insurance upon a child reaching the maxium age without evidence of insurability. |
|
|
A long stretch of national economic hardship cause a 7% rate of inflation. Devon notices that the face value of her life insurance policy has been raised 7% as a result. What is the name of the provision that causes this change?
a) value adjustment rider b) economic adjustment rider c) inflation rider d) cost of living rider |
D) cost of living rider
The cost of living rider annually adjust the policy's face value in accordance with the national of inflation or deflation. This provision allows for the relative value of the policy to remain constant over time, despite changes in the economy. The cost of living rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time. |
|
|
Fred is unable to pay the premium on his whole life insurance policy by the end of the grace period. He can prevent the policy from lapsing by:
a) borrowing the premium from the cash value if there is sufficient amount to cover the loan. b) requesting a binder. c) giving a promissory note to cover the premium. d) placing the policy on the waiver of premium provision. |
A) borrowing the premium from the cash value if there is sufficient amount to cover the loan.
When a policy have cash value, it has loan value that may be borrowed by the policyowner. |
|
|
Loretta finds that she is no longer able to pay premiums on her 50,000 whole life policy, but feels that she still needs that amount of coverage to protect her family. Which of the nonforfeiture option would allow her to do this?
a) reduced paid-up b) paid-up option c) extended term d) fixed amount |
C) extended term
An extended term nonforfeiture option would provide 50,000, of coverage for as long as the cash value would pay for the term. |
|
|
Which of the following statement is true concerning a mutiple indemnity life insurance policy?
a) a multiple protection rider is only available to insure over age 65. b) mutiple protection policies must insure more than one individual. c) if the insured's death occur during a specified period after an accident, the policy will pay a benefit of double or triple the face amount. d) a mutilpe protection rider is only available on a level term policy. |
C) if the insured's death occur during a specified period after an accident, the policy will pay a benefit of double or triple the face amount.
Multiple Indemnity, also known as " double or triple indemnity", is a rider that requires the policy to pay double or triple the face amount if the insured dies within specified period after an accident. |
|
|
Which of the following has the authority to make changes to an existing life insurance policy?
a) agent b) policyowner c) policyholder d) insurer |
D) insurer
Any changes made to a policy must be endorsed and attached to the policy over the signature of an authorized officer of that insurer. No other individual has the authority to make changes or waive policy provisions. |
|
|
On the way home from work, Jeremy is involved in a car accident that damages his cervical vertabrae and surrounding nerves. Jeremy becomes quadriplegic as a result of the accident. What describes the insurance premium that he will pay for the rest of his life if his policy contains an optional waiver of premium rider?
a) jeremy's premium rate will be substantially reduced for the rest of his life. b) jeremy will have to pay his regular premium for 1 year. After that point, he will be charged a reduced rate. c) jeremy will have to pay his regular premium for 6 months. He will then be reimbursed for those premiums, and subsequent premiums will be waived. d) jeremy will continue to pay the premiums in the same manner as before the accident. |
c) jeremy will have to pay his regular premium for 6 months. He will then be reimbursed for those premiums will be waived.
Because jeremy is totally disabled, unable to return to work, jeremy's premiums will be waived, for the rest of his life, under the waver of premium rule. There is a six month waiting period to determine if the disability will last for at least six months. If it does, the insured is refunded those premiums. |
|
|
Which option provides a single beneficiary with income for the rest of his/her life?
a) single beneficiary option b) single life option c) one beneficiary option d) joint life option. |
B) single life option
The single life option provides a single beneficiary with income for the rest of his/her life. |
|
|
Who controls changes in premium payments, face value, and policy plans?
a) agent b) policyowner c) insurer d) beneficiary |
B) policyowner
Mandatory provisions give these rights to the policyowner. |
|
|
Peter wants to utilize the cash value from his life insurance policy to buy another policy. He opts to use the cash value as a single premium to buy a policy that has a lesser face amount than the original, which will accumulate in cash value until it matures or Peter dies. What type of policy does Peter have?
a) conversion b) paid-up addition c) paid-up d) reduced paid-up |
D) reduced paid-up
In a reduced paid-up policy, the original policy's cash value is used as a single premium to pay for another policy with a reduced face amount from the original, hence the name. The new policy accumulate in cash value until its maturity or the insured's death. |
|
|
The automatic premium loan provision is activated at the end of the
a) ending period b) policy period c) grace period d) time period |
C) grace period
Provided that there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force. |
|
|
A policy owner fails to pay the premium due on his whole life insurance policy after the grace period has passed, but the policy remains in force. This is due to what provision?
a) assignment b) automatic premium loan c) nonforfeiture option d) incontestible period |
B) automatic premium loan
This provision is not required, but 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. |
|
|
What provision dictates who has the right to change beneficiaries, choose options, and receive proceeds?
a) the ownership provision. b) the entire contract c) the consideration clause. d) the assignment provision |
A) the ownership provision.
The ownership provision states the rights of the policyowner. |
|
|
Lyle has a 10,000 term life policy. He paid his annual premium on Feb 1. Lyle fails to renew the policy and dies on Feb 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from Lyle's insurance company?
a) O b) 10,000 c) 9,800 d) $200 |
C) 9,800
In this scenario death occurred within the mandatory 30 day grace period. Past due premiums would be subtracted from the face amount of the policy. |
|
|
What is true about nonforfeiture values?
a) policyowners do not have the authority to decide how to exercise nonforfeiture values. b) they are required by law to be included into the policy. c) they are optional provisions. d) a table showing nonforfeiture values must be included in a policy for a minimum period of ten years. |
B) they are required by law to be included into the policy.
Nonforfeiture values are aptly named because they cannot be altered by the policyowner. They are required by state law to be included in the policy. A table showing the nonforfeiture values must be included in the policy for a minimum period of 20 years. |
|
|
What are some provisions in a insurance contract?
|
Ownership, Assignment, Entire Contract, Modifications, Right to Examine (Free Look), Payment of Premiums, Grace Period, Reinstatement, Backdating of Policies, Incontestability, Misstatement of Age or Sex, Exclusions, Suicide, Payment of Claims, and Autopsy.
|
|
|
What does a standard provision intell?
|
This explains the rights and characteristics of an insurance contract. There is no standard policy form for life insurance because wording is not required by state statue. However, there is a great deal of uniformity among life insurance policies because of state regulations and NAIC guidelines.
|
|
|
What is a policyowner?
|
This is the individual who has the rights, including the responsibility of paying the premiums. They are usually the applicant and is the person who must have an insurable interest in the insured at the time of application for hte insurance. They may also be the insured and may name his or her estate as beneficiary of the policy preceeds.
|
|
|
What is the assignment provision?
|
The policyowner of a life insurance policy has the right to transfer the policy to another person without the consent of the insurer. Only the rights udner the policy are transferred, the policy itself stays the same. In other words, transfer of the life insurance policy does not change the insured or amount of coverage, it only changes who has the right to exercise the policy ownership rights. The policyowner does not need the insurer's permission to assign the policy, but they do need th advise the insurer in writing of the assignment.
|
|
|
What are the two types of assignment?
|
Absolute and Collateral
|
|
|
What is absolute assignment?
|
This assigment involves transferring all rights of ownership to another person or entity. This is permanent and total transfer of all the policy rights. The new policyowner does not need to have an insurable interest in the insured.
|
|
|
What is collateral assignment?
|
This assignment involves transfer of partial or temporary rights of ownership to another person. It is usually done in order ot secure a loan or some other transaction.
|
|
|
What constitute the entire contract?
|
This stipulates that this is the policy, and a copy of the application along with any riders or amendments.
|
|
|
What are modifications?
|
This is changes in the policy, or any agreement in connection with the policy, must be endorsed on or attached to the policy in writing over the signature of an executive officer of the insurer. While the policyowner may request changes, only an executive officer can make the changes to the contract.
|
|
|
What is the right to examine or free look provision for a new policy?
|
This allows the policyowner of a new policy 10 days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The beginning of this period starts when the policyowner receives the policy, not when the insurer issues the policy.
|
|
|
What is the right to examine or free look provision for a replacement policy?
|
This allows the policyowner of a old policy 20 days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium. The beginning of this period starts when the policyowner receives the policy, not when the insurer issues the policy.
|
|
|
What is the payment of premium provision?
|
This is when the policy stipulates when the premiums are due, how often they are paid (monthly, quarterly, semiannually, annually, etc.) and to whom. The least expensive way to pay the policy premium is annually or by monthly draft; all other modes of payment requires the policyowner to pay a service fee for the additional administrative costs incurred by the insurer.
|
|
|
What is the mode?
|
This is the manner or frequency that the policyowner pays the policy premium.
|
|
|
What is the grace period?
|
This is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days). The purpose of this period is to protect the policyholder against an unintentional lapse of the policy. If the insured dies during this period, the death benefit is payable; however, the unpaid premium will be deducted from the death benefit.
|
|
|
What is the reinstatement period?
|
This period allows the policyowner an opportunity to restart a policy that has lapsed, subject to providing continued insurability. The maxium time limit is usually three years. If the policyowner does this, the policy is restored to its original status, and all policy values must be brought up date. In other words, the policyowner is required to pay all back premiums, plus interest, and to repay any outstanding loans and interest.
|
|
|
What is backdating of a policy?
|
This allows a policyowner to get a lower premium rate. The policy may not go back more than 6 months, and all premiuims must be paid from the effective date of the policy.
|
|
|
What is incontestablilty clause?
|
After two years a lie becomes the truth. This prevents an insurer from denying a claim due to statement in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.
|
|
|
What is the provision of the statement of misstatement of age or sex?
|
This allows the policyowner the provision to adjust the benefit to an amount that the premium at the correct age would have otherwise purchased (either lower or higher).
|
|
|
What are 3 types of exclusions?
|
* Aviation Clause
* Hazardous Occupations or Hobbies Clause * War or Military Service Clause. |
|
|
What is the aviation clause exclusion?
|
This is a stipulation in a contract that will not provide coverage to pilots, or require an additional premium for the coverage.
|
|
|
What is hazardous occupations or hobbies clause exclusion?
|
This is a stipulation in a contract that will provide coverage to insured engaged in a hazardous occupation or participates in hazardous hobbies (such as sky diving or auto racing), the underwriter may exclude death that results for the hazardous occupation or hobby. Ex. Jeff Gordan race car driver.
|
|
|
What is war or military service clause?
|
This is a stipulation in a contract that will not provide coverage that contain a no military clause.
|
|
|
Waht are the two types of different exclusions that may be used by life insurers that limit the death benefit if hte insured dies as a result of war or while serving in the military.
|
The status and the result clause.
|
|
|
What is the military service status clause?
|
This exclude all causes of death while the insured is on active duty in the military.
|
|
|
What is the military service result clause?
|
This excludes the death benefit if the insured is killed as an act of war.
|
|
|
What is the suicide provision?
|
Unless the life insurance cna prove the insured intended to die at the time of application, they must pay the life insurance benefit. There is no time limit on this type of provision.
|
|
|
What is the payment of claims provision?
|
Upon receipt of a written proof of loss, the insurer must pay death claims immediately. This must be within 30 days.
|
|
|
What is the autopsy provision?
|
This provision states that the insurance company, can, at its own expense, have a deceased body looked at, to determine if the death was accidental ro due to natural causes.
|
|
|
What is the change of beneficiary provision?
|
This provision gives the policyowner considerable latitude in deciding how and to whom the policy proceeds will be paid at death.
|
|
|
What is the beneficiary?
|
This is the person or interest to whom the policy proceeds will be paid upon the death of the insured. This may be a person, class of persons (sometimes used with children of the insured), the insured's estate, or an institution or other entity such as a foundation, charity, corporation or trustee of a trust.
|
|
|
Who is a primary beneficiary?
|
This is who has first claims to the policy proceeds following the death of the insured. The policyowner may name more than one person and how he want the proceeds to be divided.
|
|
|
Who is a contingent beneficiary?
|
This is who has second claims to the policy in the event that the primary beneficary dies before the insured. They do not receive anything if the primary beneficiary is still living at the time of the insured's death. The policyowner may name more than one person and specify how the proceeds are to be divided.
|
|
|
Who is the tertiary beneficiary?
|
This is the third person in line for the death benefits in the event that both the primary and continent beneficiary predecease the insured.
|
|
|
What is a class of beneficiary?
|
This is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or illegitimate children. That is why many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive.
|
|
|
What are the two class designation types?
|
Per Capita and Per Stirpes
|
|
|
What is Per Capita?
|
This means "by the head." This means that the benefits are to be evenly distributed among the remaining survivors.
|
|
|
What is Per Stirpes?
|
This mean "by the bloodline."
This mean that the benefits are to be distributed the benificiary benefits who has died before the insured to the beneficiary's heirs. |
|
|
What happen to an insured state if at the time of his death, none of the beneficiary are alive?
|
The insured's state (assets and liability left by the insured at death) will automatically receive the proceeds of a life insurance policy. The death benefit of the policy may be included in the insured's taxable estate if this occurs.
|
|
|
How is benefits designated to minors?
|
Because of the legal status of minors, benefits to a minor need either be given to a guardian or trustee of the minor or placed in trust for the minor.
|
|
|
What is a trust?
|
This person has specific purpose. The owner gives legal title to another, to be used for the benefit of a beneficiary. This person cannot benefit from this, but is paid to administer the funds in accordance with the instructions of the funds.
|
|
|
What is succession of beneficiary?
|
Primary, Contingent, and Tertiary. In each of these levels, is only eligible for the death benefit if the beneficiary(s) in the level(s) above them has died before the insured.
|
|
|
What is the difference between a revocable versus irrevocable beneficiary designation?
|
The policyowner, without the consent or knowledge of the beneficiary, may change a revocable designation at any time. An irrevocable designation may not be changed without the written consent of the beneficiary. Irrevocable beneficiaries have a vested interest in the policy and, therefore, the policyowner may not exercise certain of the policyowner rights without the consent of the beneficiary.
|
|
|
What is the common disaster clause?
|
This clause is designated to protet the contingent beneficiary and the wishes of the isured. If the insured and the primary beneficiary dies at approx. the same time from a common accident with no clear evidence as to who died first, a problem may arise in identifying which person died first. The USD Law will assume that the primary beneficiary dies first in common diaster and the proceeds will be paid to either the contignet beneficiary aro the insured's estate, if no contingent beneficiary is designated.
|
|
|
What is the spendthrift clause?
|
This clause prevents the beneficiary's reckless spending of benefits by requiring that the benefits be paid in a fixed period or fixed amount installments. The beneficiary does not have the right to select a different settlement option and is not allowed to assign or borrow any of the proceeds. This clause is designed to protect the proceeds from creditors of the of the beneficiary.
|
|
|
What are the 5 types of settlement options of how the beneficary get paid?
|
1. Cash Payment
2. Interest Only 3. Fixed-Period Installments 4. Fixed-Amount Installments 5. Life Income |
|
|
What is cash payment in the settlement to the beneficary?
|
Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash of a lump sum, unless hte recipient chooses an optional mode of settlement. The policyowner may selcet the settlement option for the beneficiary; however, if the policyowner does not select an option, the beneficiary will be allowed to choose one at the time of the insured's death. If the policyowner does select the settlement option in which the proceeds are to be paid, the beneficiary cannot change the option. Payments of the principal face amount after the insured's death are not taxable as income. If any interest is paid, the interest is taxable.
|
|
|
Waht is the interest only option in the settlement to the beneficiary?
|
Only the interest is going to be taxed. This is a temporary option used, when beneficiary doesnt know how to be paid. The insurance company retains the policy proceeds and pays interest on the proceeds to the recipient at regular intervals (monthly, guarterly, semiannually, or annually). This option is considered to be temporary since the proceeds are retained by the insurer, until some point in time when the proceeds are paid out in a lum sum or paid under one of the other settlement options. When the beneficiary is allowed to select a settlement option, hte interest option is sometimes used as a temporary option if the beneficary requires some time in deciding which settlement option to select.
|
|
|
What is the fixed-period installment option in the settlement to the beneficiary?
|
This installment payout is called a period certain. This allows a specified period of years to be selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of the that period. In the event of the recipient's death, the payment would continue to a beneficiary. This option does not guarantee income for the life of the beneficiary; however, it does guarantee that the entire principal will be distributed.
|
|
|
What is the fixed-amount installment option in the settlement to the beneficiary?
|
This installment pays a fixed, specified amount in installments until the proceeds (principal and interest) are exhausted. The recipient selcets a specified fiexed dollar amount to be paid until it is gone. If the beneficiary dies before the proceeds are exhausted, installments will continue to be paid to a contingent beneficiary until all proceeds have been paid out.
|
|
|
What is the life income installment option in the settlement to the beneficiary?
|
This installment provides the recipient with an income that he or she cannot outlive. The installment payments are guaranteed for as long as the recipient lives, irrespective of the date of death. If the beneficiary lives for a very long time, payments may exceed the total principal. However, if the beneficiary dies shortly after he or she begins recieving installments, the balance of hte principal is forfeited. This option guarantees payments for the life of the beneficiary; however, there is no guarantee that the beneficiary will receive all of the death benefit.
|
|
|
What is the single life option?
|
This provides a beneficiary income for the rest of his/her life.
|
|
|
What is the life income and joint survivor option?
|
This guarantees an income for two or more recipients for as long as they live. Although it is possible for the surviving recipient or recipients to receive payments in the same amount as the first recipient to die, most contracts provide that the surviving recipient will recieve a reduced payment after ther first recipient dies. Most commonly the reduced option is written as "joint and 1/2 survivor" or "joint and 2/3 survivor", in which the surviving beneficiary recieves 1/2 or 2/3 of what was received when both beneficiary were alive.
|
|
|
What are 3 nonforefeiture options?
|
1. Cash Surrender Value
2. Extended Term 3. Reduced Paid-Up Insurance |
|
|
Waht are nonforteiture values?
|
These are cash values that permanent life insurance have. That have cash value that are built into the policy that cannot be given up by the policyowner.
|
