Nc Life Insurance-Policy Provisions, Options, And Other Features

Front 1

What are Non-Forfeiture Values

Back 1

Non-Forfeiture values are option the insured has when they surrender a policy prior to maturity. Non-Forfeiture values are a contractural part of a Universal Life, Whole Life, and Endowment type of policy.

Front 2

What 3 Non-Forfeiture Options are available??

Back 2

1.Cash Surrender Value

2. Extended Term insurance

3. Paid up Insurance

Front 3

What is Cash Surrender Value?

Back 3

Cash surrender value is the amount of money the insured could recieve when they terminate a policy prior to maturity.

*The insured has a legal right to get the cash surrender value as long as they request it within a certain time period

*The amount is shown under guranteed values in the contract. Dividends may be available as well but are not shown in the contract bc Dividends are NEVER guranteed.

Front 4

What adjustments could be made to a Cash Surrender Check??

Back 4

1. A company may credit a small amount of unearned premium

2. Any unpaid loan balance would be deducted from the proceeds

3. Any interest due on the unpaid loan

Front 5

What is the Extended Term option under Non Forfeiture Options??

Back 5

This is when the insured has the options to use the values obtained from surrendering (terminating) a policy prior to maturity to purchase TERM INSURANCE for as long as it will last. The insurance is purchased for the same amount of the original face value of the policy

Front 6

What is the Paid Up insurance option under the non-forfeiture options??

Back 6

This option allows the insured to use their noon-forfeiture value to provide the largest possible policy that would be paid up with no further payments being required. This policy is of the same plan that was originally purchased but is adjusted to a reduced amount of coverage. The paid up insurance option provided coverage for life.

*Paid up insurance provides the longest period of protection

Front 7

What Non Forfeiture option is elected if no option is made after a certain period of time??

Back 7

If no option is made after a certain period of time then they usually choose EXTENDED TERM.

*None of the non forfeiture options would come into play if the insured had the Automatic Provison Loan on their policy.

Front 8

What is the Automatic Provision Loan (APL)??

Back 8

The Automatic PRovision Loan is an option the insured can put on their policy . Assuming that there is enough cash in the cash value to equal one premium payment, then this option would automatically borrow money from the policy values to keep the plan in force.

*If the APL activates then the cash value and the death benefits will decrease

Front 9

What is a Settlement??

Back 9

A settlement is an agreement between the policy owner and the insurance company as to how insurance values will be taken. The values can be made available in 2 ways:

1. In the even of a death of the insured

2. When alive, and you use the values that have built up

They can be set up in 2 ways:

A) By Owner-this is where the owner by contract can arrange for values to be set uo in a certain way in the event of death

B)By Beneficiary-this is where the owner of the policy has left it up to the benficiary to decide how they would like the the proceeds to be distributed in the event of the insured premature death.

Front 10

How do ypu determine how much NET PROCEEDS will be distributed in the event of a death of the policy owner

Back 10

ADD the following:

a. The face amount of the policy

b. Dividends, if any

c. Unearned premium

d. The interest must be credited from the 30th day followin PROOF OF LOSS

Then SUBTRACT the following:

a. Any outstanding loan balance

b. Any loan interest due

c. Any unpaid premium due

Front 11

What are the SETTLEMENT OPTIONS of the Insured??

Back 11

a.Joint Survivor

b. Interest Only

c. Fixed Amount

d. Fixed Period

e. Life Income

Front 12

What is the Joint Survivor SETTLEMENT OPTION??

Back 12

The Joint Survivor settlement option is where the income is paid throughout the lives of 2 or more benficiaries.

Front 13

What is the INTEREST ONLY settlement option??

Back 13

In this options the proceeds are retained by the insurance company and the interest is paid out

Front 14

What is the Fixed Amount settlement option??

Back 14

In this option, a given amount of money is paid out until there is no principle or interest remaining

Front 15

What is the Fixed Period Settlement option??

Back 15

In this option, the goal is to be certain that some amount of income is received on a systematic basis over a fixed period of time. The insurance contract states the amount of incoome that can be paid out for this certain period of time

Front 16

What is the Life Income option settlement option??

Back 16

In this option, we are trying to obtain an income for life of a given individual, whether it be for the insured or the benficiary.

*When the individual is concerned about receiveing the highest income possible, the Pure Straight Life Option is selected. The high payment would be recieved for life. HOWEVER, THERE IS NO REFUND WHEN THE PERSON DIES. So, that why most people choode this option with a time period attached to it. This way th individual is assured an income for life, but in the even of an early death, the money would continue for some period of time to a named beneficiary.

Front 17

Types of Beneficiary Catagories

Back 17

a. Estate vs. Named Party

b. Named vs. Class

c. Revocable vs. Irrevoccable

Front 18

Describe a Estate vs. Named Party

Back 18

Here, the insured can name their estate as beneficiary, alothough most people choose to name a individual or individuals. Also a TRUST, a PARTNERSHIP, or a CORPORATION can be named as a beneficiary.

*The first beneficiary is called the PRIMARY BENEFICIARY

*The second beneficiary is called the SECONDARY or CONTINGENT.

The secondary benficiary would only recieve money if the primary beneficiary dies before the insured dies.

*If no beneficiary is named, then the money will AUTOMATICALLY go to one's ESTATE.

Front 19

Describe a Named vs. Class Party??

Back 19

Here the policy owner came designate a named insdividual to receive proceeds or they can do this list by class. Example: My estate will go to John Johns (Named Beneficiary) or My estate will go to all my children (Class Beneficiary)

Front 20

Describe a Revocable vs. Irrevocable Party??

Back 20

In a REVOCABLE, the policy owner can change the beneficiary as he/she desires. A REVOCABLE BENEFICIARY HAS NO RIGHTS!!!

In an IRREVOCABLE beneficiary, the beneficiary must give written consent for a change of signing. Also they would have to sign to ok any substantial change to a policy such as borrowing, dividend option changes, assignment, etc.

Front 21

What is the Uniform Simultaneous Death Act??

Back 21

This law states that if it cannot be determined otherwise, it is ASSUMED that a beneficiary PREDEACEASED an insured. Thus the secondary/contigent beneficiary would recieve the proceeds or the estate of the insured would if no secondary/contingent had been named..

*Example: Suppose Dan and Jan were in a accident and a witness said that they were both dead upon arrival. In this situation, it would be assumed for insurance purposes that the beneficiary died FIRST. Thus the insured secondary/or contigent beneficiary would be entiltled to the proceeds

Front 22

What is Common Disater and Short Term Survivorship

Back 22

This ensures that in the event of the death of the insured and the beneficiary. That the said beneficiary muct outlive the insured for a certain number of days before the insurance is payable. If the said individual does not live the certain amount of days, then the estate goes to the insured secondary/contigent. This COMMON DISASTER CLAUSE must be from the same ACCIDENT to apply. Without this clause then the insured estate would likely go to the beneficiaries family instead of his own.

Front 23

What are some methods of Filling vs. Endorsment??

Back 23

1. Filing/Recording Method-This is where the case is filed with the companies home office. The change becomes effective the day the owner signs the change form

2. Endorsement Method-This method requires that the owner send the beneficiary request to the home office. The home office then either types or attaches this change directly to the policy.

Front 24

What is Modes??

Back 24

This refers to the different ways the insured can pay their premiums

Front 25

What is a Mortality Charge??

Back 25

This is the first ingriedeint a insurance company looks at to determine a fair and equitable premium rate. The 2 other items are INTEREST and EXPENSE.

*Rememeber INTEREST, MORTALITY, and EXPENSE

Front 26

What does a Mortality Table include??

Back 26

This is a device that shows how many people die at each year at a certain age

Front 27

What is another word for EXPENSE??

Back 27

Load

Front 28

What is a Front End Load??

Back 28

This term was introduced with UNIVERSAL LIFE. A front end loaded product is one whose expenses are deducted first and then interest is credited.

*A change was made bc people complained that too much money was being taken out in the early years. So they made expenses payable in the later years of a policy.

Front 29

What is a Rear End Load

Back 29

This is where the expenses are payable in the later years of a policy

Front 30

What is the EXPENSE CHARGE

Back 30

This is basically the operating expenses that an insurance office may have

Front 31

What is the Interest Credit

Back 31

This is the final ingriedient used to determine the premium rate. Premium dollars coming into an insurance agency are available for investment until they are need to pay expense and claims. The higher the investment earnings a company can earn, the competitive the product

Front 32

What is Excess Interest Provision

Back 32

This is where a company can credit additional interest over and above the minimum guranteed rate.

Front 33

What is Change of Contract

Back 33

This feature allows the insured contractural rights to make changes in the policy. This specifies to which form a policy holder may change their policy to. It will spell out what the policy owner can do without requiring evidence of insurability. This remains fairly flexible so that the policy holder can make changes down the road should their needs change.

Front 34

What is Accidental Death and Dismemberment Benefit

Back 34

This states that the policy will pay an additional amt if someone dies by accident. We most often see this written as a DOUBLE INDEMITY, which means the polciy will pay twice the face amount.

*Accidental Death is clearly defined in the actual contract. The definition is that death must result from bodily injury by external, violent, and accidental means and that actual death must occur within 90 days of the injury to be covered.

Front 35

What is Guranteed Insurability

Back 35

This is another rider that can be added for a small addtional premium. This rider enables the insured ti purchase additional insurance without evidence of insurability a certain specific ages. If someone does purchase this type of rider, they must know that the rate for the additional coverage will be for their attained age, not the age when the policy was original issued

Front 36

What is Waiver of Premium

Back 36

This states that should the policy owner become permenately and totally disabled, the premiums will be waived for as long as the person remains in this condition.

*Unemployment DOES NOT qualify

*The waiting period to qualify for this is 6 months

*If the insured goes back to work, they DO NOT have to pay back the premiums

Front 37

What is Waiver of Monthly Deductions

Back 37

This is the Waiver of Premium, but for a Universal Life/Adjustable policy.

a) Mortality Costs: if the insured is disabled the insurance company will only waive the cost of term insurance on their policy. The expense portion or additonal premiums will NOT be waived

b)Planned target Premiums: the insurance company will waive the entire planned premium that is being paid by the insured

Front 38

What is the Cost of Living Rider??

Back 38

This rider is offered by companies that automatically increases insurance due to inflation and cost of living increases. Basically, the rider automatically buys Term insurance as the COST OF LIVING rises

Front 39

What is the ownership clause

Back 39

This clause is the priviledges the policy owner has

*The owner may change premium paying methods, beneficiary setups, settlement options, dividend options, etc.

*It does NOT allow you to change the amount earned on your tax values

Front 40

What is the Misstatement of Age Clause??

Back 40

NO TIME LIMIT!! This clause states that any mistake as far as age or sex is concerned will be subject to adjustment. The policy will be adjusted to what the premium would have been if they had purchased at that current age or sex

Front 41

Incontestable Clause (2years)

Back 41

This clause protects the insured by saying that a policy becomes incontestable normally after a period of 2 years. Meaning that if a insurance company finds that someone has intentionally lied on their application and it is past the 2 year limit, the insurance company has to honor that policy by law

Front 42

What is the Life Grace Period??

Back 42

Normally an insured has 31 days to pay a premium due. The companies offer a grace period of 28 days to avoid unintentional policy laspe

Front 43

What is Reinstatement (5 years) and what does the insured have to do to reinstate a policy??

Back 43

This means if someone has gone beyond the grace period and hs still not paid the premium the company will reinstate the policy if 3 conditions are met:

1. Evidence of Insurability

2.Payment of back premium and interest

3. Repayment of any loans against the policy

Front 44

What are the advantages to having a a policy reinstated??

Back 44

The main reason is because the insurance rates would be based on a younger age so it would have greater values, dividends, etc

Front 45

What does the term ABSOLUTE mean

Back 45

This is where a policy is totally transferred from one person or one entity to another. The old owner has no further rights

Front 46

What does the term Collateral Mean??

Back 46

This is where a bank,for example, is assigned a policy. If the insured dies prior to the loan being paid off, then the bank would recieve the first amount of money.

Front 47

What is the Free Look Provision??

Back 47

This provision allows a policy holder 10 days from the policy delivery in which to look over there policy. If for any reason they are not satisfied then the policy can be returned and the entire premium refuned and the policy will be considered null and void from the beginning.

Front 48

What is the Suicide Clause??

Back 48

This clause states that if someone should commit suicide within a 2 year period, then the insurance companys only obligation is to returns the premiums to the beneficiary. However, if someoone commits suicide AFTER the 2 year period then the insurance company is obligated to pay the FULL claim

Front 49

What is the Entire Contract Clause

Back 49

This just states that the policy and application forms the entire contract. Also that no outside documents are part of the contract. And that the company CANNOT change anything after the policy is issued

Front 50

What is the Insuring Clause

Back 50

This states the promise to pay and to define the scope of the policy

Front 51

What is the Aviation Exclusion Clause

Back 51

This clause can limit or exclude coverage when the insured is participating in some type of air travel

Front 52

What are some Policy L:oan Provisions??

Back 52

After cash values build up in a policy, the policy owner may borrow from it. Insurance companies charge loan interest rates for the use of this money. it may be on a fixed or on a variable rate.

*You can borrow on your insurance an unlimited amount of times provided there is enough money in it to do so.

*Insurance companies can defer a person from borrowing money up to 6 months

*If the policy owner dies before paying the loan back, the loan plus any interest accumulated will be subtracted

Front 53

What is the Automatic Premium Loan Clause (APL)

Back 53

1.States that a few days after the grace period, an insurance company will automatically take the money away from an insurance policy to pay the premium.

*Any APL amount will DECREASE the cash value and the death benefit

Front 54

What are the Dividend Options??

Back 54

1. CASH

2. Reduce Premium

3. Accumulate at interest

4. Paid up Additions-this buys up paid insurance of the same type as the policy

5. 5th Dividend Option-here, dividends buy one year term insurance equal to the cash value of the policy

Front 55

What happens if the APL is activated??

Back 55

The cash value and the death value will decrease

Front 56

What type is policy is known to have rear end loading in theh form of service charges for withdrawals or policy surrenders??

Back 56

Adjustable Life

Front 57

If the expense factor in a Universal Life policy is DEDUCTED out of the mortality charge (cost of pure insurance protection) before being added to the cash accumulation fund, this is known as a...

Back 57

Front End Load

Front 58

What are the requirements to reinstate a life insurance policy??

Back 58

*Reinstate within 5 years

*Pay back all premiums plus interest

*Pay back any outstanding loans on th elasped policy

*Provide evidence of insurablitiy

Front 59

What automatic option will a policy go into if the premiums stop and the insured does NOT elect a nonforfeiture option

Back 59

EXTENDED TERM

Front 60

What clause protects the money from going into the primary beneficiaries estate if the primary beneficiary dies shortly after the insured but from a totally unrelated cause of death

Back 60

Short Term Survivorship Clause

Front 61

What provision states that no outside documents can be referred as part of the contract

Back 61

Entire Contract

Front 62

What does the cost of living rider do

Back 62

Keeps the policy in pace with the insured current earnings

Front 63

What non forfeiture option provides the greatest amount of life insurance protection??

Back 63

Extended Term

Front 64

If a policy is under Collateral Assignment and Dan wants to borrow 1,000$ from the policies cash value. Dan sends in a loan request to the insurer, what happens now

Back 64

The bank has to approve the loan and then the insurer mails Dan a check for $1,000

Front 65

What is the purpose of a grace period

Back 65

To protect against unintentional laspe of the policy

Front 66

The function of the entire contract provision in a life insurance policy

Back 66

To prohibit the insurer from making changes in the policy

Front 67

The insurers consideration is stated in what clause

Back 67

The Insuring Clause

Front 68

Interest must be paid on proceeds not paid out within

Back 68

30 days

Front 69

When the owner of a policy transfers ALL rights listed in the policy to another party, what type of assignment has been effected

Back 69

Absolute

Front 70

Dividends are set by

Back 70

The management of the insured

Front 71

Under the Waiver of Premium Provision, generally how long must an insured be disabled to qualify for this benfit

Back 71

6 months

Front 72

Which life insurance policy provision states that in consideration of the payment of premiums the company agrees to pay a certain stipulated amount to the named beneficiary upon due proof of death of the insured.

Back 72

Insuring Clause

Front 73

An insurance policy is normally incontestable after what period of time

Back 73

2 years

Front 74

Premium amounts which cover the time for which protection has not yet been provided is called

Back 74

Unearned Premium

Front 75

What is the maximum period of time an insurance company may delay a life insurance loan or a surrender request??

Back 75

6 months

Front 76

What life insurance settlement options "maintains" the face amountn rather than using it up

Back 76

Interest Only

Front 77

Under the Uniform Simultaneous Death Law, who is considered to have died first if the insured and the beneficiary die simultaneously??

Back 77

The BEneficiary

Front 78

The Waiver of Monthly Deductions would normally apply to which policy

Back 78

Universal Life

Front 79

Only the policy holder needs to sign the proper form in order to change this type of beneficiary

Back 79

Revocable

Front 80

What is the proper order of Beneficiaries

Back 80

Primary, contigent, estate

Front 81

What method of changing your beneficiary requires that you send the actual policy to the home office??

Back 81

Endorsement

Front 82

What method requires that only the benficiary change form be sent to the home office

Back 82

Filing

Front 83

The Sons of Larry Ludlow is an example of what type of benficiary designation

Back 83

Class

Front 84

What is Per Stirpes??

Back 84

In a life iinsurance policy owned by Tom Taylor he wants his policy proceeds to go to his 3 daughters in equal shares. If any daughter does not survive Mr. Tom Taylor, he wants her share to be paid to her SURVIVING CHILDREN

Front 85

What Life insurance provision recognizes the equity built up in a Life Insurance Policy??

Back 85

Nonforfeiture

Front 86

What nonforfeiture option provides the longest period of protection??

Back 86

Paid up Insurance

Front 87

Under the fifth dividend option, dividends will be used to

Back 87

Purchase One year Term

Front 88

Which dividend option allows the highest amount of life coverage??

Back 88

Paid Up Additions

Front 89

For the beneficiary to collect the ACCIDENTAL LIFE BENEFIT, the insured's death generally would have to occur within what period of time after the accident??

Back 89

90 days

Front 90

In order for a life policy to pay full benefits due to death by suicide, the policy would have to be inforce for how many years??

Back 90

2 years

Front 91

Under the Ownership Provision of a Life insurance policy, what rights does the policy owner have??

Back 91

*The right to assign the policy

*The right to change the beneficiary, except in the case of a irrevocable beneficiary

*The right to select a non forfeiture option

Front 92

Name the rider that in some whole life policies grants the policyowner the right to purchase additional life insurance of the same type of the original policy on specfied dates for specific amounts without supplying addtional evidence of insurability,

Back 92

Guranteed Insurablility Rider

Front 93

An insurance policy with a back-end load

Back 93

Makes a service charge when the policy is surrendered

Front 94

Life insurance proceeds are paid out in installments in all the following settlement options except...

Back 94

Interest Only

Front 95

Sam is in the army and has a results type war clause in his policy. Sam is killed in a skiing accident while at home on leave. What will his policy pay upon his death??

Back 95

The full death benefit, since the death was non military related