Can it happen where the insured and the owner are the same, in a life insurance policy?
Yes, that is the case most of the time
Can the owner and the beneficiary be the same person?
Yes, in the case of spouses
Can the insured and the beneficiary be the same person?
Occassionally, goes to the estate
What rights does the owner of a life insurance policy have?
Can change the beneficiary, convert policy to cash value, receive dividends, and changing ownership of the contract
What does the entire-contract clause mean? Who does it protect?
States that life insurance contract and attached application makes up the entire contract. It protects the owner and the beneficiary from an insurer changing the conditions during the contract's term
What does the incontestable clause mean? How long is the incontestable period? What if there's a material misrepresentation? What if the beneficiary takes out a policy with the intention of murdering the insured? What if the insured has somebody else take
Insurer may not contest policy after it has been in force for longer than 2 years, even if there is a material misrepresentation. Exceptions: intent to murder, someone else took the medical exam, or no insurable interest at time of policy conception
What is the critical factor in the suicide clause? When is suicide covered? What happens when a claim is not paid on the basis of exclusion by the suicide clause? Why is this provision in the contract? Who has to prove that the death was/wasn't a suicide?
If insured commits suicide within two years of policy inception, claim is not paid. However, the premiums will be refunded to the beneficiary in order to protect the beneficiary. The burden of proof is on the insurer to prove suicide.
What is the grace period? How long is it? What happens if the insured dies during the grace period?
Defined time period to pay overdue premium, usually around 30 days. If insured dies, then overdue premium is deducted from claim
What is the reinstatement clause? What conditions must be satisfied to reinstate the policy? Why might someone choose to reinstate a policy rather than buy a new one?
Allows insured to reinstate a lapsed policy, but they must pay all overdue premiums plus interest, must demonstrate insurability. Will result in a lower premium, higher cash value, and better interest rates.
What happens if the age or sex of the insured is misstated on the application? How is the adjustment calculation made?
Amount payable= Amount paid/correct amount * Death benefit.
What is a primary beneficiary? What is a contingent beneficiary? What is an irrevocable beneficiary? What happens if all beneficiaries die before the insured does?
Primary is first to receive benefits, contingent is second. Irrevocable has the right to a pay-out no matter what. If all beneficiaries die, the life insurance death benefit will go to your estate
Who owns the cash value of the policy? How does an insured get the cash value out of the policy? Is it paid to the beneficiary on top of the death benefit?
Cash value belongs to the pool, not the insured. The insured can take out policy loans at a stated interest rate which can ither be paid or capitalized (added to the balance of the load, i.e. student loans)
What are the dividend options in a participating policy? What are the settlement options? What are the non-forfeiture options?
Dividend options: Mutual (participatory) vs stock insurers (nonparticipatory), cash, reduction of the next premium, investment of dividends so insured gets interest, paid up additions to buy permanent insurance
Settlement options: Cash, investment for int
What riders can be added to a life insurance policy?
Waiver of premium (if disabled), guarantee purchase option (allows increased coverage despite health status), Accidental death benefit rider (double if accident, not illness), cost of living rider (adjusts for inflation), accelerated death rider (for term