Assignment
Provision in a life insurance policy to transfer partial or complete ownership of the policy to another person without consent of the insurer
Absolute Assignment
Type of assignment where all right of ownership are transferred to another person
Collateral Assignment
Type of assignment where partial rights of ownership are transferred to another person; it is usually done to secure another; it is usually done to secure a loan or some other transaction
Entire Contract
Provision that states that the policy and a copy of the application along with riders or amendments make up the entire contract; nothing can change the contract without both parties agreeing to do so
Modifications
Provision that changes in the policy must be endorsed on, or attached to, the policy in writing over the signature of an executive officer of the insurer
Right to Examine
This provision allows the policy owner 10 days for receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of the premium
Payment of Premiums
Provision that stipulates when the premiums are due, how often they are to be paid, and to whom
Grace Period
Provision that stipulates that time period after the premium due date that the policyowner has to pay the premium before the policy lapses
Reinstatement
Provision that allows a lapsed policy to be put back in force
Incontestability
Provision that prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years
Misstatement of Age or Gender
Provision that allows the insurer to adjust the policy at any time due to the misstatement of age or gender by the applicant
Interest on Life Insurance Proceeds
Provision that stipulates that interest on benefits of a life insurance policy begins to accrue in 20 days after receipt of acceptable proof of loss due to death by the insurer
Settlement of Death Benefit
Provision that states that an insurer is forbidden to ffer a settlement of less than the value provided by the policy minus any outstanding premiums, loans, or interest
Backdating of Policies
A possible way to lower the premium rate by dating an application no more than six months before the date of the application or the medical examination
Exclusions
- Aviation
- Hazardous occupations or hobbies
- Suicide within two years of policy creation
- War and military service
Beneficiary Designation Options
- Individuals
- Classes
- Estates
- Minors
- Trusts
Class Dessignations
- Per Capita (by the head)
- Per Stirpes (by the bloodline)
Spendthrift Clause
When included in the life insurance policy, prevents the beneficiary's reckless spending of benefits by requiring that the benefits be paid in a fixed-period or fixed-amount installments
Facility of Payment
Provision that allows the insurer to pay a portion of the proceeds to any relative or person who has possession of the policy
Policy Loan
Provision that allows policy owners to borrow money against the cash value (permanent life) of the policy minus the unpaid loans and their interest
Automatic Premium Loans
Provision for a type of loan that prevents the unintentional lapse of a policy due to non payment of the premium
Waiver of Premium
Rider that allows insured to not pay the premium for a policy in the event that he/she becomes disabled and unable to work
Waiver of Cost of Inusrance
Rider that waives the cost of insurance in the event that the insured becomes disabled and other expenses; this does not waive the cost of premiums necessary to accumulate cash values
Death income benefit
For this rider, the insurer will waive policy premiums and pay a monthly income to the insured in the event that the insured becomes disabled
Other Insured Rider
For this rider, the policyowner can get coverage for one or more family members other than the insured; the rider is usually level term insurance
Children's term Rider
This rider allows for the insured to get his/her kids added to coverage for a limited period of time for a specific amount
Family Term Rider
Combination of Children's Term Rider and Spouse Term Rider (coverage for both kids and spouse)
Accidental Death Rider
Rider that provides a multiple of the death benefit if the death was caused by an accident; death must occur within 90 days of the accident
Guaranteed Insurability Rider
Rider that allows for additional coverage to be purchased at specific future dates (every three years) or events (marriage or birth of a child) without proof of insurability for an additional premium
Cost of Living Rider
Rider that addresses the inflation factor by automatically increasing the amount of insurance without proof of insurability from the insured
Return of Premium Rider
Rider that when added to a whole life policy will return all premiums paid if the insured dies before a specified age
Accelerated Benefit (Living Needs) Rider
Rider that provides for early payment of part of death benefit if the insured is diagnosed with a terminal illness that will result in death within two years
Long-Term Care Rider
Rider that provides for early payment of part of the death benefit to cover the insured's health care expenses
Nonforfeiture Options
Certain guarantees that are built into policies that cannot be forfeited by the policyowner because permanent life insurance policies have cash values; the are either cash surrender value, reduced paid-up insurance, or extended term
Cash Surrender Value
For this option, the policyowner simply surrenders the policy for the current cash value at a time when coverage is no longer needed or affordable
Extended Term
For this option, the insurer will use the policy cash value to convert to term insurance for the same face amount; insurer automatically selects this option if the policyowner has not selected one before policy expires
Reduced paid-up insurance
For this option, the policy cash value is used by the insurer as a single premium to purchase completely paid-up permanent policy that has a reduced face amount from that of the former policy
Dividend Options
Options to receive excess premiums from participating (mutual) insurers,
Cash Payment Option
In this dividend option, the insurer simply sends the policyowner a check for the the amount of the dividend
Reduction of Payments Option
In this dividend option, the insurer uses the dividend to reduce next years premium
Accumulation of Interest Option
In this dividend option, the insurer keeps the dividend in an account where it gains interest, the interest is taxable
One-year Term Option
In this dividend option, the insurer purchases additional insurance in the form of one-year term insurance which increases the overall policy death benefit
Paid-up Additions Option
In this dividend option, the insurer uses the the dividend to purchase an additional single premium policy in addition to the face amount of the permanent policy
Paid-up Insurance Option
In this dividend option, the insurer first accumulates dividends with interest and then uses them to pay off the policy early
Settlement Options
Option for how to pay the beneficiaries upon the insured's death
Lump-sum payment
In this settlement option, proceeds are paid in one cash payment to the beneficiaries
Life Income (Straight Life)
In this settlement option, the insurer must provide an income for the beneficiary until he/she dies; if the beneficiary dies shortly after the insured's death, the death benefit is forfeited to the insurer
Single life-income option
In this life income option, a single beneficiary receives income for the rest of his life
Joint and survivor income option
In this life income option, an income is guaranteed for two or more recipients for as long as they live; the surviving recipient will receive a reduced payment
Life with period certain
In this life income option, a single beneficiary receives income for the rest of his life; if the beneficiary dies shortly after the insured another benificiary still receives payment for a certain period
Straight life
In this life income option, the beneficiary is guaranteed income until the date of death regardless of whether or not that amount exceeds the death benefit
Life refund
In this life income option,the benificary receives income for the rest of his life and if he/she dies before the death benefit is entirely used, the remainder is paid lump sum to the beneficiary
Interest-only option
In this settlement option, the insurance company retains the policy proceeds and pays interest on the proceeds to the beneficiary at regular intervals
fixed-period installments
In this settlement option, a specified period of years is selected, and equal installments are paid to the beneficiary
fixed-amount installments
In this settlement option, the policy pays a fixed, specified amount in installments until the proceeds are exhausted