Final review 4

POLICY PROVISIONS
Required Provisions	Assignment Absolute/Collateral  Entire contract-application, along with any riders or amendments Grace period-31day,premium very60 Incontestability-2 years Misstatement of age Ownership-pay premiums Payment of premiums-insurer must refund any unearned premium Proof of death-in 30days Reinstatement-in 3 years lapsed Right to examine (free look)-19day Statements of the applicant/insured(Q/A)-if a warranty is untrue, void, representation untrue, cancel
Exclusions	Aviation Hazardous occupation Suicide (within a specified time period) War or military service
Beneficiaries	Designations: Individuals, classes, estates, minors, trusts Succession - the levels of priority. Each level in the succession is only eligible if the beneficiary in the level above has died: Primary - first claim to the policy proceeds Contingent (secondary, tertiary) - next claim after primary Policyowner's right to change a beneficiary: Revocable - can be changed at any time Irrevocable - can only be change with the beneficiary's consent Common disaster clause - protects the rights of contingent beneficiaries; if the insured and the primary beneficiary died at approximately the same time, it is assumed that the primary beneficiary died first Spendthrift clause - protects policy proceeds from the claims of creditors
Policy Loans, Withdrawals and Partial Surrenders	Cash loans available - policy's cash value minus any unpaid loans and interest Automatic premium loans - prevent unintentional policy lapse due to nonpayment of premium Withdrawals and partial surrenders - available in Universal Life; a charge may apply
OPTIONS
Nonforfeiture	Cash surrender value - after that, no more insurance Extended term - automatic option; uses cash value to convert to term insurance Reduced paid-up insurance - uses cash value as a single premium to purchase a permanent policy with a reduced face amount
Dividend	Cash - insurer sends a check to the insured Reduction of premium - dividend is applied to the next year's premium Accumulation at interest - insurer keeps the dividend in an account where it accumulates interest One-year term - dividend is used to buy additional insurance Paid-up addition - dividend is used to increase the face amount
Settlement	Cash - lump-sum payment; usually not taxable Interest only - insurer retains the principal and only pays out interest Fixed period - payments for a specified time period until all the proceeds are paid out Fixed amount - payments in specified amounts until all the proceeds are paid out Life income - provides an income the beneficiary cannot outlive; no guarantee that the principal will be paid out (if the beneficiary dies too soon); available as single life or as joint and survivor
RIDERS
Disability	Waiver of premium - waives the premium if the insured becomes totally disabled; 6 months waiting period before benefits begin Waiver of cost of insurance - in Universal Life policies: waives the cost of insurance in the event of the insured's disability Disability income - waives the premium and pays monthly income
Accelerated Benefit	Early payment if insured is diagnosed with a specified catastrophic illness A portion of the death benefit Death benefit is reduced by the amount paid plus earnings lost by the insurer
Additional Insureds	Spouse/other insured - term rider (limited time, limited coverage); usually expires when spouse turns age 65 Children's term - covers all children of the insured (limited time, limited coverage); can be converted to a permanent policy Family term - spouse and children covered under one rider
Riders that affect the Death Benefit	Accidental death - pays double or triple indemnity if accidental death occurs as defined in the policy; death must occur within 90 days of accident Guaranteed insurability - allows for purchase of additional insurance at specified times without evidence of insurability, at the insured's attained age Cost of living - increases the face amount by a cost of living factor died to inflation Return of premium - increasing term is added to a whole life policy that provides that if death occurs prior to a given age, not only is the death benefit payable to the beneficiary, but all premiums paid as well