Life Insurance Policies Part 2

If the insured dies or is injured as a result of hazardous occupation or hobby, the insurer will not pay the claim.

Allows the insurer to adjust the policy benefits if the insured's age or sex is misstated on the policy application.

the options you have for your cash value if you terminate a policy that has cash value. There are 3 nonforfeiture options:

• Cash surrender

• Extended Term option

• Reduced Paid-Up option

Allows the policyowner to receive the policy's cash value. Policyowner no longer has coverage at this point. Normally, the maximum length of time a life insurance company may legally defer paying the cash value of a surrendered policy is 6 months (delayed payment provision)

Permits the policyowner to use the policy's cash value to buy level, extended term insurance for a specified period. No premium payments are made. The coverage provided with the extended term nonforfeiture option is equal to the net death benefit of the lapsed policy.

The policyowner pays no more premiums but the face amount is decreased.

The options a policyowner has when receiving dividend payments from an insurance policy. The five options are:

• cash option (take the cash)

• reduced premiums options (reduces premium payments)

• accumulate interest option (allows dividends to accumulate interest. interest is the ONLY thing you can be charged tax on.

• paid-up additions options (purchase single payment whole life coverage)

• one-year term option (purchase one-year term protection)

Permits the policyowner to buy additional permanent life insurance coverage at specific points of time in the future without submitting proof of insurability. It also includes specific events like marriage and births, without requiring the proof of insurability. Usually the benefit is allowed every 3 years, up to the original face amount of the policy.

• Health doesn't matter, age does

• Increase coverage for yourself without providing evidence of insurability

• LIFE INSURANCE:

• Typically issued on a child's policy

• Allows them to add additional WHOLE LIFE COVERAGE

• Marriage, childbirth, various ages (25, 28, 31, 37, 40)

• Health insurance:

• Typically for long-term care or disability

• Allows to add additional LTC coverage or income protection

• Typically to keep offered at various ages to keep up with inflation and promotions

• Sometimes also called Future Increase Options or cost of living increase

Allows the policyowner to waive premium payments during a disability and keeps the policy in force. It does not provide cash payments to the policyowner. The disability must be total and permanent and have sustained through the waiting period (90 days or 6 months). After a certain age (usually 60 or 65), the waiver of premium rider is void. Waiver: covers the PRIMARY INSURED. Does NOT provide income. Is NOT a loan. The insurance company is "waiving" the premiums. It's just as if the insured made the premiums ever month.

available under certain juvenile life insurance policies and provides for the waiver of future premiums if the person responsible for paying them dies or is disabled before the policy becomes fully paid or matures as a death claim, or as an endowment, or the child reaches a specific age.

Pays an additional sum to the beneficiary if the insured dies due to the accident. The amount paid is a multiple of the policy face amount such as double or triple the benefit. Truly the cheapest way to add a lot of coverage for a period of time.

Pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a certain period specified in the policy. It also returns premiums to the living insured at the end of a specified period of time, as long as the premiums have been paid.

• The right to designate and change the beneficiary of the policy proceeds

• The right to select how the death proceeds will be paid to the beneficiary

• The right to cancel the policy and select a nonforfeiture option

• The right to assign ownership of the policy to someone else

Found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract. It prohibits the insurer from making any changes to the policy, either through policy revisions or changes in the company's by-laws, after the policy has been issued. The clause does not prevent a mutually agreeable change from being made to the policy if the policy specifically provides a means for modifying the contract after it has been issued.

Sets forth the company's basic promise to pay benefits upon the insured's death. Generally, this clause is not actually titled as such, but appears on the cover of the policy. An insuring clause might state that the promise to pay is subject to a policy's provisions, exclusions, and conditions. The insuring clause is typically undersigned by the president and secretary of the insurance company.

Defines the person who may name and change beneficiaries, select options available under the policy, and receive any financial benefits from the policy.

Required by most states, gives policyowners the right to return the policy for a full premium refund within a specified period of time, if they decide not to purchase the insurance. In Florida, the free-look period for life insurance contracts (and annuities) is 14 days from policy delivery.

Consideration is the value given in exchange for a contractual promise. In a life insurance policy, the consideration clause states that the policyowner's consideration consists of completing the application and paying the initial premium.

-All back premiums must be paid
-Interest on past-due premiums may be required to be paid
-Any outstanding loans on the lapsed policy may be required to be paid
-The policyowner may be asked to prove insurability
The perios is usually three years, but in some cases it may be as long as seven years.

• Interest rates on policy loans vary, but most states stipulate a maximum allowable rate (In Florida, that maximum is 10%)

• When a life insurance policyowner obtains a policy loan, the collateral for the loan is the cash value of the policy

• Interest rates on policy loans vary, but most states stipulate a maximum allowable rate. Some newer policies are issued with a variable interest rate tied to the Moody's corporate bond index.

• If the policyowner does not make a scheduled interest payment on a policy own, the amount of interest due will be added to the loan balance.

• In the event a policy loan plus interest exceeds a life insurance policy's cash value, the policy is no longer in force.

The incontestable clause or provision specifies that after a certain period of time (usually two years from the issue date), the insurer no longer has the right to contest the validity of the life insurance policy so long as the contract continues to be in force. This means that after the policy has been in force for the specified term, the company cannot contest a death claim or refuse payment of the proceeds even on the basis of a material misstatement, concealment, or fraud. Even if the insurer learns that an error was deliberately made on the application, it must pay the death benefit at the insured's death if the policy has passed the contestable period.

• Impersonation. When application for insurance is made by one person but another person signs the application or takes the medical exam, the insurer can contest the policy and its claim.

• No insurable Interest. If no insurable interest existed between the applicant and the insured at the inception of the policy, the contract is not valid to begin with. As such, the insurer can contest the policy at any time.

• Intent to murder. If it is subsequently proven that the applicant applied for the policy with the intent of murdering the insured for the proceeds, the insurance company can contest the policy and its claim. Since the policy did not have a legal purpose from the start, the insurance company may simply deny coverage. The policyowner is powerless to enforce such a claim as no court of law will force an insurer to provide coverage under these circumstances.

People who purchase life insurance policies are commonly referred to as a policyowners rather than policyholders because they actually own their policies and may do with them as they wish. They can even give them away, just as they can give away any other kind of property they own. This transfer of ownership is known as assignment.

Absolute and collateral

Under an absolute assignment, the transfer is complete and irrevocable, and the assignee receives full control over the policy and full rights to its benefits.

one in which the policy is assigned to a creditor, as security or collateral, for a debt. If the insured dies, the creditor is entitled to be reimbursed out of the benefit proceeds for the amount owed. The insured's beneficiary is then entitled to any excess of policy proceeds over the amount due the creditor. When the debt is repaid, the policyowner is entitled to the return of the rights assigned.

Gives discretionary authority to the insurer when determining the eligibility of an insured for benefits under the policy. This provision limits the way a court can review a claim denial and makes it difficult for the court to conduct a fair review of the claim. Some states have enacted laws that prohibit discretionary provisions because they are designed to protect the insurance company!

Life insurance policies may be either PARTICIPATING OR NONPARTICIPATING. The major difference between par and nonpar is the presence of POLICY DIVIDENDS. At any given age people who buy par policies normally pay premiums that are slightly higher. Policy dividends are really a RETURN of part of the premiums paid. As such, policy dividends are generally not taxable income. . DIVIDENDS ARE NOT GUARANTEED

This rider allows a policyowner to purchase additional life insurance coverage at specified dates without providing evidence of insurability.
Costs for new coverages purchased under this rider are calculated on the basis of the insured's attained age.
This rider will also allow the policyowner to purchase additional coverage at marriage or the birth of a child.

Provides valuable added security for policyowners. It can prevent a policy from lapsing for nonpayment of premiums while the insured is disabled and unable to work. The waiver of premium rider is available on both permanent and term insurance policies.

pays monthly deductions while you are disabled. There is a 6-month waiting period. This rider won't pay the full premium or will it ad to the cash value.

Some companies offer their applicants the ability to guard against the eroding effects of inflation. A cost of living (COL) or cost of living adjustment (COLA) rider can provide increases in the amount of insurance protection without requiring the insured to provide evidence of insurability. The amount of increase is tied to an increase in inflation index, most commonly the Consumer Price Index (CPI).

Can help safeguard against the financial burden of long-term care. The rider provides an acceleration of the death benefit to help pay for costs involved with long-term care. Under normal circumstances, an insured would require assistance in at least 3 Activities of Daily Living (ADL's) to be eligible to receive benefits. Benefits are typically paid out income tax-free and will reduce both the death benefit and cash surrender values of the life insurance policy.

WHOLE LIFE

When the insured dies or at the policy's maturity date, whichever happens first.

Whole Life

Limited-Pay life

Variable Life

Through mutual funds, stocks, and bonds.

Universal Life

The cash value

Variable Universal Life

Flexible premiums

join life policy

upon death of the last insured

The policyowner. These policies are illegal in most states.

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract. A policy is considered OVERFUNDED by by the IRS's 7-PAY TEST if more than 7-years of PREMIUMS are paid in to the insurance account at once.

Modify a provision in the insurance contract

Owner's Rights

insuring clause

Insuring agreement or clause

The initial premium

amount of premium payments and when they are due

contest a claim during the contestable period

Entire contract

Entire contract

Entire Contract Provision

Entire contract

Exclusion

Excluded by the insurer

Buy additional coverage at a later date

Payor provision.

Face amount plus the policy's cash value