HS 311 Chapter 9: Life Insurance Policy Provisions

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beneficiary

the person or persons who are entitled to receive death benefits (on a life policy)

standard policy provisions laws

state requirements for life and health insurance to ensure that they contain certain "base" provisions

grace period

the time period that a policyowner has to pay a premium after its initial due date (without the policy lapsing)

late remittance offer

an offer by the insurer that would allow the policyowner to reactivate a policy after it has lapsed from nonpayment

policy loans

money borrowed from life policies that generate a cash value; properly-paid loans cannot result in policy termination

automatic premium loan option

an option in which any late premiums are systematically paid by a new policy loan

direct recognition

a condition in which whole life policy dividends are reduced when outstanding loan policies are in effect

incontestable clause

a provision that prohibits the insurer from disputing or contesting the validity of the policy after it has been in effect for a certain time period

divisible surplus

the portion of the insurer's surplus that is declared to be distributed via policy dividends

dividend options

the various ways that policy dividends can be used

fifth dividend option

the ability to use a whole life policy's dividend to purchase 1-year term insurance for the policy's current cash value

entire contract provision

a law that states the life policy and the application constitute the entire contract; it cannot be changed over time

reinstatement provisions

allows a policyowner to reacquire coverage under a policy that has lapsed

misstatement of age or gender clause

a provision that mandates the premiums be adjusted if the insured's age or gender are misrepresented in the application (versus cancelling the policy)

nonforfeiture options

laws that require the policyowner to be able to use a whole life policy's cash value (typically after a minimum period such as 3 years)

settlement options

alternative methods of paying the death benefits of a policy (e.g. lump sum, annuity payments)

primary beneficiary

the person or organization that is to receive death benefits if he, she, or it survives the insured

contingent beneficiary

the receiver of death benefits if the primary beneficiary is deceased first or becomes ineligible

contingent payee

the receiver of death benefits that begins receiving payments if the original beneficiary becomes deceased during the payment period

suicide provision

an optional inclusion for suicide during the policy's entire period (it is typically not covered for the first 1-2 years)

ownership provision

describes the rights of the owner in management of the policy

assignment provision

describes the rights of the owner to transfer ownership of the policy to someone else

plan change provision

an option that allows the policyowners to change some aspects of the policy

accelerated benefits provision

an option that allows the policyowner to withdraw a portion of the death benefit under certain circumstances (e.g. the insured becomes terminally ill)

add accidental death benefits

an option that pays "double indemnity" if the insured dies accidentally

guaranteed purchase (insurability) option

allows the policyowner to buy additional amounts of coverage for the insured, without providing proof of continued/current insurability

waiver-of-premium rider

an option in which the insurer will waive premium payments if the insured becomes totally disabled

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