Additional Policy Rights Riders and Optional Benefits

  1. _____ provision allows the policy owner to change the type of policy,

    for example, Whole Life to Limited Pay or Universal to Variable Life, with the same company and for the same dollar amount.

    1035 Exchange: The Internal Revenue Code does provide for an exchange of one life contract for another, subject to certain requirements, in Code Section 1035. If the requirements are met, the policyholder may exchange one contract for another(including moving the cash value) without incurring any current income taxation.
    Change of Contract
  2. _____ pays an additional amount beyond the face amount of the policy (such as double or triple) if the insured dies accidentally. However, the death of the insured must occur within 90 days from the date of the accident.

     For example, if an insured has a $100,000 life policy with a double indemnity rider, the policy will pay a beneficiary $200,000 (double the face amount) should the insured die within 90 days from the date of the accident. If the insured should die after the 90 days,it would pay only the $100,000 face amount.
    Accidental Death (a.k.a. AD rider)
  3. _____may be written as a separate policy or as a rider on another life or disability policy. The Principal Sum pays for accidental death, for the dismemberment of or loss of use of any two limbs, or for the total loss of hearing, sight or speech. The Capital Sum (which pays ½ of the Principal Sum) pays for loss of or loss of use of any one limb, for loss of sight in one eye or partial loss of hearing.

     The AD&D policy has a schedule of benefits for other lesser types of dismemberments such as the loss of a hand or a finger. Some policies will pay for loss of internal organs such as loss of a kidney or spleen when due to an accident.

     AD&D policies and AD riders will not pay if death or dismemberment occurs more than 90 days after the accident.
    Accidental Death and Dismemberment
  4. Both the ____ policy and the AD rider WILL NOT PAY for death:

    ⊘ Due to any illness

    ⊘ Due to suicide or any intentional acts

    ⊘ Due to any war or warlike action (military duty)

    ⊘ Due to air travel other than as a fare-paying passenger

    ⊘ Which happens while the insured is committing a crime

    ⊘ Due to the use of any drugs (unless the insured is under a doctors' care)

    ⇒ If an insured commits suicide, an _____ policy will not refund any premiums nor will it pay any death proceeds, as intentional acts are excluded.
    Exclusions... AD&D
  5. _____ guarantees the insured the opportunity to purchase additional permanent insurance coverage. This option may be taken at specified ages without proof of insurability. Usually, options are a minimum of $5,000 up to a maximum of $50,000.

    Gross premium is charged and the insured's attained age is used.

    Purchase Dates are the ages when an option to buy additional insurance can be made without proof of insurability.

     An insured can move-up in G.I.O., but can never go back.

    Advance Purchase Dates allow the insured to move-up and take the next option date available. The Advance Purchase Options include:

    a. The New Born Provision allows the insured to take advantage of the next option upon the birth of a child.

    b. The Marriage Provision allows the insured to take advantage of the next option upon marriage
    Guaranteed Insurability Option (a.k.a. GIO, GIB or GR)
  6. _____ Almost all companies offer a waiver-of-premium benefit. Sometimes the price is included in the overall policy premium, but more often the rider is added to the life contract for extra premium. It provides that in the event the insured becomes disabled, premiums on the contract will be waived during the continuance of a disability.

     The operation of the contract continues just as if the policy owner were paying the premiums. Thus, dividends continue to be paid on the participating policies, cash values continue to increase, loans may be secured, and so on.
    Waiver of Premium Rider
  7. ____ works the same way the waiver of premium works but pays a regular monthly income to a policy owner who becomes totally disabled. There is a waiting period which is the same amount of time that the waiver of premium rider has before any benefits are paid.
    Waiver of Premium with Disability Income Rider
  8. When added to the Juvenile Policy, this provides that premiums will be waived in the event the premium payer dies or becomes disabled, or until the insured (the child) reaches a specified age. Evidence of insurability must be furnished by the premium payor before the clause can be added to the contract.
    Payor Waiver (Benefits) Rider
  9. _____, (aka_____), gives the insurer the right to defer loans and/or cash payments to the policy owner for up to 6 months following the owner’s request. The following is an exception:

    Death benefits must be paid immediately upon proper proof of loss.
    The Right of the Insurer to Defer Clause, (a.k.a. Delay Clause)
  10. _____ (aka_____)With this rider, part or all of the policy face amount may be paid in advance on the diagnosis of certain dread diseases or in the event of circumstances significantly affecting the insured's longevity and quality of life, such as a major organ transplant or entering a nursing home. The amount that a company will advance may vary from company to company.

     Accelerated death benefits paid to the chronically ill and terminally ill may be treated as death benefits, thereby avoiding tax on the amount paid to those individuals.

     By using the accelerated death benefit of a policy, it may make it possible for the insured/owner to avoid having to sell his policy to an investment group or investor for the needed money or income.
    Accelerated Death Benefit Rider (a.k.a. Life Settlements)
  11. ____ (abrv)can be added to a life insurance policy that will pay benefits to cover the insured should care be needed in a long-term care facility or for at-home care. The rider may be purchased in one of two ways:
    a) integrated into the face amount of the policy, or
    b) stand-alone/independent of the life insurance policy.

    1) When the long-term care insurance is integrated into the policy, and long-term care benefits are paid under this LTC rider, the payments made use up a portion of the available death benefit. The rider applies only up to a certain percentage of the face value of the life insurance policy.
    The problem with this arrangement is that the life insurance proceeds would go to pay for long- term care while the original need for those proceeds might still exist.

    2) The (abrv) Rider may be a stand-alone rider to the policy, meaning when the policy pays any long-term care benefits for the insured, it will NOT affect the face amount or cash value of the life insurance policy.The problem with this arrangement is that the policy will cost more in premiums than the integrated rider; however, any (abvr) benefits paid under the independent rider will NOT affect any death benefit paid to the beneficiary when the insured dies. In reality, these (abvr)  riders are not intended as substitutes for (abvr) policies. Instead, they should be considered a supplement to such policies.
    Long-Term Care (LTC) Rider
  12. Insurance Companies began offering _____ on their term policies in the early 1990s as a solution to the "live-and-lose" dilemma presented by traditional term policies. As the name implies, this rider will allow term life insurance policyholders to recover all or part of their premiums paid over the life of the policy if they do not die during the stated term. Of course, adding this protection will raise the overall cost (premium) of the policy accordingly.
    Return of Premium Rider
Card Set
Additional Policy Rights Riders and Optional Benefits
Additional Policy Rights, Riders and Optional Benefits: