Chapter 4 Provisions, Options and Riders

Absolute assignment is a policy assignment under which the assignee (person to whom the policy is assigned) receives full control over the policy and full rights to its benefits.

The accidental death benefit rider pays an additional sum to the beneficiary if the insured dies due to a covered accident.

The Accelerated Benefit Rider allows the insured to receive a portion of the death benefit before death if the insured has a terminal illness and is expected to die within 1-2 years.

The “accumulate interest” dividend option allows the policy owner to leave dividends with the insurer to accumulate interest. In turn, the policy owner will be required to pay taxes on any interest (profit) generated by the dividend.

The assignment clause allows the right to transfer policy rights to another person or entity.

(Whole life insurance)The automatic policy loan provision allows the insurance company to deduct the overdue premium from an insured's cash value by the end of the grace period if a payment is missed on a life policy.

The “cash” dividend option allows the policy owner to cash out the dividends they receive.

The “cash surrender” nonforfeiture option allows the policy owner to receive the policy's cash value. The policy owner no longer has coverage at this point.

Collateral assignment is an assignment of a policy to a creditor as security for a debt.

The consideration clause states a policy owner must pay a premium in exchange for the insurer's promise to pay benefits. A policy owner's consideration consists of completing the application and paying the initial premium.

Dependents may be added to as additional (other) insureds through the use of a dependent rider. Other insured riders are typically used for spouses and children.

are the options a policy owner has when receiving dividend payments from an insurance policy.

The entire contract provisions (or clause) states the insurance policy itself, any riders and endorsements/amendments, and the application comprises the entire contract between all parties.

Exclusions are features of an insurance policy stating that the policy will not cover certain risks.

the “extended-term” nonforfeiture option permits the policy owner to use the policy's cash value to buy level term, extended term insurance for a specified period.

The free look period states the policy owner is permitted a certain number of days once the policy is delivered to look over the policy and return it for a refund of all premiums paid.

The grace period is a period after the due date of a premium during which the policy remains in force without penalty (one month, 30 or 31 days). If an insured dies during the Grace Period of a life insurance policy before paying the required annual premium, the beneficiary will receive the face amount of the policy minus any required premiums.

The Guaranteed insurability rider permits the policy owner to buy additional permanent life insurance coverage at predetermined intervals without submitting proof of insurability.

The incontestable provision states that the insurance company may not challenge the validity of the policy once the policy has been in force for a period of time, typically two years.

The insuring agreement is the insurer's basic promise to pay specified benefits to a designated person in the event of a covered loss.

The Misstatement of Age or Sex Provision allows the insurer to adjust the policy benefits if the insured's age or sex is misstated on the policy application. The misstatement of age provision allows the insurer to adjust the benefits payable if the age of the insured was misstated when the application for the policy was made.

Nonforfeiture options are the options you have for your cash value if you terminate a policy that has a cash value. You are closing your account (surrendering your policy); what do you want us to do with your cash (so you don't forfeit it)? When a policy owner decides he does not want his insurance policy anymore, he has the option to surrender his policy.

The “one year term” dividend option allows the policy owner to exchange the dividend for additional coverage in the form of a one-year term policy.

The “paid-up addition” dividend option allows the policy owner to exchange the dividend for an additional single payment whole life policy.

The payor provision waives future premiums for a juvenile life insurance policy if the person responsible for paying the premiums dies or becomes disabled.

The policy load provisions apply to policies that have cash value also have policy loan and withdrawal provisions. These policies must begin to build cash value after a certain number of years. In most states, this is three years. These loans, with interest, cannot exceed the guaranteed cash value, or the policy is no longer in force.

The “reduced paid-up” nonforfeiture option allows the policy owner to reduce the policy’s benefit amount and, in turn, cease making premium payments.

The “reduced premium” dividend option allows the policy owner to return the dividend payment to the insurer in exchange for a reduction in the following year’s premium payments.

Reinstatement is putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required. It Permits the policy owner to reinstate a policy that has lapsed as long as the policy owner can provide proof of insurability and pays all back premiums, outstanding loans, and interest.

The return of premium rider pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a specific period specified in the policy. It may also return premiums to the insured at the end of a specified period.

The suicide clause states that the policy will be voided, and no benefit will be paid if the insured commits suicide within two years from policy issuance. The primary purpose of a suicide provision is to protect the insurer from applicants contemplating suicide.

The waiver of premium rider allows the policy owner to waive premium payments during a disability and keeps the policy in force.