What Does the Ownership Clause in a Life Insurance Policy

Seminar #8 1) Define the ownership clause. In life insurance the provision or endorsement that designates the owner of the policy when such owner is someone other than an insured. The clause vests ownership rights. 2) What rights do the ownership clause include? The clause designates ownership of an insurance policy other then the insured person. 3) What is the entire contract clause? A standard insurance contract provision that limits the agreement between the insured and the insurer to the provisions contained in the contract as a protection of the insured. 4) Define the incontestable clause. An incontestability clause is a clause in most life insurance policies that prevents the provider from voiding coverage due to a misstatement by the insured after a specific amount of time has passed. Usually two years. 5) What is the suicide clause? Most life insurance policies have a ‘suicide clause’. If the policyholder commits suicide within the first two years of the policy, then the beneciaries will not receive the pay out, sometimes they will return the premiums. 6) What is the grace period? An insurance grace period is a defined amount of time after the premium is due in which a policyholder can make a premium payment without coverage lapsing. 7) Define the reinstatement provision. A reinstatement clause is an insurance policy clause that states when coverage terms are reset after the insured individual or business files a claim due to previous loss or damage. Restarts coverage. 8) What requirements must be met to reinstate a policy? The insurer may be required to show evidence of eligibility. 9) What is the misstatement of age or sex clause? A clause that allows the insurer to adjust the benefit payable if the age or sex of the insured was incorrectly stated when the application for the policy was made. 10) Who is the beneficiary? A person designated to receive insurance after someone has died. 11) Who is the primary beneficiary? The first person to receive insurance pay out after the owner has passed. 12) Who is a contingent beneficiary? Someone who must fulfill a certain future event in order to receive an insurance pay out after the owner of the policy dies. 13) Distinguish between a revocable and irrevocable beneficiary. An irrevocable beneficiary has certain guaranteed rights to assets held in the policy, even the insured can not change this once it has been set. An irrevocable beneficiary the person choosen has no guaranteed rights when it comes to receiving the death benefit of an insurance policy. 14) Who is a class beneficiary? A class beneficiary refers to a group; example: children 15) What is a change of plan provision? It allows life insurance policyholders to exchange their present policies for different contracts; flexible 16) Define the war clause. An exclusion clause that refers to the protection of an insurer who will not be obligated to pay for losses caused by war-related events. 17) Distinguish between an absolute assignment and a collateral assignment. Absolute assignment intends to transfer all interests, rights and ownership in the policy to an assignee. Collateral assignment is a conditional assignment appointing a lender as the primary beneficiary of a death benefit used as collateral for a loan. 18) What is a policy loan provision? A permanent life insurance policy that may be borrowed against using the cash value as collateral. 19) What is an automatic premium loan provision? A provision that allows the insurer to deduct the amount of an outstanding premium form the value of the policy. 20) Distinguish between a participating and a non-participating policy. Participating policies enable the policy holder to share the profits of the insurance company. Non-participating policies hold the profits are not shared and no dividends are paid. 21) Identify the sources for dividends. Permanent life insurance policies often pay dividends on a regular basis. 22) Identify the options for taking a dividend. 1. Paid in cash 2. Reduce/Pay Premium, 3. Purchase Paidup Additions 23) What is cash surrender value? A sum of money an insurance company pays to a policyholder or an annuity contract owner in the event that their policy is voluntarily terminated before its maturity or an insured event occurs. 24) Identify the settlement options. Options include; lump-sum payment, interest only, interest accumulation, fixed period, lifetime income, lifetime income with period certain. 25) What is the fixed period option? A life insurance option that may be selected as a settlement under which the policy proceeds are left on deposit with the insurance company to accrue interest and are paid to the beneficiary in equal payments for a specific number of years. 26) What is the fixed amount option? An option that a life insurance beneficiary may select as a settlement, whereby the policy proceeds are paid through periodic installments of fixed amounts until the principal and interest are exhausted. 27) Define the life income option. A settlement option under which a beneficiary may have policy proceeds converted to a life annuity for the beneficiary. 28) What are disadvantages of the life income option? Life Income annuities distributions are taxed as ordinary income at a higher rate than that for the capital gains from other retirement accounts. 29) When would payment to a trust be desirable? When you want to save your beneficiaries from having to pay distribution or estate taxes, acts as a tax shield. 30) What is the waiver of premium provision? Waiver of premium rider is an insurance policy clause that waives premium payments if the policyholder becomes critically ill, seriously injured or disabled. 31) What are blended policies? A policy that begins as a combination of term and permanent coverage and eventually converts to permanent insurance. Dividends are used to turn the term into permanent. 32) What is the guaranteed insurability option? An option available on certain life insurance policies that allows the purchase of additional insurance at specific dates in the future without having to have a physical exam. 33) Define the advance purchase privilege. Most insurance policies have an advance purchase privilege which allows the insured to purchase additional insurance within 90 days of marriage or childbirth. 34) Define the accidental death benefit rider. Refers to a payment due to the beneficiary of an accidental death insurance policy. This payment is normally paid in addition to the standard benefit. 35) What is the cost of living rider? A COLA rider is an optional add-on to a long term disability insurance policy that helps any benefits you are paid keep pave with inflation in such event that you become disabled. 36) What is the accelerated death benefits rider? An insurance provision in a life insurance policy, allows you to access your death benefits while you are still alive. 37) Define viatical settlements. An arrangement whereby a person with a terminal illness sells their life insurance policy to a third party for less than its mature value, in order to benefit from the proceeds while still alive. 38) What is a life settlement? It is the legal sale of an existing life insurance policy for more than its cash surrender value, but less than its net death benefit