1. Life Insurance: Policy Basics

2. Life Insurance Policies differ from company to company and from state to state The following provisions are usually in a policy: Life Insurance: Policy Basics Insuring agreementInsuring agreement Ownership rightsOwnership rights Death benefitDeath benefit Beneficiary clauseBeneficiary clause Settlement optionsSettlement options Incontestability clauseIncontestability clause Misstatement of age clauseMisstatement of age clause Grace period clauseGrace period clause Reinstatement clauseReinstatement clause Alteration of policyAlteration of policy Suicide clauseSuicide clause

3. Life Insurance: Policy Basics Entire Contract Clause or Insuring Agreement Basic clause in the contract that states once the application is completed, answering everything truthfully, and the policy together have become a contractBasic clause in the contract that states once the application is completed, answering everything truthfully, and the policy together have become a contract If the insurer believes the person misrepresented themselves on the application, the contract can be voidedIf the insurer believes the person misrepresented themselves on the application, the contract can be voided

4. Life Insurance: Policy Basics Ownership Rights and Assignment Policyholder is the owner and has certain rights: To designate beneficiariesTo designate beneficiaries To determine settlement optionsTo determine settlement options To receive dividends of a participating policyTo receive dividends of a participating policy To cash in or borrow against the policyTo cash in or borrow against the policy To transfer ownership rightsTo transfer ownership rights

5. Life Insurance: Policy Basics Death Benefit Provision specifies how the death benefit is handledProvision specifies how the death benefit is handled Beneficiary Clause Policyholder names who the payout will go toPolicyholder names who the payout will go to The primary beneficiary is the person the money goes to firstThe primary beneficiary is the person the money goes to first The contingent beneficiary gets the payout if the primary beneficiary has diedThe contingent beneficiary gets the payout if the primary beneficiary has died The beneficiary can be changed at any timeThe beneficiary can be changed at any time

6. Life Insurance: Policy Basics Settlement Options Determines how the death benefit is paid to the beneficiariesDetermines how the death benefit is paid to the beneficiaries Incontestability Clause After a set period of time, usually two years, the company will not contest the contract for any reasonAfter a set period of time, usually two years, the company will not contest the contract for any reason

7. Life Insurance: Policy Basics Misstatement of Age Clause If the insured misstates their age, the insurance company has the right to adjust the death benefit to the correct ageIf the insured misstates their age, the insurance company has the right to adjust the death benefit to the correct age Grace Period Clause Allows a grace period if someone misses their premium without the policy lapsing, usually 31 daysAllows a grace period if someone misses their premium without the policy lapsing, usually 31 days

8. Life Insurance: Policy Basics Reinstatement Clause Takes effect if the policyholder misses payments beyond the grace period and the policy lapsesTakes effect if the policyholder misses payments beyond the grace period and the policy lapses Policy can be reinstated if all outstanding premiums are paidPolicy can be reinstated if all outstanding premiums are paid Company may also require evidence of insurabilityCompany may also require evidence of insurability Alteration of Policy States that no modification of the policy can be accepted unless the modification is in writing and signed by one of the officers of the companyStates that no modification of the policy can be accepted unless the modification is in writing and signed by one of the officers of the company

9. Life Insurance: Policy Basics Suicide Clause Protects insurers for people who buy insurance to pass onto their dependents before committing suicideProtects insurers for people who buy insurance to pass onto their dependents before committing suicide The policy is considered void if the insured commits suicide within the specified period of time, usually two yearsThe policy is considered void if the insured commits suicide within the specified period of time, usually two years

10. Life Insurance: Policy Basics Special Options You can purchase riders as an add-on to your policy Accidental Death Rider Doubles the death benefit if the insured dies by accident rather than by natural causesDoubles the death benefit if the insured dies by accident rather than by natural causes Guaranteed Insurability Rider Gives the insured the right to buy a new policy or to increase the death benefit on a present policyGives the insured the right to buy a new policy or to increase the death benefit on a present policy Insured does not have to prove insurabilityInsured does not have to prove insurability

11. Life Insurance: Policy Basics Applying for Life Insurance You must fill out an applicationYou must fill out an application An application is made up of two partsAn application is made up of two parts The first part of the application consists of your basic information such as name, address and birth dateThe first part of the application consists of your basic information such as name, address and birth date The second part contains information that underwriters use to determine your insurability such as tobacco use and hazardous hobbiesThe second part contains information that underwriters use to determine your insurability such as tobacco use and hazardous hobbies

12. Life Insurance: Policy Basics Applying for Life Insurance An individual may be asked to take a medical examAn individual may be asked to take a medical exam Generally, if you are under 40 a person will not be asked to take an examGenerally, if you are under 40 a person will not be asked to take an exam Exceptions include applying for a large amount of insurance or if you have a medical conditionExceptions include applying for a large amount of insurance or if you have a medical condition Most consumer experts agree that you should pay the first premium when you applyMost consumer experts agree that you should pay the first premium when you apply Although there is a small chance that something would happen to you, you are covered if a loss happensAlthough there is a small chance that something would happen to you, you are covered if a loss happens

13. Life Insurance: Policy Basics Uninsurable An insurance company may reject an application stating that a person is too high of a risk What options are left for the person?

14. Life Insurance: Policy Basics Graded Death Benefit The death benefit is calculated on the amount of time the person livesThe death benefit is calculated on the amount of time the person lives ExampleExample If the person dies within the first year the dependents receive premiums paid plus 10%If the person dies within the first year the dependents receive premiums paid plus 10% If the person dies within the second year the would receive premiums plus 25%If the person dies within the second year the would receive premiums plus 25% It may take up to five years for the person to receive the entire death benefitIt may take up to five years for the person to receive the entire death benefit

15. Life Insurance: Policy Basics Group Insurance If someone is deemed uninsurable they could seek group life insurance through an employer, a union, or a professional group.If someone is deemed uninsurable they could seek group life insurance through an employer, a union, or a professional group. Group plans must accept everyone belonging to the groupGroup plans must accept everyone belonging to the group

16. Life Insurance: Policy Basics Steps to take when filing a death benefit claim You should give the name and phone number of your company to appropriate family and friendsYou should give the name and phone number of your company to appropriate family and friends Make a list of all bank accounts, investments, and insurance policiesMake a list of all bank accounts, investments, and insurance policies You must file a claim with the insurance companyYou must file a claim with the insurance company