Life & Health Essentials
Life insurance basics
Term is pure protection with no cash value. Whole life has level premium, guaranteed cash value, and policy loans. Universal life is flexible premium with interest-driven cash value. Variable life shifts investment risk to the owner. Know the three parties: owner, insured, and beneficiary, and the difference between primary and contingent designations.
Provisions
Grace period of about 30 or 31 days; incontestability, which bars the insurer from contesting the policy after two years for misrepresentation but never for nonpayment of premium; reinstatement generally within three years with evidence of insurability and back premiums; a two-year suicide clause; misstatement of age or sex, which adjusts the benefit rather than voiding the policy; and the automatic premium loan.
Disability income
The critical definitions are own occupation versus any occupation, elimination period, benefit period, and benefit amount. Own occupation is the more favorable definition for the insured. Residual or partial disability benefits pay a portion when income drops.
Health insurance
Deductible, coinsurance, out-of-pocket maximum, and coordination of benefits are the tested mechanics. Under COB, the plan of the person whose birthday falls earlier in the year is primary for dependent children.
Worked example: an insured dies by suicide 18 months after issue. The insurer refunds premiums and denies the face amount. After the two-year suicide clause expires the full benefit would be payable. Questions often swap the suicide and incontestability periods.