III IC-02 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Insurable interest

A financial or close-family relationship that justifies insuring another person's life. It must exist when the policy is issued, and the owner cannot profit from the insured's death.

Policyowner

The person who owns the life insurance contract and holds its rights, including naming beneficiaries, borrowing cash value, surrendering and assigning the policy. May differ from the insured.

Contestability period

A period, commonly two years from issue, during which the insurer may rescind a policy for material misrepresentation on the application. After it, coverage is generally incontestable.

Grace period

A stated time after a premium due date, often 30 or 31 days, during which the policy stays in force. Death during the grace period is covered, with unpaid premium deducted.

Reinstatement

Restoring a lapsed policy by paying overdue premiums with interest and providing evidence of insurability. A new contestability and suicide period usually begins from reinstatement.

Free-look period

A period after policy delivery, typically 10 to 30 days, during which the owner may return the policy for a full premium refund. It protects buyers from pressured purchases.

Premium payment mode

The frequency of premium payments: annual, semiannual, quarterly or monthly. More frequent modes cost more in total because of lost interest and added administrative expense.

Level term insurance

Term coverage with a fixed face amount and fixed premium for a stated number of years. It pays only if the insured dies during the term and builds no cash value.

Whole life insurance

Permanent coverage with level premiums, guaranteed cash value and a guaranteed death benefit. It stays in force for life as long as required premiums are paid or the policy is otherwise funded.

Universal life insurance

Permanent, flexible-premium coverage with a cash value credited interest and charged monthly cost of insurance. Premium and face amount are adjustable, but guarantees depend on policy terms.

Variable life insurance

Permanent coverage whose cash value is invested in separate accounts chosen by the owner. The owner bears investment risk, and the product is a security requiring a prospectus.

Cost of insurance

The monthly mortality charge in a universal life policy, based on the net amount at risk, the insured's age and risk class. It rises as the insured ages.

Waiver of premium rider

A rider that pays premiums if the insured becomes totally disabled for a specified period. It keeps the policy in force without further payment during the qualifying disability.

Accidental death benefit rider

A rider paying an additional amount, often equal to the face amount, if death results from an accident within a stated period. Natural-cause deaths receive only the base benefit.

Deferred annuity

An annuity that accumulates value during a deferral period before income payments begin. It may be fixed, with a guaranteed rate, or variable, with investment risk on the owner.

Group life insurance

Term coverage issued to an employer or association under one master contract, covering a class of members. It usually requires no individual evidence and offers conversion rights.

Constructive delivery

Unconditional placement of a policy with the agent or in the mail, which completes delivery even without physical handoff. The free-look period generally starts at delivery.

Primary beneficiary

The person or entity first in line to receive policy proceeds on the insured's death. A contingent beneficiary receives the proceeds if the primary is deceased.

Irrevocable beneficiary

A beneficiary whose designation cannot be changed without that beneficiary's written consent. The owner gives up the right to alter the designation unilaterally.

Per stirpes distribution

A method of splitting proceeds where a deceased beneficiary's share passes to that beneficiary's descendants. Per capita instead splits equally among living named beneficiaries.

Common disaster clause

A provision that sets the order of death when insured and beneficiary die in the same event, so proceeds reach the contingent beneficiary rather than the primary's estate.

Collateral assignment

A temporary assignment of policy rights to a lender as security for a loan. The lender may collect up to the debt; the beneficiary receives any remaining proceeds.

Facility of payment clause

A provision letting the insurer pay part of the proceeds to a relative or person who paid the insured's final expenses, when no valid beneficiary receipt is available.

Field underwriting

The agent's first-stage risk assessment: completing the application accurately, recording observations and forwarding medical and financial information so the insurer can classify the risk.

Substandard risk

An applicant whose health, occupation or habits create higher-than-average mortality. The insurer may issue coverage at a rated premium, with exclusions, or decline the application.

Conditional receipt

A receipt given with the first premium that provides interim coverage only if the proposed insured meets the insurer's underwriting requirements. Otherwise no coverage exists before issue.

Misstatement of age provision

A clause adjusting the death benefit, rather than voiding the policy, when the insured's age or sex was misstated. The benefit becomes what the premium would have bought.

Suicide clause

A provision limiting payment to a refund of premiums if the insured dies by suicide within a stated period, commonly two years from issue or reinstatement.

Proof of death

Documentation, usually a certified death certificate plus a claim form, submitted by the beneficiary so the insurer can verify the claim and pay the proceeds.

Twisting

Misrepresenting an existing policy to persuade a client to replace it, often by false comparisons. It is a prohibited unfair trade practice in insurance regulation.

Rebating

Offering part of a commission or another inducement not stated in the policy to win business. Most jurisdictions prohibit it as an unfair trade practice.

Replacement notice

A disclosure signed when new coverage will replace existing insurance, comparing costs and warning of new contestability, suicide and surrender-charge periods.