Term
| How does the Primary Beneficiary and the Contingent Beneficiary differ? |
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Definition
| Primary is the party designated to receive the policy proceeds following the death of the insured. The Contingent beneficiary can receive the policy proceeds only if all designated primary beneficiaries have predeceased the insured. |
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Term
| When no beneficiaries are named, the proceeds go to the policyowner, if the policyowner is living. If the policyowner is deceased, then the proceeds go to the estate. Some policies contain a Preference Beneficiary clause - define that? |
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Definition
| Preference Beneficiary Clause states that if the policyowner does not name a beneficiary then the insurer will pay the policy proceeds in a stated order of preference. The spouse of the insured, if living, then the children of the insured, then the parents of the insured. |
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Term
| What is the Facility of Payment Clause? |
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Definition
| This permits the insurance co. to pay all or part of the policy proceeds either to a relative of the insured or to anyone who has a valid claim to the proceeds. This includes someone who incurred expenses for the deceased, like medical payments. That portion is paid to that person. |
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Term
| In terms of Changing Beneficiaries - what does Right of Revocation mean? |
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Definition
| This simply means the right to change the beneficiary designation. |
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Term
| In regard to Changing Beneficiaries, what is the difference between Revocable and Irrevocable Beneficiary? |
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Definition
| Revocable beneficiary has no rights to any policy values and cannot prohibit the policyowner from exercising any policy ownership rights, including the right to change beneficiaries. They are said to be a "mere expectency" of receiving the policy proceeds. Irrevococable beneficiary has a vested interest in the proceeds of the life insurance policy even during the insured's lifetime. |
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Term
| What is the most important procedural point in a change of beneficiary? |
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Definition
| Written notification to the insurer of the change. Most insurance co. require the policyowner notify the co. in writing of the change. This is called the Recording Method. |
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Term
| What are the five types of Dividend Options? |
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Definition
1. Cash Dividend
2. Premium Reduction Option
3. Accumulation at Interest Option
4. Paid-Up Additional Ins. Option
5. Additional Term Ins. Option |
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Term
| What is a Settlement Option? |
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Definition
| This grants a policyowner or a beneficiary several choices as to how the ins. co. will distribute the proceeds of a life ins. policy. |
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Term
| What is the difference between the Interest Option and the Fixed-Period Option? |
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Definition
| The Interest Option is a settlement option under which the ins. co. invests the policy proceeds and periodically pays the interest on those proceeds to the payee. The fixed-period Option agrees to pay policy proceeds in equal installments to the payee for a specified period of time. |
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Term
| What is the difference between Fixed-Amount Option and the Life Income Option? |
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Definition
| Fixed Amount Option is where the ins. co. pays equal installments of a stated amount until the policy proceeds, plus the interest earned, are exhausted. The Life Income Option agrees to pay the policy proceeds in periodic installments over the payee's lifetime. |
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Term
| What is an Assignment and What is the Assignment Provision? |
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Definition
| An assignment is an agreement where one party transfers some or all of the ownership rights in a particular property to another party. An Assignment Provision describes the roles of the insurer and the policy owner when the policy is assigned. |
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Term
| What is the difference between an Absolute Assignment and a Collateral Assignment? |
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Definition
| An Absolute is where a policyowner transfers all of his policy ownership rights to the assignee. A collateral is a temporary assignment of the monetary value of a life ins. policy as collateral or security for a loan. |
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