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Lecture Risk management and insurance - Lecture No 23: Life insurance contractual provisions

Lecture Risk management and insurance - Lecture No 23: Life insurance contractual provisions. This chapter’s objectives are to: Life insurance contractual provisions, dividend options, nonforfeiture options, settlement options, additional life insurance benefits. | Life Insurance Contractual Provisions Lecture No. 23 1 Objectives Life Insurance Contractual Provisions Dividend Options Nonforfeiture Options Settlement Options Additional Life Insurance Benefits 2 Life Insurance Contractual Provisions Under the ownership clause, the policyowner possesses all contractual rights in the policy while the insured is living Rights include naming beneficiaries and surrendering the policy for its cash value The policyholder can designate a new owner by filing an appropriate form The entire-contract clause states that the life insurance policy and attached application constitute the entire contract between the parties Prevents the insurer from making amendments without the policyholder’s knowledge 3 Life Insurance Contractual Provisions The incontestable clause states that the insurer cannot contest the policy after it has been in force two years during the insured’s lifetime Protects the beneficiary if the insurer tries to deny payment of the claim years . | Life Insurance Contractual Provisions Lecture No. 23 1 Objectives Life Insurance Contractual Provisions Dividend Options Nonforfeiture Options Settlement Options Additional Life Insurance Benefits 2 Life Insurance Contractual Provisions Under the ownership clause, the policyowner possesses all contractual rights in the policy while the insured is living Rights include naming beneficiaries and surrendering the policy for its cash value The policyholder can designate a new owner by filing an appropriate form The entire-contract clause states that the life insurance policy and attached application constitute the entire contract between the parties Prevents the insurer from making amendments without the policyholder’s knowledge 3 Life Insurance Contractual Provisions The incontestable clause states that the insurer cannot contest the policy after it has been in force two years during the insured’s lifetime Protects the beneficiary if the insurer tries to deny payment of the claim years after the policy was first issued The insurer has two years to detect fraud The insurer can contest a claim after the incontestable period if: The beneficiary takes out the life insurance policy with the intent of murdering the insured The applicant has someone else take a medical examination An insurable interest does not exist at the inception of the policy 4 Life Insurance Contractual Provisions The suicide clause states that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid Reduces adverse selection against the insurer A life insurance policy contains a grace period during which the policyholder has a period of 31 days to pay an overdue premium Prevents the policy from lapsing by giving the policyowner additional time to pay 5 Life Insurance Contractual Provisions The reinstatement provision permits the owner to reinstate a lapsed policy To reinstate, the following .