Questions and Answers
What does the guaranteed insurability rider guarantee to the policyowner?
What is one of the requirements to exercise the guaranteed insurability rider?
Policyowner must wait for specified policy anniversaries or special life events.
The guaranteed insurability rider limits the policies to any form of permanent life insurance policy the insurer is offering at the time the option is exercised, excluding __________.
term insurance
The premiums for the policy bought under a guaranteed insurability rider option are based on the original policy's premium.
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What happens when a guaranteed insurability option is exercised on a universal life insurance policy?
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Match the riders with their primary features:
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Study Notes
Guaranteed Insurability Rider
- Allows policyowners to purchase additional permanent life insurance without needing to prove insurability, even if the insured becomes uninsurable.
- Known as purchase option rider or additional insurability option rider, typically offered with permanent life insurance policies.
Features
- Additional life insurance can be bought on specified policy anniversaries, often at three-year intervals around ages 25, 28, 31, 34, 37, and 40.
- Some riders may start options earlier than age 25 and continue until age 65.
- Missing an option date results in a lost opportunity until the next option date.
- Special life events (e.g., marriage, birth/adoption of a child) can trigger alternative option dates.
- New policy premiums are based on the insured's age when the option is exercised, while the original policy premium remains unchanged.
Limits
- Options are limited to permanent life insurance policies available at the time of the option exercise; term insurance is generally excluded.
- New policies can include additional benefit riders (except another guaranteed insurability rider) for an extra premium.
- Policy limits are typically the lesser of the face amount of the original policy or a specified limit, such as $25,000 or $50,000.
Guaranteed Insurability and Universal Life
- The rider can also be added to universal life insurance policies.
- Upon exercising the option, the death benefit of the underlying policy increases instead of issuing a new policy.
- Increased death benefit leads to higher future monthly insurance deductions reflecting the new net amount at risk.
Accidental Death Benefit Rider
- Provides extra insurance if the insured dies due to an accident, typically offering double or triple the base policy's face value.
- Riders may be called "double indemnity" or "triple indemnity," requiring an additional premium.
- Benefit applies only if death results from an accident; does not cover deaths from illness, disabilities, or self-inflicted injuries.
- Claims must be made within a specified period post-accident (e.g., 60 or 90 days).
- Insurers often limit the addition of this rider to policyowners under age 50, with riders typically expiring at ages 60 or 65.
- Expiration leads to the end of the associated premium payments; the rider does not build cash values while active.
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Description
Explore the essential concepts of insurance policy riders with these flashcards. Learn about terms like the guaranteed insurability rider and how they impact life insurance coverage. Perfect for insurance professionals and students seeking to deepen their understanding of policy features.
