Insurance Riders Overview

Questions and Answers

What is another name for the Guaranteed Insurability Rider?

Future Payment Option

Future Increase Option (correct)

Evidence of Insurability Option

Guaranteed Purchase Rider

What is generally not allowed when exercising the additional purchase option after age 50?

Investment earnings will be included

Exercising the option based on the current health status

Request for increased coverage amount beyond a specified limit (correct)

Purchasing amounts exceeding normal insurance limits

What determines the premium for the additional insurance amount purchased under this rider?

The insured's original policy amount

The insured's age at the time the option is exercised (correct)

The duration of the policy

The health status of the insured at the time of the policy

What must be fulfilled before each purchase under the Guaranteed Insurability Rider?

An earnings test Signup and view all the answers

At what intervals are insured individuals typically given the option to purchase additional coverage?

Every two years Signup and view all the answers

What is the primary purpose of an impairment or exclusion rider?

To delete coverage for a pre-existing condition Signup and view all the answers

How might an impairment rider affect the cost of an insurance policy?

It does not change the premium Signup and view all the answers

In which situation might a person find an impairment rider beneficial?

If they need affordable insurance despite a pre-existing condition Signup and view all the answers

What factor does the underwriter consider when issuing an exclusion rider?

The potential for future claims unrelated to the impairment Signup and view all the answers

Which statement is true regarding impairment or exclusion riders in insurance policies?

They take coverage away from standard policies without altering premium costs. Signup and view all the answers

What is a temporary impairment rider?

A rider that may exclude coverage for a limited time Signup and view all the answers

Which is NOT a characteristic of the impairment rider?

It adds extra cost to the policy. Signup and view all the answers

When might a policy be issued with an exclusion rider?

When the applicant has previously suffered from an injury Signup and view all the answers

Study Notes

Impairment or Exclusion Rider

An impairment rider eliminates coverage for specific pre-existing conditions, like back injuries.
It can be temporary or permanent; once applied, it excludes certain conditions from coverage.
Insurers often use exclusion riders to grant access to insurance for individuals with existing impairments, despite higher risks.
Example: A physician may receive a disability policy with an exclusion on back-related claims, allowing coverage for other disabilities.
Terms of the exclusion are explicitly stated in the insurance policy, emphasizing clarity.
Unlike most riders adding coverage, the impairment rider removes coverage without reducing premium costs.

Guaranteed Insurability Rider

Also known as the Future Increase Option or Guaranteed Purchase Option.
Allows insured individuals to purchase additional disability income coverage without proving insurability.
Insureds receive specific option dates, typically every two years, to exercise this additional coverage.
Companies generally restrict exercising the option beyond age 50 to limit risk exposure.
Premiums for additional insurance are calculated based on the insured’s age at the time of purchase.
To prevent over-insurance, an earnings test is required before each purchase option.
Insurers often cap the coverage amount available at each option date, typically between $500 and $5,000.

Description

This quiz covers the concept of impairment or exclusion riders in insurance policies. Understand how these riders affect coverage for pre-existing conditions like back injuries. Explore the implications of temporary versus permanent riders in insurance contracts.