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Michigan Life Insurance Policy Provisions, Options and Riders Exam 2024 Questions and Answers
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Michigan Life Insurance Policy Provisions, Options and Riders Exam
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Michigan Life Insurance PolicyProvisions, Options and Riders Exam
Provisions - Answer -stipulate the rights and obligations of an insurance contract and
are fairly universal from one policy to the next.
Riders - Answer -modify provisions that already exist and are used to increase or
decrease policy benefits and premiums.
Options - Answer -offer insurers and insureds ways to invest or distribute a sum of
money available in a life policy. It is essential for you to have a good understanding of
the different provisions, riders, and how they apply to life insurance transactions.
What are the 2 types of policy assignment? - Answer --Absolute Assignment: involves
transferring all rights of ownership to another person or entity. This is a permanent and
total transfer of all the policy rights. The new policyowner does not need to have an
insurable interest in the insured.
-Collateral Assignment: involves a transfer of partial rights to another person. It is
usually done in order to secure a loan or some other transaction. A collateral
assignment is a partial and temporary assignment of some of the policy rights. Once the
debt or loan is repaid, the assigned rights are returned to the policyowner.
Entire Contract - Answer -The entire contract provision stipulates that the policy and a
copy of the application, along with any riders or amendments, constitute the entire
contract. No statements made before the contract was written can be used to alter the
contract. Neither the insurer nor the insured may change policy provisions once the
policy is in effect without both parties agreeing to it and the change being affixed to the
contract.
Modifications (Changes) - Answer -in the policy must be endorsed on, or attached to,
the policy in writing over the signature of an executive officer of the insurer. While the
policyowner may request changes, only an executive officer can make the changes to
the contract. Most modification clauses specifically state that no agent has the right to
waive policy provisions, make alterations or agreements, or extend the time for payment
of premiums.
, Right to Examine (Free Look) - Answer -This provision allows the policyowner 10 days
from receipt to look over the policy and if dissatisfied for any reason, return it for a full
refund of premium. The freelook period starts when the policyowner receives the policy
(policy delivery), not when the insurer issues the policy. Certain life insurance
transactions, such as replacement, may require a longer free-look period.
Payment of Premiums - Answer -The policy stipulates when the premiums are due, how
often they are to be paid (monthly, quarterly, semiannually, annually, etc.) and to whom.
Premium Mode - Answer -is the manner or frequency that the policyowner pays the
policy premium. Most policies allow for annual, semi-annual, quarterly, or monthly
payments.
Grace Period - Answer -is the period of time after the premium due date that the
policyowner has to pay the premium before the policy lapses (usually 30 or 31 days).
The purpose of the grace period is to protect the policyholder against an unintentional
lapse of the policy. If the insured dies during this period, the death benefit is payable;
however, any unpaid premium will be deducted from the death benefit.
Michigan Grace Period - Answer -In Michigan, each life insurance policy must provide a
grace period of 1 month for the payment of every premium after the first year. If the
insurer terminates coverage, a written notice must be sent to the policyowner's last
known address at least 30 days prior to termination. If an insurer collects a majority of
its annual premium in person, this regulation does not apply.
Reinstatement - Answer -The reinstatement provision allows a lapsed policy to be put
back in force. The maximum time limit for reinstatement is usually 3 years after the
policy has lapsed. If the policyowner elects to reinstate the policy, he/she will have to
provide evidence of insurability. The policyowner is required to pay all back premiums
plus interest, and may be required to repay any outstanding loans and interest. The
advantage to reinstating a lapsed policy as opposed to purchasing a new one is that the
policy will be restored to its original status, and retain all the values that were
established at the insured's issue age.
Note that a policy that has been surrendered cannot be reinstated.
Incontestability Clause - Answer -prevents an insurer from denying a claim due to
statements in the application after the policy has been in force for 2 years, even if there
has been a material misstatement of facts or concealment of a material fact. During the
first 2 years of the policy, an insurer may contest a claim if the insurer feels that
inaccurate or misleading information was provided in the application. The
incontestability period does not apply in the event of nonpayment of premiums; it also
does not usually apply to statements relating to age, sex or identity.
Misstatement of Age or Gender - Answer -Because the age and gender of an insured
are important to the premium that will be charged for a life insurance policy, a provision
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