Life Insurance Policy Provisions, Options and Riders
Medicare Advantage Plans(takes you to ~ myfloridamedicare.net)
Florida Life Insurance
3 Categories of Life Insurance
(1.) Ordinary Life Insurance
Premiums are paid monthly, quarterly, semiannually or annually
A. Term (temporary) Insurance ~ Level Term - Decreasing Term - Increasing Term
B. Permanent Life Insurance Whole Life - Endowment - Universal Life - Variable Universal Life - various interest-rate sensitive cash value plans
(2.) Industrial Life Insurance
Premiums are paid weekly
Often called "debit insurance" it gives individuals who cannot afford larger policies some measure of insurance coverage. The amounts are small, often as little as $,1000 of coverage.
(3.) Group Insurance
Group Life Insurance covers employer-employee groups, associations, unions and creditors and provide coverage under one contract.
Life Insurance Policy Rights of Ownership
The most significant rights of policy ownership include:
The right to designate and change the beneficiary of the insurance policy proceeds
The right to select how the death proceeds will be paid to the beneficiary (lump sum, installments)
The right to cancel the insurance policy and select a non-forfeiture option
The right to take out a policy loan, assuming the policy is a permanent plan and a cash value exists
The right to receive policy dividends and select a dividend payment option, if it is a participating policy
The right to assign ownership of the insurance policy to someone else
The Beneficiary
Individuals
Businesses
Trusts
Estates
Charities
Minors
Classes ~ "my children" "children of the insured"
Order of Succession
Primary Beneficiary ~ A person named to receive the death benefit
Secondary Beneficiary ~ The person to receive the death benefit if the primary beneficiary dies.
Tertiary Beneficiaries ~ The person who will receive the death benefit if the primary and secondary beneficiaries have passed away.
Per Stirpes ~ Per Capita Distribution of policy proceeds
When life insurance policy proceeds are distributed to the insured's descendants it is by per stirpes or per capita.
Per Stirpes ~ "by way of" "by branches" Should the beneficiary of a life insurance policy die before the insured, under per stirpes, the proceeds of the policy are distributed to the beneficiary's children in equal shares.
Per-Capita distribution is only to the beneficiaries who are living and have been named in the policy.
Revocable and Irrevocable Beneficiaries
Revocable Beneficiary ~ The policy owner can change the person named should they desire.
Irrevocable Beneficiary ~ The policy owner gives up the right to change the beneficiary. The beneficiary has a vested right in the policy and the policy owner can't exercise any rights affecting the beneficiary's rights without the beneficiary's consent.
Irrevocable clauses can be absolute or reversionary
When absolute the beneficiary has an absolute vested interest in the life insurance contract even if the beneficiary dies before the policy owner.
When reversionary, all rights of ownership revert back to the policy owner including the right to name a new beneficiary.
Uniform Simultaneous Death Act
If the insured and the beneficiary die in the same accident the policy proceeds are distributed as if the insured died last.
Common Disaster Provision A provision often added to a policy that says the promary beneficiary must outlive the insured by a definite period of time stipulated by the policy owner (14 or 30 days are common choices), or policy proceeds are paid out as if the insured died last.
Spendthrift Trust Clause ~ Shelters life insurance policy proceeds not yet paid to the beneficiary from the claims of creditors (creditors of the beneficiary or the policy owners). It does not apply to proceeds paid in one lump sum.
Facility of Payments Provision
In some limited situations an insurer may pay the proceeds to someone not designated as a beneficiary but who has a valid right (though not named in the policy). These situations may arise when:
The named beneficiary is a minor
The named beneficiary is deceased
No claim is submitted within a specified time period
Costs were incurred by another party for the deceased final expenses
Insurance Policy Dividends
Insurance policies may be Participating (they pay dividends) or non-Participating (they do not pay dividends)
Dividends are tax free, interest earned on the dividends is taxable
Dividend Payment Options
Cash
Apply dividends against premiums
Allow dividends to accumulate at interest
Use dividends to buy paid-up additions of life insurance
Use dividends to purchase one-year term insurance