Lecture Notes on Standard Policy Provisions by NAIC

Introduction

• Series of short videos explaining standard policy provisions.
• Focus on provisions adopted by the National Association of Insurance Commissioners (NAIC).

Entire Contract

• Includes:
  • The policy itself.
  • Copy of the application.
  • Any riders and amendments or endorsements.
• Riders:
  • Add-ons to a policy (e.g., covers additional needs like nursing homes).
• Amendments/endorsements:
  • Changes or authorizations post-application.

Insuring Clause

• Basic agreement between insurance company and insured.
• Components:
  • Premium payment details.
  • Death Benefit.
  • Duration and type of policy.
  • Parties involved (e.g., insured, beneficiary, owner).

Free Look Period

• Refund period for reviewing the policy.
• Varies by state (e.g., 14 days in Florida).
• Allows changes or requests for refunds.

Consideration

• Obligations from each side:
  • Insured: Promise to pay premiums and truthful application.
  • Insurer: Promise to pay claims if insured dies.

Ownership Rights

• Key parties:
  • Insurer, Policy Owner, Insured, Beneficiary.
• Policy Owner Rights:
  • Change beneficiaries, access cash value, pay premiums.
  • Must have insurable interest.

Assignment

• Transfer of policy ownership:
  • Absolute Assignment: Full transfer of rights.
  • Collateral Assignment: Partial transfer, often for securing loans.

Beneficiaries

• Types:
  • Primary and Contingent Beneficiaries.
• Rules for changes:
  • Revocable Beneficiary: Can be changed without consent.
  • Irrevocable Beneficiary: Requires consent for changes.
• Common Disaster Clause: Protects contingent beneficiaries if primary dies simultaneously with the insured.

Premium Payments

• Modes of payment: Monthly, Annually, etc.
• Grace Period: Time allowed post-due date to avoid lapsing.

Reinstatement

• Conditions to reactivate a lapsed policy:
  • Pay back premiums and loans.
  • Provide evidence of insurability.

Incontestability

• After 2 years, policy cannot be contested except for age, gender, identity discrepancies.
• Contestability Period: First 2 years where claims can be challenged.

Policy Loans

• Available in policies with cash value.
• Interest charged on loans.
• Automatic Premium Loan: Uses cash value to cover premiums to prevent lapsing.

Exclusions

• Risks not covered:
  • Aviation, hazardous jobs, military actions.
• Suicide Clause:
  • No payout if suicide occurs within first 2 years.

• Promotion of services related to selling life insurance over the phone.
• Encouragement to engage with content (subscribe, like, etc.).

These notes cover the key aspects and details necessary for understanding policy provisions essential for life insurance exams.