Evidence Of Insurability

Fenwick owns a whole life policy on his own life. He wants term coverage on his wife, who has no coverage of her own, attached to that same contract rather than bought as a separate policy. Which rider accomplishes this?

1. A.A payor benefit rider.A payor benefit rider sits on a juvenile policy and waives premiums if the adult who pays them dies or becomes disabled. It provides no death benefit on the adult.
2. B.A guaranteed insurability rider.A guaranteed insurability rider lets the BASE insured buy additional coverage on his own life at scheduled option dates without evidence. It never covers a second person.
3. C.An OTHER-INSURED, or spouse, rider: term insurance on a person other than the base insured, attached to the base policy.Correct. The rider covers the wife under Fenwick's contract, usually more cheaply than a small standalone policy, and typically carries a conversion privilege for her.
4. D.A waiver of premium rider.Waiver of premium keeps the policy in force without payment if the BASE insured becomes totally disabled. It adds no coverage on any other life.

Why: An OTHER-INSURED rider, often called a spouse rider or additional-insured rider, adds term insurance on a person other than the base insured to an existing policy. It is convenient and usually cheaper than a small standalone policy because it shares the base contract's issue costs, and it commonly carries a conversion privilege letting the covered person obtain individual permanent coverage without evidence of insurability. The rider terminates on its own schedule, and often on divorce or on the base insured's death, subject to that conversion right.

Sableford Mills' group life plan defines its ELIGIBLE CLASSES as full-time salaried staff and full-time hourly staff. Two people apply outside the annual enrolment window. One is an independent contractor who works part time on the loading dock. The other is a full-time hourly worker who was offered coverage when first eligible and simply declined it. How does the insurer treat them?

1. A.Both must be accepted without evidence of insurability, because group underwriting evaluates the group rather than the individual.Group underwriting waives individual evidence for people entering when first eligible. It does not create a right for anyone at all to join at any time, and it never reaches a person outside the eligible classes.
2. B.The contractor is outside any eligible class and cannot be covered; the late-entering hourly worker is in an eligible class but is normally required to submit evidence of insurability.Correct. Class membership is a threshold the contractor fails outright, while the hourly worker clears it and faces only the late-entrant evidence requirement.
3. C.Both are refused permanently, because anyone who misses initial enrolment forfeits the right to coverage forever.A late entrant is not barred forever. He may ordinarily apply and be accepted on satisfactory evidence of insurability, or at a later open enrolment if the plan holds one.
4. D.The contractor may be added with evidence of insurability, while the hourly worker cannot be added at all.This is exactly backwards. Evidence of insurability cannot cure the contractor's failure to fall within an eligible class, and the hourly worker is the one who can be added on such evidence.

Why: Group eligibility works in two steps. First, a person must fall within an eligible CLASS defined in the master contract by an employment-related characteristic; the contractor does not, so no amount of underwriting makes him insurable under this plan. Second, a person inside an eligible class who declines when first eligible and applies later is a LATE ENTRANT, and insurers routinely require individual evidence of insurability from late entrants to blunt the adverse selection that free re-entry would invite.

Six years into his universal life policy, Kasimir asks the insurer to raise the specified amount from 250,000 dollars to 400,000 dollars, pointing out that universal life is an adjustable product. What should he expect?

1. A.The increase takes effect automatically on request, because universal life is an adjustable product.Adjustability means the contract permits the request. It does not compel the insurer to take on additional mortality risk sight unseen.
2. B.The policy must be surrendered and rewritten, restarting every provision in the contract.Universal life is designed to absorb changes within the existing contract. Surrendering it would trigger tax consequences and lose the protection the original coverage has already earned.
3. C.He must furnish evidence of insurability for the ADDITIONAL amount, the monthly cost of insurance will rise, and the contestable and suicide provisions generally start over as to the increase only.Correct. The new layer of coverage is underwritten and treated as newly issued for contestability and suicide, while the original 250,000 dollars keeps the protection it has already accrued.
4. D.Evidence of insurability is never required on a universal life increase, because the contract already exists.An increase adds mortality risk the insurer never underwrote. Evidence of insurability for the additional amount is the standard requirement.

Why: Adjustability means the contract PERMITS a request to change the specified amount; it does not oblige the insurer to accept additional mortality risk without underwriting. An increase therefore requires evidence of insurability for the ADDITIONAL amount, raises the monthly cost of insurance because the net amount at risk is larger, and generally starts the contestable and suicide provisions over as to the increase only. The original amount keeps the protection it has already earned.

Merrivale Castings' group term plan contains a TOTAL DISABILITY provision. Employee Odalric Stjern becomes totally disabled while insured, stops working, and the employer stops paying premium on his behalf. He never applies for an individual conversion policy. He dies later, still totally disabled. Which statement about his coverage is correct?

1. A.His coverage ended the day he stopped working, and conversion was his only option.That is the default rule only where no total-disability provision applies. This plan contains one, so coverage can continue on proof of disability without further premium.
2. B.Under a total-disability continuation or extended death benefit provision, coverage on a member disabled while insured can continue without further premium, subject to proof of continuing disability.Correct. The provision keeps the group death benefit in force for a totally disabled member who satisfies and maintains the proof requirement, which is why filing that proof matters.
3. C.The group insurer must pay only if he had already applied and paid for an individual conversion policy.Conversion and total-disability continuation are separate rights. Where the disability provision applies, the group coverage itself continues and no conversion application is needed to trigger it.
4. D.The employer, rather than the insurer, becomes personally liable for the death benefit.The obligation is the insurer's under the master contract. An employer can face liability for its own administrative failures, such as neglecting to submit a disability claim, but the benefit itself is not its debt.

Why: Group term contracts commonly include a total-disability continuation, sometimes styled an extended death benefit or a waiver of premium provision. A member who becomes totally disabled while insured can have the group death benefit continue without further premium, subject to submitting and maintaining satisfactory proof of continuing total disability. The benefit belongs to the group insurer under the master contract; the employer does not become personally liable for it.