Life Insurance Endorsements - Basic Benefit and Disability

Transcription

1 A st Edition, 2008 (Updated: December 2012)

2 Chapter 3 General Clauses of a Contract Benefits and endorsements Basic benefit In simple terms, the basic benefit means the insured risk. It is the insurance coverage offered by the insurer. In fact, it is the insurance contract that determines the covered risk and specifies the event for which coverage is provided. Life insurance is therefore considered the basic benefit of a life insurance contract, but this kind of contract might also contain clauses providing protection against accidents or illness. Example Leo takes out a life insurance policy for $100,000 on his life with a family insurance endorsement. The basic benefit is therefore the $100,000 coverage on his life Endorsements An endorsement is a document that is added to and made an integral part of an insurance contract, showing changes made to the initial contract. Under the Civil Code of Québec, changes made to the contract by the parties are evidenced by endorsements attached to the policy. A number of endorsements may be attached to basic life insurance products to tailor the product to the insured s needs and goals. The owner can cancel an endorsement without affecting the policy or substitute the endorsement for his life insurance policy. As a result, the product described in the endorsement becomes the basic product and the initial basic product (described in the policy) is cancelled. Example In 1995, while he was still a student, Andrew bought a $50,000 permanent life insurance policy. In 1999, to cover a loan taken out to open his business, he added an endorsement to the contract in the form of temporary coverage of $200,000. Andrew contacts his insurance of persons representative to terminate his permanent insurance policy because he finds the premium too high, but he wants to keep his temporary coverage in effect. In the above example, the basic coverage will be terminated and the temporary coverage endorsement will become the basic product.

3 144 Example 1 An insured s contract may provide for: A basic face amount of $25,000 PLUS An additional AD&D benefit of $25,000 PLUS A second AD&D benefit of $25,000 (added to the first for death occuring in public transportation) If the insured dies of natural causes, the beneficiaries will receive $25,000. If the insured dies in a car accident, the beneficiaries will receive $50,000. If the insured dies accidentally while riding in a bus, the beneficiaries will receive $75,000. Type of death Amount received by beneficiaries Natural causes $25,000 Car accident $25,000 + $25,000 = $50,000 Bus accident $25,000 + $25,000 + $25,000 = $75,000 Example 2 As a result of the AD&D benefit, the additional benefits payable may differ from the basic face amount. For example, if the face amount is $50,000, the insured may be eligible for $25,000 in AD&D benefits. In the event of accidental death, the beneficiary would receive a total of $75,000 ($50,000 + $25,000). Similarly, consider the example of a policy with a face amount of $50,000. If $40,000 in additional benefits is payable in the event of accidental death involving train travel, the beneficiary will receive a total of $130,000: $50,000 (basic face amount) + $40,000 (first benefit) + $40,000 (second benefit). The first and second benefit amounts are identical. In other words, by including the second benefit provision, the total amount paid out is double the initial benefit amount, as shown in Example 1.

4 158 Question 5 In which one of the following scenarios would 50% of the face amount be paid out under dismemberment coverage? a) At least two limbs are completely severed, or eyesight or hearing is b) At least two limbs are completely severed and eyesight or hearing is partially lost. c) At least one limb is completely severed and eyesight or hearing is d) At least one limb is completely severed, or eyesight or hearing is Question 6 A disability annuity benefit is payable: a) Until the end of the disability episode or until the insured turns 65, b) Until the end of the disability episode or until the insured turns 65, c) Until the end of the disability episode or until the insured turns 55, d) Until the end of the disability episode or until the insured turns 55, Question 7 Ron has $50,000 in permanent life insurance coverage with a $25,000 health endorsement. Under this endorsement, Ron is entitled to receive a lump-sum payment of if he is diagnosed with one of the critical illnesses listed in the contract and if he lives for the after this endorsement is added to the contract. a) $25,000; first 15 days; b) $50,000; first 15 days; c) $25,000; first 30 days; d) $50,000; first 30 days.

5 164 Answer 5 In which one of the following scenarios would 50% of the face amount be paid out under dismemberment coverage? a) At least two limbs are completely severed, or eyesight or hearing is b) At least two limbs are completely severed and eyesight or hearing is partially lost. c) At least one limb is completely severed and eyesight or hearing is d) At least one limb is completely severed, or eyesight or hearing is Answer 6 A disability annuity benefit is payable: a) Until the end of the disability episode or until the insured turns 65, b) Until the end of the disability episode or until the insured turns 65, c) Until the end of the disability episode or until the insured turns 55, d) Until the end of the disability episode or until the insured turns 55, whichever comes first. Answer 7 Ron has $50,000 in permanent life insurance coverage with a $25,000 health endorsement. Under this endorsement, Ron is entitled to receive a lump-sum payment of if he is diagnosed with one of the critical illnesses listed in the contract and if he lives for the after this endorsement is added to the contract. a) $25,000; first 15 days; b) $50,000; first 15 days; c) $25,000; first 30 days; d) $50,000; first 30 days.