Catastrophic illness coverage provides for accelerated death benefit payments on approximately the same terms and conditions as terminal illness coverage, except that the insured must have been diagnosed as having one of several listed catastrophic illnesses. Also referred to as dread disease coverage, the provision typically covers stroke, heart attack, cancer, coronary artery surgery, renal failure, and similar catastrophic diseases. Both terminal illness and catastrophic illness coverage’s provide that policy death benefits are reduced on a one-for-one payout basis. Cash values are reduced on either a one-for-one basis or in proportion to the death benefit reduction. [Read more...]
The financially debilitating effects of diseases such as AIDS, combined with continuing medical advances and increases in life expectancy, have focused individuals’ attention to the possibility of incurring significant end-of-life expenses. The individual may have adequate life insurance, and the life insurance may have cash values. However, the promise to pay the face amount on the insured’s death may offer little solace at a time when major expenses are being incurred. The cash surrender value could be helpful because it could serve as collateral for a policy loan, but the total loan will be limited to the policy’s surrender value, which itself may be minimal in comparison to the face amount. If the insured is expected to die within a short time period, the actuarial value of the death benefit promise under the policy will be greater [Read more...]
A common practice is to attach riders that provide certain benefits in the event of the insured’s disability. The two most common disability benefits are (1) waiver of premium and (2) disability income. The definition of disability, a critically important aspect, usually is the same for both waivers of premium and disability income benefits.
Definition of Disability
Under the disability clauses in life and health insurance policies and annuity contracts, the risk covered pertains to total and permanent disability. Although phraseology varies greatly, the customary wording of the clause declares the policy owner to be entitled to the benefits promised when the insured’s illness or injury results in his or her total and permanent disability. [Read more...]
One of the problems faced by young people just starting their careers is a combination of limited income and a growing future need for life and health insurance protection as their life cycle evolves. The guaranteed insurability option, also known as the additional or guaranteed purchase option, permits an insured to purchase additional insurance without providing evidence of insurability. It was developed to permit young individuals to be certain that they would be able to purchase additional insurance as they grew older, regardless of their insurability. The usual rider gives the ir1ured the option (in finance terms, a call option) of purchasing additional insurance at periodic, set intervals (e.g., three years), provided the insured has not attained a specified age, such as age 40. Special option dates may be allowed for such life events as birth or adoption of a child and marriage. In most cases, the amount of the additional insurance is limited to a multiple of the basic policy [Read more...]
An accidental death benefit (sometimes called double indemnity) clause or rider, which may be added to most life insurance contracts, provides that double (or other multiple) of the face amount is payable if the assured dies as a result of an accident. From a financial planning standpoint, there is no reason why double or triple the policy face amount should be paid for an accidental death, as compared with death from other causes. The financial loss to the family is equally great irrespective of the cause of death. Moreover, with respect to most persons, the likelihood of accidental death is less than the likelihood of death from other causes. The clause has value, of course, and its comparatively low premium reflects the relatively low probability of loss. The small premium, coupled with the belief (erroneous for the most part) by most persons that if they die, the cause of death will be an accident, are probably the main reasons for its appeal. [Read more...]