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Topic 29: Life Insurance - 91 E Collateral assignment Allows the owner to use the policy as collateral This is often done in a business setting F Incontestable clause This clause gives the insurance company two years during the life of the insured to discover any information about the insured that would have affected issuance of the policy If material adverse information is found, the company has the right to void the contract If the information is found after the two years, the policy stays in force (fraud is an exception) G Misstatement of age If, at death, the death certi cate shows the insured was older or younger than stated in the application, the death bene t will be adjusted to what the premium would have purchased H Grace period This is the automatic extension for premium payment, usually to 31 days after due date Without this provision, if a premium is received after the due date, the policy lapses I Reinstatement If the premium arrives after the grace period, the policy lapses The reinstatement provision permits the owner, if insurable interest still exists and if the insured is still insurable, to reinstate a policy that has lapsed for nonpayment of premium If a policy was surrendered for its cash value, it may not be reinstated Generally, reinstatement is automatic if requested within 30 days of the end of the grace period J Automatic premium loan If the premium has not been paid at the end of the grace period, the company will automatically lend the owner the premium, using the cash value of the policy as collateral This prevents the policy from lapsing It is used only in cash value policies K Suicide clause Adverse selection would occur if insurance companies had to honor death claims for suicides that occurred shortly after a life insurance policy is taken out In most states, if the insured commits suicide within the rst two years after the policy was issued, the insurance company will pay only the cumulative premiums plus interest L Aviation and war clauses These eliminate coverage for any death that is aviation related or due to war Few if any policies currently have these provisions M Policy loans Permanent policies permit owners to borrow from the insurance company at a speci ed interest rate, using the policy as collateral The policy loan clause describes that right and contains speci c provisions N Simultaneous death clause If the insured and the bene ciary die simultaneously, it will be presumed that the bene ciary died rst The proceeds will be distributed as if the insured survived the bene ciary and will be paid to the secondary bene ciary or to the insured s estate O Common disaster clause Settlement of the policy proceeds is withheld for a designated number of days after the death of the insured (usually 30), and any bene ciary surviving the insured but dying within the speci ed period is considered to have predeceased the insured Therefore, the proceeds are distributed as if the insured survived the bene ciary P Guaranteed purchase option This option protects the policy owner against the chance of becoming uninsurable by allowing the insured to purchase additional amounts of insurance at speci ed times or ages without showing evidence of insurability Q Waiver of premium If the insured becomes disabled, the insurance company will waive premiums on the life insurance policy during the continuance of the insured s disability R Accelerated bene ts provision (accelerated death bene t) This allows a terminally ill insured to withdraw a portion of the policy s death bene t before death The amount received is income tax free.

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A process designed by, or under the supervision of, the issuer s principal executive and principal financial officers, or persons perform-

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ing similar functions, and effected by the issuer s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

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92 - Insurance Planning and Risk Management S Prohibited provisions found in life insurance (1) Nonpayment of a loan is not a cause for forfeiture, and (2) an insurance company cannot promise something in the declarations and take it away in the ne print 4 Dividend options Participating life insurance policies offer several dividend options: A Cash Dividend is paid to the owner in cash Such payments are considered a return of premium and are income tax free B Reduction of premiums The dividend is used to reduce the current premium C Accumulation at interest The insurance company holds on to the funds and pays interest on the accumulated funds The interest is taxed as ordinary income This is similar to a savings account D Purchase of paid-up additions The annual dividend is used to purchase small amounts of paid-up permanent insurance (no future premiums due) E Purchase of term insurance Used in combination with one of the other options Part of the dividend is used to purchase one-year term insurance in the amount of the guaranteed cash value of the policy F Many companies also permit the owner to apply the dividend to any interest or principal of a policy loan 5 Nonforfeiture option A number of choices are available regarding how a life insurance policy owner can use the policy s cash value: A Surrender for cash The policy owner can withdraw the cash value (called cash surrender value) of the policy All surrenders must be made in cash B Purchase an annuity The policy owner can purchase an annuity to provide income for life or a speci ed time period C Buy a reduced amount of paid-up permanent insurance This option permits the owner to have a zero premium policy of a reduced amount D Buy the same amount of extended term insurance The amount of the term insurance is the same as the face amount of the original policy, but the period of coverage will be only for the time frame identi ed in the policy 6 Settlement options A An interest-only option can be used to buy time before a nal settlement is chosen When interest only is chosen, the insurance company typically sends a quarterly check representing interest earned during the quarter B A lump sum payment is income tax free This is the most popular choice of life insurance settlement A cash settlement allows the bene ciary to retire outstanding debt, pay funeral costs, provide for an emergency fund, and allow for investing in the market C There are several xed annuity options that provide partial taxability: (1) Fixed income option The recipient tells the insurance company how much income is needed each month The insurance company tells the recipient how long the payments will continue (2) Fixed period option The recipient tells the insurance company how long the money must last The company then calculates the amount of each payment (3) There are four life income options (a) Straight life income The bene ciary receives a speci ed amount for as long as he or she lives, but nothing is paid after his or her death This option provides the largest monthly bene t per $1,000 of proceeds.

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If a single request has completed on the thread in the interim, the active scheduler performs lookup and calls the appropriate event handler on that active object If more than one request has completed in that time, the active scheduler calls the event handler for the highest priority active object It follows that, if multiple events are generated in close succession while another event is being handled, those events may not be handled in the sequence in which they occurred because the active object search list is ordered by priority to support responsive event-handling Normally, active object code should be designed so the priority does not matter, otherwise the system can become rather delicate and be thrown off balance by minor changes or additional active objects on the thread However, to be responsive, say for user input, it is sometimes necessary to use a higher priority value Long-running, incremental tasks, on the other hand, should have a lower priority than standard since they are designed to use idle processor time (as I ll describe later in this chapter) It s important to understand that the priority value is only an indication of the order in which the active scheduler performs lookup and eventhandling when multiple events have completed In contrast to the priority values of threads used by the kernel scheduler, it does not represent an ability to pre-empt other active objects Thus, if you assign a particular active object a very high priority, and it completes while a lower-priority active object is handling an event, no pre-emption occurs The RunL() of the lower-priority object runs to completion, regardless of the fact that it is holding up the handler for the higher-priority object On Symbian OS, you cannot use active object priorities to achieve a guaranteed response time; for this you must use the pre-emptive scheduling associated with threads1 , which is described in 10 If you have a large number of active objects in a single thread which complete often, they compete for their event handler to be run by the active scheduler If some of the active objects have high priorities and receive frequent completion events, those with lower priorities wait inde nitely until the active scheduler can call their RunL() methods In effect, it s possible to hang lower-priority active objects by adding them to an active scheduler upon which a number of high-priority active objects are completing.

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