Texas General Lines — Life, Accident, Health and HMOLife InsuranceHard
A life insurance policyowner has a policy with a guaranteed insurability rider. At age 35, they experience a significant life event and wish to increase their death benefit without undergoing a new medical exam. Assuming the rider's terms allow, when would be an appropriate time to exercise this option?
- AAnytime the policyowner desires, as long as premiums are current.
- BOnly at the policy anniversary closest to age 40.
- CAt specified option dates, typically every three years or upon certain life events.
- DWithin 31 days of the policy's issue date.
Show answer & explanationAnswer & explanation
Correct answer: C. At specified option dates, typically every three years or upon certain life events.
The Guaranteed Insurability Rider allows the policyowner to purchase additional insurance coverage at specified future dates or upon the occurrence of certain life events (e.g., marriage, birth of a child, home purchase) without evidence of insurability. These are known as 'option dates' or 'option periods,' not just any time or only at a specific age.
Why the other options are wrong
- A. Incorrect. The rider can only be exercised at pre-defined option dates or upon qualifying life events, not at any time.
- B. While age 40 might be an option date, the rider offers flexibility beyond a single age.
- D. This describes the Free Look period, not the exercise of a guaranteed insurability rider.
Guaranteed Insurability Rider
A life insurance rider that allows the policyowner to purchase additional amounts of insurance coverage at specific future dates or upon certain life events without providing evidence of insurability.
- Eliminates the need for a new medical exam for additional coverage.
- Options can typically be exercised at specified ages (e.g., 25, 28, 31, 34, 37, 40).
- Can also be exercised upon qualifying life events (e.g., marriage, birth/adoption, home purchase).
- Each option typically has a maximum additional purchase amount.
Memory trick: Guaranteed Insurability: Grow with Life's Steps