Question

Sonja, age 25, recently purchased a $100,000 ordinary

life insurance policy on her life. The waiver-of-premium

rider and guaranteed purchase option are attached to

the policy. For each of the following situations, indicate

the extent of the insurer’s obligation, if any, to Sonja

or to Sonja’s beneficiary. Identify the appropriate policy

provision or rider that applies in each case. Treat each

event separately.

a. Sonja fails to pay the second annual premium due

on January 1. She dies 15 days later.

b. Sonja commits suicide three years after the policy

was purchased.

c. At Sonja’s death, the life insurer discovers that

Sonja deliberately lied about her age. Instead

of being 25 years old, as she indicated, she was

actually 26 years old at the time the policy was

purchased.

d. Two years after the policy was purchased, Sonja is

told that she has leukemia. She is uninsurable but

would like to obtain additional life insurance.

e. Sonja is seriously injured in an auto accident. After

six months, she is still unable to return to work.

She has no income from her job, and the insurance

premium payments are financially burdensome.

f. Sonja has a mentally disabled son. She wants to

make certain that her son will have a continuous

income after her death.

g. Sonja lets her policy lapse. After four years, she

wants to reinstate the policy. Her health is fine.

Point out to Sonja how she can reinstate her life

insurance.

h. Sonja wants to retire and does not wish to pay

the premiums on her policy. Indicate the various

options that are available to her.

i. Ten years after the policy was purchased, Sonja is

fired from her job. She is unemployed and is in desperate

need of cash.

j. When Sonja applied for life insurance, she concealed

the fact that she had high blood pressure.

She dies five years later.

Answer 1

As per rules I am answering the first 4 subparts of the question

a: The claim is paid to the beneficiary because the policy was still effective and within grace period.

b: The beneficiary will receive refund of premium and not the face value. The insurance is valid but limited.

c: The benefit can be denied at the discretion of the insurance company since Sonja has lied anbout her age.

d:The insurance comes with the waiver of premium rider and the guaranteed purchase option. This allows her to purchase additional life insurance without proof of insurability.