Study Notes for the Long Term Insurance Examination (2011 Edition)

(iv)(v)AIDS or HIV related conditions (sometimes only excluded for say the firstfive years of the insurance);Congenital abnormalities treatment.3.5 INSURABILITY BENEFITSInsurability means that by normal underwriting and business standards a particularrisk is acceptable for insurance. The usual feature that affects this is, of course, the healthof the person who is to be the life insured. Checking whether a person is insurable is abasic element in underwriting (see 5.3). Sometimes the question of insurability,however, arises for an existing client (perhaps with policy reinstatement - see 4.7 or onother occasions). This question, however, may be avoided if the policy is made subject tothe Guaranteed Insurability (GI) Benefit.3.5.1 Guaranteed Insurability OptionThe GI benefit is sometimes referred to as a Guaranteed InsurabilityOption (GIO). The basic features of this rider are:(a)(b)(c)(d)(e)(f)Meaning: the policyowner has the right to purchase additional insurance(of course for an additional premium) on specified option dates, withouthaving to supply evidence of insurability.Limitations: the amount of additional cover may be limited (to the existingpolicy's face amount, or less). Also the right must be exercised before thelife insured reaches a certain age (typically aged 40).Not automatic: if the policyowner does not effect the extra cover on aparticular option date, that particular right is lost. He may, however,exercise the right on the next option date, if any.Option dates: these are specified in the rider, either as particular dates orfor particular events (such as marriage, or the birth of a child).Temporary cover: some insurers grant term insurance cover automaticallyto cover the policyowner-insured during the period allowed for exercisinghis purchase option, so that if he dies before completing the option he hasthe extra cover.Policy with WP: if the insurance also has a Waiver of Premium rider (see3.1.1) and the policyowner-insured is disabled at the time he is to exercisehis option for additional cover, the additional cover is grantedautomatically. The WP rider also provides for all premiums to be waived,until the recovery or death of the policyowner-insured.3/10