Sonja's Suicide Case Study

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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.
A. According to the book, a life insurance policy contains a grace period during which the policy owner has a period of 31 days to pay an overdue premium. The insurance remains in force during the grace period. Since Sonja only fails to pay the …show more content…
Sonja commits suicide three years after the policy was purchased.
A. Sonja’s insurance policy should have a suicide clause that states if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; there is only a refund of the premiums paid. In some life insurance policies, suicide is excluded for only one year. If the insured commits suicide after the period expires, the policy proceeds are paid just like any other claim (Rejda, 2011). In this case Sonja committed suicide three years after the policy was purchased so the beneficiary will receive the proceeds of the policy because the suicide clause has …show more content…
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.
A. The waiver-of-premium rider and guaranteed purchase option are attached to the policy. The guaranteed purchase option gives policyholders the right to purchase additional amounts of life insurance at specified times in the future without evidence of insurability (Rejda, 2011).
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.
A. The waiver-of-premium rider and guaranteed purchase option are attached to the policy. A waiver-of-premium provision can be added to a life insurance policy. Under this provision, if the insured becomes totally disabled from bodily injury or disease before some stated age, all premiums coming due during the period of disability are waived. During the period of disability, death benefits, cash values, and dividends continue as if the premiums had been paid (Rejda, 2011).
f. Sonja has a mentally disabled son. She wants to make certain that her son will have a continuous income after her
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Sonja's Suicide Case Study

policyholder to make the premium payments. B. Sonja commits suicide three years after the policy is purchased. “The suicide clause states that if the insured commits suicide within two years after the policy is issued, the face amount of the insurance will not be paid; there is only a refund of the premiums paid” (Rejda, 2014). This means that the policy proceeds will be paid in full as the time frame is after the two years. An important fact to…

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