Sonja's Suicide Case Study

A. Sonja fails to pay the second annual premium and dies 15 days later. According to the grace period of thirty-one days the insurer is obligated to pay out the policy minus the costs of the premium. The grace period is utilized for the prevention of a policy lapsing and providing extra time to the 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 …show more content…
Upon Sonja’s death, the insurer discovers that Sonja deliberately lied about her age. In this situation the insurer will only pay out the amount that would have been under the correct age of her policy. This is called the misstatement of age or sex clause. If this misstatement is discovered while the policyholder is still alive the premiums will be adjusted to the appropriate rates under the correct age.
D. Two years after the policy is purchased, Sonja is told she has Leukemia. In this situation the guaranteed purchase option would allow the insured to purchase more insurance, if desired, without the requirement of medical information. The “guaranteed insurability is a life and health insurance policy feature that enables the insured to add coverage at future times and at fixed and agreed-upon rates regardless of health conditions” (Free Dictionary).
E. Sonja is seriously injured in an auto accident and her premiums become financially burdensome. “A waiver of premium rider is an insurance policy clause that waives premium payments in the event the policyholder becomes critically ill, seriously injured, or disabled” (Investopedia). Typically, this is only available, to add to the policy, during the purchase of the policy and any preexisting conditions can’t purchase this option. There is usually a six month waiting period before the waiver is in …show more content…
Sonja has a mentally disabled son and wants to ensure a continuous income for him after her death. “Special needs trusts are made specifically for the benefit of disabled or mentally ill beneficiaries” (FindLaw). A few advantages to setting up a trust is the beneficiary can still maintain government benefits, as well as, have someone to assure their needs are met under the policy. A trustee would be in charge of making sure any items needed, bills paid, or other special instructions, with the policy funds are provided as long as the funds are available.
G. Sonja lets her policy lapse. After four years she wants to reinstate her policy. In order to reinstate a policy that has lapsed the insured must fulfill certain requirements. These requirements consist of: evidence of insurability, paying overdue premiums plus interest, and repaying any policy loan plus interest. As well, the policy can’t have been surrendered for cash, must be reinstated within the time period allowed, and fall under the reinstatement clause.
H. Sonja wants to retire and doesn’t wish to pay the premiums on her policy. The insured can utilize a reduced paid up option under the extended term insurance non-forfeiture option. This allows the policyholder to use “the cash-surrender value is applied as a net single premium to purchase a reduced paid-up policy” (Rejda, 2014). This option works well for individuals not wanting to pay premiums when they

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Sonja's Suicide Case Study