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 3 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 6 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 4 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 5 years later.