Life Insurance Policy Provisions, Options, and Riders
Core provisions
Entire contract (policy plus attached application) and a grace period, commonly 30 days, during which coverage continues. Incontestability: after two years from issue the insurer cannot contest the policy for misrepresentation, though it may still act on nonpayment of premium. Misstatement of age or sex is not a contest - the benefit is adjusted to what the premium would have purchased. The suicide clause is generally limited to two years, with premiums refunded. Reinstatement is available after a lapse on evidence of insurability and payment of overdue premiums with interest, and it restarts the contestable and suicide periods. Free look (10 days in Alaska, longer if the policy states) allows return for a full refund.
Nonforfeiture and loans
If a whole life policy lapses, the owner may take cash surrender value, reduced paid-up insurance (smaller face, no further premiums), or extended term (same face for a limited time). Policy loans accrue interest and reduce the death benefit; if the loan plus interest exceeds cash value, the policy lapses. An automatic premium loan uses cash value to keep the policy in force.
Dividends and riders
Dividend options: cash, reduce premium, accumulate at interest, paid-up additions, one-year term. Common riders: waiver of premium, disability income, accidental death/double indemnity, guaranteed insurability, term rider, child rider, accelerated death benefit, and long-term care or chronic illness.
Settlement options
Interest only, fixed period, fixed amount, life income (with period certain or refund features), and joint and survivor. The owner chooses; if no election was made, the beneficiary may.
Worked example: An insured understated age by five years. After the contestable period, the insurer pays the face amount the actual premium would have purchased. Trap: settlement options and nonforfeiture options are different lists.