Life Insurance Policy Provisions, Options and Riders
The contract shell
The entire contract clause means the policy plus the application - nothing outside can alter it. The free look (at least 10 days; longer for Medicare supplements and often annuities) allows return for a full refund. Incontestability bars the insurer from challenging the policy after two years for misrepresentation, but never for nonpayment of premium. Suicide exclusions run two years; misstatement of age or sex adjusts the benefit rather than voiding the policy.
Money provisions
Grace period (typically 30 or 31 days) keeps coverage alive for a late premium. Reinstatement within three years requires evidence of insurability plus overdue premiums with interest. Policy loans accrue interest and reduce the death benefit; the automatic premium loan uses cash value to prevent lapse. Nonforfeiture options: cash surrender, reduced paid-up, extended term. Dividend options: cash, reduce premium, accumulate at interest, paid-up additions, one-year term.
Who gets paid
Owners control the policy; a collateral assignment pledges it to a lender, an absolute assignment transfers all rights. Beneficiaries may be primary or contingent, revocable or irrevocable; per capita splits equally among survivors, per stirpes among branches. Common disaster and spendthrift clauses protect proceeds.
Paying out
Settlement options: lump sum, interest only, fixed period, fixed amount, and life income with or without a period certain. Riders add waiver of premium, disability income, guaranteed insurability, accidental death, accelerated death benefit, child term, payor benefit, cost-of-living, and long-term care.
Traps: assuming incontestability protects a policyholder who stops paying, and confusing reduced paid-up (smaller face, lifetime coverage) with extended term (same face, limited time).
Rule of thumb: any guaranteed period in a settlement option lowers each payment.