Life Insurance Policy Provisions, Options, and Riders
Contract provisions
The entire contract clause limits the agreement to the policy plus the application. The insuring clause states the insurer's promise. The free-look period allows return for a refund, running from delivery, not purchase. Ownership rights include changing beneficiaries, assigning, borrowing, surrendering, and choosing settlement options. The incontestability clause bars the insurer from contesting for material misrepresentation after two years from issue; the suicide clause limits payout (typically return of premium) for deaths within two years. Misstatement of age or sex adjusts the benefit rather than voiding the policy. The grace period (commonly 30 or 31 days) keeps coverage in force for late payment.
Beneficiaries and options
Designations may be primary, contingent, revocable or irrevocable, per stirpes or per capita, class, or estate. Nonforfeiture options on lapse: cash surrender, reduced paid-up, extended term. Dividend options include cash, reduce premium, accumulate at interest, paid-up additions, and one-year term. Settlement options: lump sum, interest only, fixed period, fixed amount, life income, and joint and survivor. A policy loan accrues interest; if unpaid, it reduces proceeds. Automatic premium loan prevents lapse by borrowing the premium.
Riders
Waiver of premium, disability income, guaranteed insurability, accidental death and dismemberment, term rider, cost-of-living, return of premium, long-term care, accelerated death benefit, and child term riders.
Rule of thumb
Misstatement of age example: a policy bought as age 35 when the insured was 40. The insurer pays the face amount that the actual premium would have purchased at the true age - the death benefit shrinks, it is not denied.