Life Insurance Policy Provisions, Options, and Riders
Required provisions
Life policies include a free-look period, typically 10 to 30 days, allowing the owner to return the policy for a full refund. The grace period, often 31 days, keeps coverage in force after a missed premium. Reinstatement is available within a stated window, usually three years, on evidence of insurability and payment of overdue premiums with interest. The incontestability clause bars the insurer from denying a claim for misrepresentation after two years from issue. Misstatement of age or sex adjusts the benefit rather than voiding the policy. The suicide clause limits payout to returned premiums if death occurs within two years. The entire contract clause prevents unilateral changes.
Nonforfeiture options
On lapse of a cash-value policy, the owner may take cash surrender value, reduced paid-up insurance (smaller face, no further premiums), or extended term insurance (full face for a limited period).
Dividend options
Cash, reduce premium, accumulate at interest, paid-up additions, or one-year term.
Settlement options
Lump sum, interest only, fixed period, fixed amount, and life income, with period-certain, refund, and joint-and-survivor variations.
Riders
Waiver of premium, disability income, accidental death, guaranteed insurable option, term rider, child rider, accelerated death benefit, and long-term care riders.
Traps
Reinstatement restarts the contestability and suicide periods. Extended term uses the full face amount; reduced paid-up does not.
Rule of thumb
Extended term equals the same face for a shorter time; reduced paid-up equals a smaller face for the same time.