Life Insurance Policy Provisions, Options and Riders
Core contract provisions
The entire contract clause limits the agreement to the policy plus the attached application and any riders - no side promises. Incontestability bars the insurer from voiding for misrepresentation after two years from issue (fraud may still matter; nonpayment of premium is always contestable). The suicide clause (usually two years) limits recovery to premiums paid. Grace period (typically 30 or 31 days) keeps coverage in force during late payment. Reinstatement is available usually within three years on evidence of insurability plus back premiums or interest. Misstatement of age or sex adjusts the benefit rather than voiding the policy. The free look allows return within the statutory period for a full refund.
Ownership rights include assignment (absolute or collateral), beneficiary change, surrender, and policy loans. The automatic premium loan (APL) rider borrows against cash value to prevent lapse.
Riders and options
- Waiver of premium - premiums waived after total disability (usually six months), policy stays in force; often ages 60-65 cutoff.
- Disability income rider - pays a monthly benefit, distinct from waiver.
- Accidental death and dismemberment - doubles or triples the face for accidental death; principal sum for accidental death, capital sum for dismemberment.
- Guaranteed insurability - buy additional coverage at set option dates without evidence.
- Term riders / other insured rider / child rider / spouse rider / payor benefit.
- Accelerated death benefit - advance of face amount for terminal or chronic illness; generally income-tax free.
- Long-term care and chronic illness riders - may create 7702B or 101(g) tax treatment.
Trap: waiver of premium pays premiums; a disability income rider pays cash to the insured. They are frequently confused on exams.
Rule of thumb: after two years, the insurer's remedy for misrepresentation is generally limited - but nonpayment of premium is never protected by incontestability.