Life Insurance Policy Provisions, Options, and Riders
Core contract provisions
The entire contract clause limits the agreement to the policy plus the application. The grace period (commonly 30 or 31 days) keeps coverage in force after a missed premium. Reinstatement is available typically within three years with evidence of insurability and back premiums plus interest. The incontestability clause bars the insurer from contesting the policy after two years from issue, except for nonpayment of premium. Misstatement of age or sex adjusts the benefit rather than voiding the policy. The suicide clause limits payout, usually to return of premium, during the first two years. The free look gives the owner a stated period to return the policy for a refund.
Ownership, beneficiary, and assignments
Ownership rights include naming beneficiaries, surrendering, borrowing, and assigning. Beneficiary designations: primary, contingent, revocable versus irrevocable, per stirpes versus per capita. Absolute assignment transfers all rights; collateral assignment pledges the policy as security.
Nonforfeiture and dividend options
Nonforfeiture options: cash surrender, reduced paid-up, extended term. Dividend options: cash, reduce premium, accumulate at interest, paid-up additions, one-year term.
Settlement options
Interest only, fixed period, fixed amount, life income (straight life pays the most), life with period certain, and joint and survivor.
Riders
Waiver of premium, disability income, accidental death and dismemberment (double indemnity), guaranteed insurability, term rider, payor (waives premium if the premium payer dies or is disabled), child rider, accelerated death benefit, long-term care, and return of premium.
Trap: incontestability does not protect an owner who stops paying premiums; misstatement of age never voids a policy. Rule of thumb: accelerated death benefit pays early; AD&D pays extra only for accidental death or dismemberment.