Life Insurance Provisions, Options, Riders, and Beneficiaries
Core policy provisions
Entire contract (policy plus application), free look (Maryland requires at least 10 days on individual life policies), grace period (commonly 30 or 31 days), reinstatement (typically within 3–5 years with evidence of insurability and payment of overdue premiums with interest; a new contestable period may attach), incontestability (2 years), suicide exclusion (usually 2 years), and misstatement of age or sex (benefit adjusted to what the premium would have purchased).
Nonforfeiture and dividend options
Nonforfeiture options are cash surrender, reduced paid-up, and extended term. Dividend options are 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 (with or without period certain), and joint and survivor. Life-only pays the most per dollar; a period certain guarantees a minimum payout.
Riders
Waiver of premium, disability income, accelerated death benefit, long-term care, accidental death (double indemnity), guaranteed insurability, cost-of-living, child term, term conversion, payor benefit, and other-insured riders.
Beneficiaries
The primary beneficiary is first in line; the contingent takes if the primary dies first. A revocable designation may be changed freely; an irrevocable one requires written consent. Know per stirpes (by branch) versus per capita (by head), class designations, minor beneficiaries (guardian or UTMA), and the common-disaster clause. The policy designation - not the will - controls, and without a surviving beneficiary proceeds pass to the owner's estate through probate.
Traps: incontestability does not excuse nonpayment of premium; an irrevocable beneficiary blocks changes; accidental death riders pay only the extra amount and only for accidental causes.
Worked example: a $200,000 policy with $40,000 cash value. Extended term keeps the full $200,000 face for whatever period $40,000 will buy; reduced paid-up buys a smaller permanent face with no further premiums. Need the largest immediate death benefit? Choose extended term.