Life Insurance Policy Provisions, Options and Riders
Core contract provisions
The entire contract clause limits the agreement to the policy plus the application. The free look lets the owner return the policy for a full refund (commonly 10 days in Ohio for individual life; longer periods may apply in replacement or annuity situations). Grace period on life is typically 30 days - coverage stays in force during it. Reinstatement is available generally within 3 years of lapse upon evidence of insurability and payment of overdue premiums with interest. Incontestability bars the insurer from contesting the policy for misstatement after 2 years, but never bars action for nonpayment of premium. Misstatement of age or sex adjusts the benefit rather than voiding the policy. The suicide clause limits payment (typically return of premium) during the first 2 years.
Options
The nonforfeiture options are cash surrender, reduced paid-up (smaller face, no further premiums, permanent), and extended term (same face for a limited period). Dividend options: cash, reduce premium, accumulate at interest, paid-up additions, one-year term. Settlement options: lump sum, interest only, fixed period, fixed amount, and life income (straight life, life with period certain, installment/refund).
Riders
Waiver of premium, disability income, accidental death and dismemberment (pays only if death results from accident, often within 90 days), guaranteed insurability, cost-of-living, long-term care, term, child, spouse, payor, and return of premium.
Traps: confusing extended term with reduced paid-up; assuming incontestability protects a lapsed policy; thinking a reinstated policy carries no new contestability period (statements in the reinstatement application are contestable again).
Worked example: an owner stops paying premiums on a $100,000 whole life policy with $20,000 cash value. Electing extended term buys the full $100,000 for a limited number of years with no more premiums; electing reduced paid-up buys a smaller permanent face amount for life.