Life Policy Provisions, Options, and Riders
Standard provisions
The entire contract clause limits the agreement to the policy, application, and attached riders. Incontestability bars the insurer from voiding for misrepresentation after two years. Suicide is excluded for two years. Misstatement of age or sex adjusts the benefit, not the contract. The grace period (usually 30 or 31 days) keeps coverage in force, with unpaid premium deducted from a claim. Reinstatement is generally available within three years with evidence of insurability plus back premiums and interest.
Values and dividend options
Nonforfeiture options convert cash value: cash surrender, reduced paid-up (smaller benefit, no more premiums), or extended term (same benefit for a limited time). An automatic premium loan uses cash value to pay a due premium. Dividend options include 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 (straight life, life with period certain, refund life, joint and survivor). The more guarantee built in, the smaller each payment.
Riders
Waiver of premium, disability income, accidental death and dismemberment, guaranteed insurability, payor rider, child term, term rider, accelerated death benefit, and long-term care or chronic illness riders.
Worked example: a client pays annually and dies on day 250 of the grace period. Because the policy remained in force during the grace period, the beneficiary receives the face amount less the unpaid premium - no interest penalty and no denial.
Rule of thumb: within two years of issue expect the insurer to examine misrepresentation; after two years, nonpayment of premium is the main defense.