Life Insurance Policy Provisions, Options, and Riders
The contract provisions
Life policies are contracts of adhesion, so ambiguous language is construed against the insurer. The entire contract clause limits the agreement to the policy plus the attached application; nothing outside it binds the company. The free-look period lets the owner return the policy for a full refund - commonly 10 days in Utah, and often longer where the policy replaces existing coverage. Incontestability bars the insurer from contesting the policy after it has been in force about two years, except for nonpayment of premium; misstatements of age or sex never avoid the policy but adjust the benefit. The grace period keeps coverage alive for roughly 30 days after a missed premium. Reinstatement within about three years requires evidence of insurability plus payment of overdue premiums with interest.
The nonforfeiture, dividend, and settlement options
If a permanent policy lapses with value, the owner may take cash surrender, reduced paid-up (smaller face, no further premiums, ends at original maturity), or extended term (face amount continues for a limited period). Dividends are a return of surplus and are not guaranteed; the usual options are cash, reduce premium, accumulate at interest, paid-up additions, and one-year term. Settlement options include lump sum, interest only, fixed period, fixed amount, and life income with or without a period certain.
Riders
Waiver of premium, disability income, accidental death (pays double or triple and requires accidental cause), guaranteed insurability, term, child, return of premium, and long-term care riders. Automatic premium loan avoids lapse by borrowing against cash value.
Worked example
A policy with a $200,000 face lapses into extended term, keeping $200,000 of coverage for 8 years; reduced paid-up would instead keep maybe $70,000 of coverage for life. Choose extended term for maximum short-term protection, reduced paid-up for a permanent but smaller benefit.