Life Insurance

Guide to Your Life Insurance Contract

Some insurance forms have become standardized, like your property insurance, but there is still no standard form for life insurance. This means that you have to be even more careful when going over all of the details of your contract to make sure that you are getting what you need. While reading your life insurance contract can be mundane, it is important that you go through it all, especially all of that fine print.

 

Parts of a Life Insurance Contract

Your life insurance contract will include:

A cover page with the name of the insurance company, the life insurance plan offered, and also states that you have 21 days to opt out of the policy in the event of dissatisfaction. The cover page will be signed by an agent at the insurance company.
A complete list of benefits and specificities including how much benefits, the premium costs and class, premium number, and insured’s name.
A table which shows estimates of future values of the life insurance (such as with universal life insurance policies)
A glossary of terms
An outline of your rights as the policyholder, such as converting the policy, changing the beneficiaries, receiving the money value of the policy, or borrowing against the policy
An outline of how beneficiaries can make claims
Any rider or endorsement to the policy
All provisions of the policy

Policy Provisions

Even though there aren’t any standard forms for life insurance policies, there are some provisions which are required by state law. Even in the states which do not require these provisions, the life insurance companies will usually still include them. They may include:Guide to Your Life Insurance Contract

Entire Contract: This provision delineates that the entire policy and application must be appended together. This is to protect the insured person in case the insurance company attempts to claim that you misrepresented yourself during the application process.
Incontestability: This provision of the life insurance policy states that the policy cannot be questioned once it has been in place for two years. Even if you made a mistake on the application or the insurance company finds out that you misrepresented yourself, your beneficiaries will still be entitled to the policy benefits.
Misstatement of Age: This provision is an exemption to the aforementioned incontestability. An insurance company does not have to pay out your policy if you misstated your age, regardless of the time which has passed since the policy went into action.
Reinstatement: Reinstatement has to do with whether or not you will have the right to activate your policy again if it has lapsed, such as from nonpayment. This provision will outline the specific details of reinstatement, if available.
Suicide: Virtually all life insurance policies have a provision for death by suicide. In most cases, the policy will not be paid out if the insured dies through suicide within 2 years of taking out the policy, though the company will be responsible for paying out all premium costs paid thus far.