Typical Parts of a Life Insurance Policy
Free Look- This is the right to examine the policy and cancel for any reason within 10 days after you receive it. Any premium paid will be refunded.
Grace Period- There is usually a 30 day grace period for each premium payment. The policy continues to stay in effect and will pay the death benefit minus the premium owed if the insured dies.
Incontestable Period- The insurance company usually has 2 years from the issue date to contest the policy, typically for false or misleading information by the insured.
Suicide Clause- Typically the policy is nullified if the insured commits suicidewithin 2 years from the issue date. Premiums will be refunded minus any loansor dividends paid.
Misstatement of Age or Sex- If either age or sex were incorrectly stated onthe application, the death benefit will be adjusted to match what the premiumswould have paid for with the correct age and sex.
Reduced Paid-up Option- This is a nonforfeiture option that allows the policyowner to use the cash surrender value of the policy to purchase a paid-uppolicy with a reduced amount of coverage
The Extras -- Life Insurance RidersSome of the options you can buy and add to your policy.
Accelerated Death Benefit- If the insured becomes terminally ill this allowsthe policy owner to access a portion of the death benefit to help with medicalcare.
Accidental Death Benefit- Payment of an additional death benefit if theinsured dies by accidental means. The policy defines the terms of an accident.
Waiver of Premium- Policy owner no longer has to pay premiums if theinsured becomes disabled for a period of time, usually before age 65. Premiumsmust be paid once the insured is no longer disabled.
Guaranteed Insurability- More insurance can be purchased at a later datewithout first having to show evidence of insurability.
Double Indemnity- Pays tiwce the amount of the death benefit if insured dies accidentally.
Other Insured’s Rider- Also called a children's or family rider, it allows other family members to be insured on the same policy.
Cost of Living Adjustment- A COLA provides increases in the amounts of coverage without evidence of insurability. It is usually tied to increases in the Consumer Price Index.
Return of Premium- When the insured dies, the an amount equal to the premiums paid will be paid out to the beneficiary in addition to the death benefit