Life Insurance Policy Provisions, Options and Riders
Entire Contract Provision
states the policy document, the application (attached) and any attached riders make up the entire contract. No other document can be "incorporated by reference". Only the documents attached are part of the policy.
Sets forth the insurance company's promise to pay benefits upon the death of the insured.
Free Look Provision
The free-look period in Florida is 10 days for insurance contracts and annuities. You have the right during this time to return the policy for a premium refund if you change your mind.
The amount and frequency of premium payments
Grace Period Provision
allows 30 days (four weeks for industrial policies) during which the premiums (after the first) can be paid to keep the policy in force. If an insured dies during the grace period and the premium wasn't paid the policy benefit is still payable but the premium is deducted from the death benefit payment.
A policy may lapse due to non-payment of premiums. A reinstatement provision alls the insured to reinstate the policy with some limitations. Reinstatement usually must happen within 3 years but may be as long as 7 years. A new "contestable period" usually goes into effect but there is no new suicide exclusion period. Usually the following are required.
All back premiums must be paid up
Interest on past-due premiums must be paid
Outstanding loans must be paid
The policy owner may be asked to prove insurability
After a certain period of time (usually 2 years from the date of issue and while the insured is living and so long as the contract continues in force) the insurance company can no longer contest the validity of the life insurance policy even for material misstatement, concealment or fraud. It generally does not apply to accidental death or disability benefits as conditions relating to accidents are often uncertain the company retains the right to investigate.
A policy issued under any of the following would not be a valid contract
Impersonation ~ If one person applies but another person signs or takes the medical exam
No insurable interest ~ There must be an insurable interest
Intent to murder ~ If it is proven that the applicant took out the policy with the intent to kill the insured for the proceeds no valid contract existed.
Policy owners may do with them as they wish, including give them away as they can other policies. This transfer of ownership is called "assignment".
Absolute Assignment ~ The transfer is complete and irrevocable
Collateral assignment ~ The policy is assigned to creditors as collateral for a debt. When the debt is repaid the policy-owner is entitled to the return of the rights assigned.
Accelerated Benefits Provision
Policy-owners with terminal illness can receive accelerated benefits, usually 50-90% of the benefits that have accumulated.
The company will not pay death benefits if the person commits suicide within a stipulated period of time, usually 1-2 years.
Misstatement of Age or Sex Provision
If the applicant has misstated age or sex the insurance company will adjust either the premiums charged or the amount of insurance.
Automatic Premium Loan Provision
Authorizes the insurance company to withdraw the premiums from the cash value of the policy if the premium hasn't been paid by the end of the grace period.
War Aviation Hazardous occupations or hobbies, Commission of a felony, Suicide
A policy owner is entitled to receive the accrued cash value in the policy at any time.
Cash Surrender Option ~ Payment is take in cash based on the table of cash values included with the policy. Insurance companies are required to make cash surrender values available for ordinary life insurance after the first three years (five years for industrial policies) Any outstanding debts will be deducted.
Reduced-Paid Up Insurance Option ~ The cash value is used as the premium for a single-premium whole life policy at a lesser face value.
Extended Term Insurance Option ~ Cash value is used to purchase term insurance for as long as there is money to pay the premiums.
Guaranteed Insurability Rider
Permits the insured to purchase specified amounts of additional insurance at specific time intervals (usually 3 years).
Wavier of Premium Rider
Allows the insurance company to pay the premium from the cash value if the grace period passes.
In a child's policy it provides for the waiver of premiums if the premium payer should die (some policies include disability)
Accidental Death Benefit Rider
Provides additional amounts of insurance, double or triple the face value if the insured dies as a result of bodily injury from some external, violent and purely accidental cause.