Clauses and Exclusions: Things to Know About Your Policy

Clauses that Protect the Policyowner

Reinstatement Clause – This clause is a little 50/50. It protects both you and the insurance company. In the event that the policy is terminated because of nonpayment, the policyowner may reinstate their policy by paying all past premiums plus interest. However, proof of continued insurability, such as going through another medical exam, may be required.

Free Look Period – While not technically a “clause”, a policyowner can return their policy within a certain time period if they are not satisfied with the policy’s terms and conditions. The policyowner will then be fully refunded.

Grace Period Clause – Each policy has a grace period, a certain amount of time typically 31 days, in which a policy will still remain active even if the premium is not paid. If after the grace period ends and there is still not payment made, the policy will be terminated. If the insured dies during the grace period, the death benefit will still be paid but the premium owed may be deducted.

Incontestability Clause – The insurance company has a specific amount of time, typically two years, to dispute the validity of statements made on an application. If the company discovers falsehoods on the application, they can terminate the policy. After this time period is over, however, the company can no longer challenge statements made on the application and must pay out in the event of the insured’s death.

Beneficiary Clause – This simply allows the policyowner to name the recipients of the death benefit.

Survivorship Clause – This states that the policyowner can elect to postpone the death benefit payout to their beneficiary. For example, the policyowner can state “My spouse is my primary beneficiary, but I want to make sure she is survives at least 30 days after I die before she receives the death benefit payout.”

Spendthrift Clause – This protects the policyowner’s beneficiaries from having the death benefit payout be confiscated by creditors.

If you own life insurance and haven’t taken the time to carefully look through your policy, now is a good time. If you did so when you first purchased it, be sure to review your policy occasionally so its particulars are fresh in your mind and to be sure nothing needs to be updated, such as your beneficiaries.

If you are looking to purchase life insurance, start by getting a free, anonymous term life insurance quote today. Quotacy’s friendly agents are happy to review any questions you may have on certain clauses or life insurance in general.