Understanding The Most Important Parts Of Your Life Insurance Policy
Reading a life insurance policy does not top most peoples list of must reads
. However, it is important to familiarize oneself with the various provisions of the policy before it is time to file for benefits. There are several basic sections with which policyholders should familiarize themselves.1.The Cover Page The cover page identifies the carrier of the policy and the type of coverage, such as term or whole life. It also outlines the right to return the policy within twenty-one (21) days, as required by many state insurance commissioners. The cover page is always signed by an officer of the insurance company.
2.Schedule of Benefits Page This page shows the amount of benefit payable upon the death of the insured. It also lists the premium due and any other charges that may be payable, such as in the case of a universal life policy. This page also lists the name of the insured, the issue date of the policy, the policy number, and the premium class of the policy, such as standard or preferred.
3.Rights of the Owner This section outlines the specific rights a policyholder has regarding their life insurance. Owners are permitted to make changes to their beneficiary or to transfer or assign their policy at any time. If the policy accrues cash value, this section will explain how to receive the cash value in a lump sum or how to apply for a loan against it.
4.Settlement - The settlement section reviews how beneficiaries can make a claim upon the death of the policyholder. It also outlines the benefit choices available for the payment of the death benefit, such as lump sum or annuity.
5.Grace Period The grace period of a policy is generally thirty-one (31) days following the premium due date. Premiums are generally due on one of four billing cycles: monthly, quarterly, semi-annually, or annually. Premiums paid after the due date, but within the grace period keep the policy in force as if the premium had been paid on or before the due date. The grace period provision is required by most state laws.
6.Reinstatement Provisions This section outlines how a lapsed policy can be reinstated. The reinstatement does not need to be unconditional and must be done within the period specified in the policy. If the policy earns cash value, the cash value of the policy must be intact. The policyholder can be required to submit new evidence of insurability in order to have the policy reinstated. All outstanding premiums must also be paid in full prior to reinstatement.
Taking the time to review these important features now can prevent misunderstandings and possibly a delay in receiving benefits later.
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