you received your term life policy and quickly
completed law school at night in order to
understand what you are reading. The
policy is after all, a contract and so it's a
good idea to break down the term life policy
provisions to better understand what exactly you
never read through their contract whether it's
health insurance or term life insurance.
There are some important aspects to understand
so that you are aware of what the contract does
and doesn't do. We'll walk through some of
the key elements that are common in most term
There are two
"do not do" clause to look at first. The
first one is the Contestability Clause.
This simply says that the life carrier has two
years from the effective date of the policy to
show misrepresentation during the application
process. This can be providing false
information, leaving out information, or any way
misrepresenting your health status and history
to the carrier that would materially affect
their underwriting decision. If they
discover this has occurred in the first two
years, they can try to essentially cancel their
obligations to pay the benefit. After this
two year period, they cannot cancel the policy
due to such issues. This protects the
beneficiary from a carrier trying to void a
contract much later in time. We always
recommend to be truthful, thorough, and
forthcoming when completing the
term life application
to avoid any complications.
Clause states that the policy will not pay
benefits during the first two years of the
policy if death is due to suicide. The
carrier may pay back premium paid but not the
full face value of the benefit.
Let's look at
some of the core Term life policy provisions
that more or less outline the responsibilities
of the contract.
Clause. This may seem obvious but life
insurance is different in that the owner might
be the applicant, the insured or beneficiary.
The Ownership Clause essentially specifies who
has control over the policy and most
importantly, can make changes such as
beneficiaries, settlement options, etc.
Contract Clause of a term life policy says that
the contract is complete and there are not other
changes to be made unless agreed by both
parties. This protects the applicant from
having the carrier make changes later on without
Period has to do with payment. It gives
the policy holder a window to pay the premium
(usually 31 days) before the term life policy
will cancel. We advise setting up an auto
deduction or credit card payment to avoid
non-payment issues altogether. This can be
a nightmare for policy holders.
Clause. If a person does lapse coverage,
he/she may be able to reinstate the policy.
They typically are subject to medical
underwriting again (sometimes not if lapse less
than 2 months). They will have to pay back
premium, interest on premium, and any
outstanding loans (not really applicable to term
life policies). Usually they can reinstate
up to five years. Double-check what the
premium would be through our
term life quoting engine
first to see which is more affordable.
of Age. Essentially, if the age is
incorrect at the time of applying, the carrier
can pay what the amount of term life benefit
his/her premium would have purchased based on
the correct age.
We cover the
in's and out's of the beneficiary section in our
term life beneficiary
article but suffice it to say, this is a very
important part of the term life policy which
requires careful consideration and we recommend
that you check out that particular article.
These are the
important parts of the term life policy.
Luckily, they tend to be pretty similar from
carrier to carrier and plan to plan which leaves
the real decision of how much term,
and which carrier provides the the most