Alright...so 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 just purchased. 

Most people 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 life policies.

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.

The Suicide 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.

Ownership 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.

The Entire 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 his/her approval. 

The Grace 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.

Reinstatement 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.

Misstatement 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, what length, and which carrier provides the the most affordable coverage.