Ten Items Often Overlooked in Your Life Insurance Policy
Ten Items Often Overlooked in Your Life Insurance Policy
August 1, 2024
Life insurance policies are incredibly detailed, and even a good policy might not cover everything you should know. Here are ten items every life insurance consumer should be aware of:
• The Free Look Period: Every state mandates a free look period, allowing the policy owner to review the contract and cancel it for a full refund if it doesn’t meet their needs. This period typically lasts from ten to thirty days.
• Incontestability Clause: Life insurance policies have a two-year incontestability clause, allowing the insurer to void the contract or deny a death claim due to fraud or misstatements. Fraud results in a voided contract and premium refund, while misstatements usually reduce the death benefit.
• Suicide Clause: Similar to the incontestability clause, the suicide clause lasts for the first two years. Death claims are not paid if the insured commits suicide within this period. After two years, the death claim is paid.
• Premium Payment Modes: Premiums can be paid annually, semi-annually, quarterly, or monthly. Monthly payments often require EFT and are more expensive due to added service costs compared to annual payments.
• Grace Period: Insurance companies typically over a 31-day grace period for late payments, during which coverage remains in force.
• Reinstating a Lapsed Policy: If your policy lapses, you can reinstate it by paying back premiums within twenty-one to thirty days without proving insurability. After this period, proof of insurability is required.
• Life Insurance Riders: Riders are additional features of a policy, some free and some paid. Important riders include spouse and child coverage, waiver of premium for disability, and accelerated death benefits for chronic, critical, and terminal illness.
Policy Loans: Policies with cash value allow borrowing against the policy, but loan interest is charged, and it can sometimes exceed the earnings on the borrowed amount.
• Death Benefit Payout Options: Beneficiaries can choose a lump sum payout, an interest-bearing account, or an annuity providing guaranteed income for a set period or life.
• Conversion Privilege: Term life policies often include a conversion privilege, allowing conversion to permanent insurance at the insured’s current age. Conversion options and periods vary by carrier and may be limited after a certain time.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
