What general provisions do life insurance policies have in
common? In other words, what general framework to life insurance
policies share? If this question means absolutely nothing to
you, don't worry, you are not alone, but it does mean that there
are some aspects to life policies that you should be aware of.
When you look at a life insurance policy, regardless of whatever
else may in that policy, you are going to find four clauses, or
sections to the policy. This is actually a way in which you can
begin to understand your policy. Look for and identify these
four basic clauses,
*the incontestability clause *the suicide clause *the lapse
clause *the clause for explaining what to do when both the
insured and beneficiary die at the same time.
Incontestability Clause
This clause declares a period of time to allow the insurance
company to investigate and contest, or disagree with, the
payment of the policy. After the period of time stated in the
incontestability clause, the insurer cannot revoke the policy
and must pay the amount agreed upon in the policy. The
importance of this clause to you should be obvious, and when
getting life insurance, you want to be sure the policy includes
this clause and that you agree with the time limit. Let me
mention that normally the maximum period of time stated in
policies is 2 years.
Suicide Clause
Basically, the sucide clause states that in the event that the
person with the insurance policy kills him or her self, the
policy is invalid and does not have to be paid, or otherwise
severely restricts the payment of benefits in some way.
Normally, in the event where the issue of suicide might be of
concern, the burden of proof rests with the insurance company.
What this means is that if an insurance company tries to deny a
claim based on the suicide clause, it is up to the insurance
company to prove that the policy holder committed suicide.
Lapse and Reinstatement Clause
This clause lays out the guidelines concerning the failure to
pay premiums. When an insurance policy has lapsed, that means a
premium or premiums have not been paid. The period of time
lapsed is the period of time of non-payment. With most policies,
there is a thirty day grace period. It is of the utmost
importance for you to know whether or not your policy has a
grace period what the length of that grace period is. In the
event that the beneficiary dies during the grace period, the
policy must be paid minus any money owed. If your life insurance
policy lapses, the policy will state terms necessary for
reinstatement. Reinstatment simply means that your policy is
once again in good standing. Generally speaking, the person with
the insurance policy may get reinstatement by sending
theinsurance company the following,
*proof of insurability *payment of money owed plus the interest
at the percentage agreed upon in the policy *payment of any
outstanding loan balance plus interest. This would not apply to
term life insurance because that type of insurance does not have
a cash balance account.
It is important to also be aware that there is usually a fixed
period of time allowed for reinstatment. This can be anywhere
between one and five years, but this is another point vital to
know about before putting your signature on the dotted line.
Simultaneous Death of Insured and Beneficiary
The point of this clause is to lay out the rules explaining what
to do when the insured and beneficiary die as a result of the
same accident or event. Normally, the insured is considered to
have died after the beneficiary. This allows the policy to be
paid either to a co-beneficiary or to whomever is named the
second (or contingent) beneficiary. If there is no other
beneficiary, then the policy can be paid to the estate of the
deceased policy holder. Occasionally the order of death comes
into dispute. That is, someone claims that the insured died
first (that the beneficiary died after the insured). In this
event, the burden of proof of the order of death rests with the
person making the dispute. Why would someone make such a
dispute? A person seeking a share of the beneficiary's estate,
who would not otherwise be entitled, might contest the order of
death.
About the author:
Evan C. Davis works in Medicare customer service and is the
webmaster and owner of Easy Insurance Finder. Find out about cheap term life
quotes online and low cost term life
premiums at http://www.easy-insurance-finder.com
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