If you plan to acquire a Life Insurance Policy, you need to know the exact details about the coverage.  Are you aware of the clauses in your insurance agreement?  Listed below are some of the most important terms and clauses you will encounter when you purchase a Life Insurance coverage.

Beneficiaries

The primary purpose of acquiring life insurance is to ensure that your dependents or beneficiaries will have financial security after your death. You may declare your spouse or your child as the beneficiary of your insurance policy.  If you have children, you can declare all them as multiple beneficiaries.

Aside from your primary beneficiary, it is also recommended that you declare a contingent beneficiary.  Thus, you can elect your spouse as the primary beneficiary and your children as contingent beneficiaries.  Hence, in the event that the insurance holder and the primary beneficiary die, there will still be heirs who can benefit from the coverage.

There is also an option to declare your beneficiaries as revocable or irrevocable.  If you choose the first option, you will be able to change the name of your beneficiary at any time.  On the hand, if you choose the latter, changing the name of your declared beneficiary will not be possible.

Survivorship Clause

The survivorship clause states that your beneficiary will be able to claim the proceeds of your insurance if he/she survives you by a specified number of days.  Hence, if your primary beneficiary dies before the specified period, the proceeds will go to the secondary or contingent beneficiary.

Misstatement of Age Clause

When you apply for an insurance policy, your age will be a major determinant in how much premium you will be charged.  Dishonesty can prove to be damaging in this case.  If you lie about your real age in an attempt to lower you insurance payment, your insurance company can penalise you through fees or by terminating your policy.

Incontestable Clause

Aside from revealing your real age, it is crucial that you fill your insurance application only with accurate information about you. For example, your insurance company will require you to disclose specific details concerning your lifestyle.  Failing to disclose relevant details may cause your policy to be terminated.  Your beneficiaries may suffer the consequences of your dishonesty if your insurance policy becomes void.

Spendthrift Clause

If you worry that creditors of your beneficiary will go after the proceeds of your insurance coverage, this clause will be a protection.  The life insurance company may hold back the proceeds and release the money in instalments to make sure that your beneficiary can enjoy the financial assistance you’ve provided them with through your life insurance coverage.

Suicide Clause

If the holder of the life insurance commits suicide, the insurance company will only return the premium paid while the holder was alive.  However, the proceeds of coverage will not be released to the beneficiaries.

Grace Period

In case the life insurance policy holder fails to pay the premium, a grace period will be provided.  This gives the policy holder the chance to catch up with payments while continuously enjoying insurance coverage.

Reinstatement

IF the policy holder defaults from payment beyond the grace period, it is still possible to reactivate the policy. This is done through reinstatement or by paying all the previous outstanding premiums plus the interest rate.