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Introduction If you have ever read your life insurance policy, only to have more questions than when you began, you are not alone. What does it all mean? Incontestability clause, exclusions and such, just make a person want to get to the bottom of the question... will the company pay the policy off when I die?
What is a life insurance policy anyway? A life insurance policy is a legal contract between the person who buys the policy (called the insured) and the company that issued to policy (called the insurer). It will pay cash to a stated beneficiary when the insured dies. When a person first applies for life insurance, they are asked a series of questions to see if they qualify for the type of insurance they are applying for. Afterward, they are given a Conditional Receipt which is a temporary insurance policy while the application is in the underwriting department and waiting for results for any exams that were ordered. This receipt may be used in case of death occurs before the actual policy is delivered, so make sure your agent reviews this with you. Once the policy is issued and the agent reviews the kind of policy issued and what's included, he or she will explain the terms of the policy. Since a life insurance policy is a legal contract, there are some provisions or terms contained in it that you should know about. Some important ones are:
provisions or terms contained in it that you should know about. Some important ones are: Make sure there is a copy of the actual application in the policy. You don't want anything you said to be misstated or written in error by your agent, and if there is an error in the application, ask your agent how it can be straightened out. Because no one can change the policy once it has been issued, this is usually handled by an amendment. Know when your payments are due. This is usually done on a monthly basis, with lower premiums being drafted from a bank account. Some other payment options are yearly and every six or three months. To help protect you against an accidental lapse of the policy, there is a grace period of 30 days after the due date. But to stay safe, make policy premiums on time every months. The period of incontestability prevents the insurer from denying the claim because of statements made in the application after the policy has been issued. Basically it says that if the insured dies within the policy's first two years after issue and there is an untrue statement found on the application, the insurer can deny paying the claim. After the first two year period of the policy, the insurer is fully liable to cover the insured no matter what is on the application.
Tell your true age. Some people think that if they claim they are a younger age, they'll get a cheaper rate. Well, if they are in fact the younger age, this logic holds true. But not so if they are older. If this happens, the insurer will correct this whenever a claim is made and the adjustment will come out of the beneficiary's proceeds. There are some things that a policy will not cover and are excluded from the policy. The insurer makes this clear at the time the application is signed. These are individuals who serve in the military, who fly aircraft and who work in hazardous occupations or hobbies. Settlement options are the ways the insurance company will pay out the proceeds of the policy. The company usually pays a lump sum to the person listed as your beneficiary. However, there are options that you can choose from. You can choose to receive a fixed-period of installments, fixed amount of installments, income for life, or interest only payments. Ask your agent for details and if one of these options are right for your family situation.
Non-forfeiture Options. Permanent life insurance policies have cash values, money that grows over time. This mean there are certain guarantees built into the policy that cannot be forfeited by the insurer. With these options you can borrow against the cash values built in the policy, use the values to convert to term insurance, or reduce the face amount of the policy to pay it up. There are many more provisions and options that are too numerous to mention here. But these few should arm you with enough information to discuss your insurance needs with your agent, and for your agent to compile a thorough financial plan. More importantly, you now have an idea of how a life insurance policy works. Source:http://bit.ly/2bNOGSn
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