A life insurance policy is a contract between an insurance company and an individual. there are a variety of policies, lots of riders, and many choices to make when setting up your coverage.
Regardless of the type of life insurance you purchase, reading the entire policy is extremely important and will help you make the best use of your policy.
Reading: How to read a life insurance policy
But you’re not alone: this guide will help you understand the ins and outs of reading your life insurance policy.
life insurance declaration page
The first few pages of a life insurance policy are a high-level summary of coverage and details about the insured. In most cases, the first page lists the name of the insurance company, the type of plan you are purchasing, the name of the insured, the owner of the policy, and the terms of the “free trial” period.
See also: Best Car Insurance in Virginia for 2022 | Bankrate
Life insurance policies have a trial period, often called a free trial period, which gives the policyholder a certain number of days, usually 10 to 30 days, to cancel the policy without penalty and recover your first payment.
After the cover is the schedule of benefits, also called the declarations page. the following details are usually included:
- personal information: check your date of birth, name, and any other information for errors.
- Benefit Amount: The amount that will be paid upon your death.
- policy type: specifies if you have a term or permanent policy.
- Premium Amount: How much you must pay monthly or annually for coverage.
- policy issue date: the date a policy was issued to you.
- Policy Number: The unique number assigned to your policy. Your beneficiaries will need this number to file a life insurance claim.
- risk class: is the life insurance classification that you have been assigned and that determines how much you pay. for example, preferred vs. standard, or smoker vs. non-smoker.
- Riders: This is supplemental coverage added to your life insurance policy.
- the policyholder: this is the person who set up the policy and pays the premium. Only the policy owner has access to the policy information and can change the beneficiaries listed on the policy.
- the insured: although this person is usually the same as the policy holder, it is not necessary for them to be. when the insured dies, the life insurance company pays the death benefit.
- the beneficiary: the person or persons receiving the death benefit when the insured dies.
- Death benefit: The death benefit is the amount of money your beneficiaries receive. This section details the details of the death benefit and how your beneficiary will make a claim after your death.
- Contest Period: The contest period is a set period of time, typically two years from the date the policy is issued, during which the insurer can contest and deny claims.
- Gradual Death Benefit: If you have a specific type of whole life insurance policy that pays a limited death benefit in the early years of the policy, this will be included.
- exclusions: there are factors that may invalidate or limit a death benefit. Most policies will not pay a death benefit if the insured dies by suicide within the contest period. any intentional misrepresentation of the information you provide could result in the voiding of the policy or could even be considered insurance fraud.
- Premiums: This section lists premiums, grace periods, and reinstatement. policies remain in force as long as you pay the premiums. most policies have a 31-day grace period, but it can vary. the policy will lapse if payment is not received by the end of the grace period. however, reinstatement allows you to reinstate an expired policy.
- Illustrations: Permanent life insurance policies have pages called illustrations that show how the policy will work at certain interest rates. the illustrations will show how much you spend on policy premiums and how much you will earn in cash value.
- Riders: A rider is supplemental coverage that you can add to your policy.
- Accelerated Benefits: A rider or rider that allows the insured to receive a portion of benefits before they die if they have a long-term or terminal illness.
- Policy Loans: These are whole or universal life insurance policies. As a policy’s cash value increases, you can borrow against the accumulated funds.
- Suicide: Most life insurance policies exclude death by suicide or self-inflicted injuries and deaths from alcohol or drug abuse.
- Illegal criminal activity: Most insurers will not pay if you die while doing something illegal. For example, if you die while robbing a bank or trying to steal a car, your family will not receive any money from the insurance company.
- Hazardous Activities: Life insurance policies exclude deaths caused by hazardous activities such as bungee jumping or skydiving. your policy will specifically exclude any risky activity you participate in.
- Wartime Peril: If you travel to war-torn areas, your life insurance policy may not pay a death benefit. however, there are exceptions if you are a soldier or traveling for work.
People listed on the policy are also very important and are listed on the declarations page. Life insurance policies have a policyholder, the insured, and the beneficiary. these are the most important people in a life insurance policy.
The beneficiary is changeable and must be reviewed with each important life event. For example, if the insured gets divorced and then remarries, she’ll want to update her beneficiary designation to include her new spouse.
sample life insurance declaration page
This is a sample life insurance illustration for a $50,000 whole life policy, highlighting specific details to review as you read your policy. click to enlarge the sample page or you can expand it by enlarging your page.
See also: Average Cost of Heart Disease Treatment in SG
Click here to zoom in
This is a sample policy illustration for a $50,000 whole life policy, highlighting specific details to review as you read your policy. click to enlarge the sample page or you can expand it by enlarging your page.
terms and definitions of the life insurance policy
Life insurance policies are written in legal language that can be confusing, but the terms and definitions sections of the policy explain what they mean. this is what you can expect to find:
life insurance policy exclusions
While life insurance policies provide financial protection for your loved ones after your death, there are some exclusions that may apply when the insurer will not pay your beneficiaries.
these are the common exclusions of life insurance policies:
Reviewing your policy and fully understanding what’s in it ensures you can get the most out of your coverage and there are no hiccups along the way. In addition, you should regularly update your life insurance policy with each major life event, as your needs may change.
See also: American Traditions Insurance Review | Kin Insurance