Life Insurance: Understanding Your Policy
By Evan Davis
What general provisions do life policies have in common? In other words, what general framework do life 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 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 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 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 company. What this means is that if an company tries to deny a claim based on the suicide clause, it is up to the 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 policy has lapsed, that means a premium or premiums

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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, and 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 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 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 because
that type of 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.
Evan Davis works in Medicare customer service and is the webmaster and owner of Easy Insurance Finder. Find out about free online term life quotes and no medical exam term life insurance at www.easy-insurance-finder.com

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