Riders and Policy Provisions
Riders to Life Contracts – these are some of the more commonly used riders.
Double Indemnity – doubles the face amount of the policy if the insured dies due to an accident.
Waiver of Premium Disability – can be added to most life insurance policies. This rider waives premium payments up to a specific age if the insured is totally disabled. The disability must have been for a specified period of time, usually four or six months.
Disability Income – this rider will pay a specified amount, after a stated waiting period, if the insured is totally disabled. Payments will continue until the insured reaches a previously determined age, generally 65.
Guaranteed-Insurability – is the option that allows the insured to purchase additional amounts of insurance at previously stated periods of time without proof of insurability. This option generally ends at age 40, but allows the insured to increase the value of the policy as his income is increasing, even if he is in poor health.
Life Policy Provisions
Provisions of importance in the majority of life insurance policy include:
Grace Period – extends coverage on the policy even if payment has not been made. This usually lasts for 31 days.
Incontestability Clause – prevents the insurance company from disputing the validity of a policy after a stated period of time, usually two years.
Suicide Clause – If an insured commits suicide within the first two years of purchasing the policy, the company is only responsible to refund the premiums, not pay the death benefit. The death benefit is, however, payable after the two-year period of time.
Automatic Premium Loans – the policyholder may elect to have this coverage. If the premium is not paid by the end of the grace period, it can be automatically deducted from the policy’s cash value, assuming that amount is sufficient. As stated, this is a type of loan, but it can prevent the policy from lapsing.
Misstatement of Age Provision – If the insurer discovers that the age of the insured was given incorrectly, they have the right to alter the benefit amount accordingly. They can adjust the amount to reflect the value that would have been given for that age based on the premiums paid.