When you have finished this chapter, you should be able to
- Describe the common provisions of life insurance contracts
- Explain the purpose and importance of the incontestable clause in life insurance contracts
- Identify and explain the distinction among the various types of beneficiaries that may be designated in a life insurance contract
- Identify and describe the settlement options and explain the circumstances in which each of the settlement options might be used
Unlike many other insurance contracts, there is no standard policy form that must be used in life insurance. Although there is no uniform contract, the states have enacted legislation that makes certain provisions mandatory in life insurance policies. The most commonly required provisions include the following:
- The policy shall constitute the entire contract.
- There must be a grace period of 30 days or 1 month.
- The policy shall be contestable only during the first 2 years.
- Misstatement of age shall be cause for an adjustment in the amount of insurance.
- Reinstatement must be permitted.
- Participating policies shall pay dividends on an annual basis.
- Nonforfeiture values must be listed for at least 20 years.
- The nonforfeiture values to which the insured is entitled must be listed after the payment of three premiums.
- Loan values must be listed.
- Installment or annuity tables shall show the amount of benefits ...