Now we are into some exciting stuff. We have blown past the cover and are now truly into the guts, the purported fine print, of my policy. I won’t hit on every detail of the next 4 pages. I figure if you can follow my ramblings, a little contract language should be a piece of cake. Please don’t hesitate to ask questions if I miss a part that is important to you.
They very graciously start off by giving you the location of their home office. No phone number, so refer to your agent for questions or changes or Google the company and get their customer service number. Your best service should come from your agent though.
The definitions are very straightforward. Ownership of the policy is generally maintained by the person being insured. There are instances where someone else may own the policy such as a buy/sell agreement where business partners own policies on each other. There is also Trust ownership. This generally is done as an estate planning tool.
Assignment! You can assign all or part of this policy to, for instance, a bank to pay off a loan. The insurance company, upon your death, will pay off the loan and give the balance of the proceeds to your beneficiary. Keep in mind that assignments are paid before beneficiaries.
It talks about payment of premiums and the grace period. If you are late with a payment your policy enters the grace period. If you die before paying the premium but still during the grace period, the company will pay the death benefit minus the premium due.
Reinstatement. If you mess up and go past the grace period you can resinstate the policy subject to the four requirements.
Change of Premium. If you take your time and don’t let your general mistrust of the insurance industry get the best of you, this is very straight forward. As mentioned in the last post, I get calls every once in a while from folks who lose it after the first 5 words, “We may change the premium”. Please read on and then if you have a question, call.
Renewal. The policy can be renewed beyond the initial level term period. When you see the prices (last post) you might think there is no way, never, uh uh. The one instance in which those prices make sense is if you get to the end of the level term period and know you are terminally ill.
Conversion. In a nutshell, during the conversion period, you can change all or part of your policy to a permanent policy, a universal life or whole life policy,Â just by completing a policy change form. No proof of insurability is required. I will cover the beauty of the conversion option in another post because I believe this is the gold nugget in your term policy and I can go on and on…..
Exchange. Read it and you should get the scoop here. They will “exhange” your policy for a new term policy during the exchange period as long as you medically qualify. Sounds a little like applying for a new policy. If you have to do that, shop it and make sure they still have the best deal out there.
General provisions. This is as close as it gets to fine print. Here is where they talk about the suicide and contestability clauses. It’s really very straight forward. If you misrepresent something on the application or commit suicide, they don’t have to pay…..if it happens in the first two years of the policy. The only contestable issue after that is non payment of premiums, so keep that policy paid. And yes, if you misstate your age or sex on the application, they can adjust the premium upon your death. Depending on which way you misstated, that could either increase or decrease the death benefit.
It has a formula for determining the death benefit. Pretty straight forward and companies are very fair about this.
Beneficiary provisions. Talks about where to find the beneficiary in your policy (in the application), that the owner of the policy can change the beneficiary, and what happens if a beneficiary dies. I will go more into beneficiary designations in a separate post.
Payment of proceeds. States that the default payment option is a lump sum. Unless your beneficiary chooses another option they get it all at once. But there are options and they will be covered in the next post.
Bottom line. The “fine print” really isn’t all that fine. No sneaky wording. Compared to many contracts I’ve read, this is simple, easy to understand, and about as straight shooting as it gets.