Buying Life Insurance? Don’t Forget to Know About These Clauses. | Spring Money

When you’re planning to buy life insurance policies, it’s important to know what type of benefits you are looking to get from them. There are a lot of different clauses and terms in policies, and it can be confusing to try to figure out what they all mean but you must be informed about all of them otherwise, you can land in great trouble. For example, some policies have clauses that do not provide any benefits for accidental deaths.

In this post, we’re going to break down some of the most important clauses in a life insurance policy so that you can be an informed consumer.

Beneficiary clause

The beneficiary clause is one of the most important clauses of life insurance. It defines who will receive the proceeds of your policy in case you die before your term ends.

In this clause, you can choose to name anyone as the beneficiary, or you can nominate a person for whom you have the full legal authority to make such nominations. If you wish to name someone else as the beneficiary, it must be done in writing and signed by that person. If there is more than one beneficiary or co-beneficiaries under your policy, then this clause will define which one receives how much money when they become eligible (based on their relationship with you).

Survivorship Clause

The survivorship clause is added in policies that cover two persons. It says that if one person dies, the other person will be entitled to claim from the proceeds of the policy only if he/she lives up to a certain age as specified in the policy.

Revival Clause

The revival clause is a provision in life insurance contracts that gives the policyholder the option to revive their coverage for a period of time. The revival clause is designed to protect against lapses in coverage due to the policyholder’s inability to pay premiums and provide evidence of insurability. Some policies allow for premium payments and evidence of insurability at any time, but most policies have specific dates when these must be submitted. If neither is submitted by this date, then the contract expires & is no longer valid.

Spendthrift Clause

A spendthrift clause in a life insurance policy is a provision that allows the beneficiary to collect the full death benefits only if they can make their own living expenses. If they are not able to do so, they cannot collect the proceeds under this particular clause.

It basically states that if someone who receives life settlement proceeds becomes a spender, meaning that they spend all of their money without maintaining any savings or assets, then those proceeds will not go to them and instead go back into the pot.

Misstatement of Age Clause

This clause states that if an applicant is found to be lying about his age to reduce premium amounts, they may have to pay a heavy price.

Usually, the higher the age, the more the premium amount.

If the insurance company finds out that you have been misleading them by hiding your real age, they will have the right to cancel the policy.

Suicide Clause

This clause requires that the insured person must not commit suicide or attempt to commit suicide while being insured under this policy. If someone commits suicide and dies while being covered under this policy, then the insurer will pay out only the premiums that have been given by the policyholder.

War Clause

Life insurance gives you coverage in case of unforeseen deaths but if anything happens to you due to an ongoing war or any war-related situation, then the insurer will not give you any benefits. While you are excluded from enjoying monetary coverage from your insurance, the insurance company may return the premiums that you have given to date in some cases.

Grace Period Clause

The Grace Period Clause is a clause found in most policies giving the policyholder a window of time after the policy has lapsed for which to renew their coverage. The length of time varies from company to company but usually falls between 30 and 90 days.

Some life insurance plans will charge premiums for this grace period, while other plans will not charge a premium. In some cases, the premium amount will be prorated during these periods.

Final Words

Putting life insurance policies in place can be complicated, and it's important to read the fine print for each policy. That way, you can make sure that you fully understand what coverage you're getting, and that you're also getting a good deal. Putting your mind at ease with a life insurance policy can be one of the best moves you can make for yourself, your loved ones, and your family.

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