Ten Items Often Overlooked in Your Life Insurance Policy
Life insurance policies are incredibly detailed, and even a good policy might not cover everything you should know. Here are ten items every life insurance consumer should be aware of:
• The Free Look Period: Every state mandates a free look period, allowing the policy owner to review the contract and cancel it for a full refund if it doesn't meet their needs. This period typically lasts from ten to thirty days.
• Incontestability Clause: Life insurance policies have a two-year incontestability clause, allowing the insurer to void the contract or deny a death claim due to fraud or misstatements. Fraud results in a voided contract and premium refund, while misstatements usually reduce the death benefit.
• Suicide Clause: Similar to the incontestability clause, the suicide clause lasts for the first two years. Death claims are not paid if the insured commits suicide within this period. After two years, the death claim is paid.
• Premium Payment Modes: Premiums can be paid annually, semi-annually, quarterly, or monthly. Monthly payments often require EFT and are more expensive due to added service costs compared to annual payments.
• Grace Period: Insurance companies typically over a 31-day grace period for late payments, during which coverage remains in force.
• Reinstating a Lapsed Policy: If your policy lapses, you can reinstate it by paying back premiums within twenty-one to thirty days without proving insurability. After this period, proof of insurability is required.
• Life Insurance Riders: Riders are additional features of a policy, some free and some paid. Important riders include spouse and child coverage, waiver of premium for disability, and accelerated death benefits for chronic, critical, and terminal illness.
Policy Loans: Policies with cash value allow borrowing against the policy, but loan interest is charged, and it can sometimes exceed the earnings on the borrowed amount.
• Death Benefit Payout Options: Beneficiaries can choose a lump sum payout, an interest-bearing account, or an annuity providing guaranteed income for a set period or life.
• Conversion Privilege: Term life policies often include a conversion privilege, allowing conversion to permanent insurance at the insured's current age. Conversion options and periods vary by carrier and may be limited after a certain time.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through WCG Wealth Advisors, LLC a Registered Investment Advisor. The Wealth Consulting Group and WCG Wealth Advisors, LLC are separate entities from LPL Financial.
Guarantees are based on the claims paying ability of the issuing company.
Riders are additional guarantee options that are available to an annuity or life
insurance contract holder. While some riders are part of an existing contract,
many others may carry additional fees, charges and restrictions, and the policy
holder should review their contract carefully before purchasing. Guarantees are
based on the claims paying ability of the issuing insurance company. (100-LPL)
