Life Insurance Exclusions & Clauses Explained

Life Insurance Clauses that Protect the Policyholder

It’s critical to understand the exclusions in your policy. Doing so ensures you know what’s covered and what isn’t, preventing unpleasant surprises for beneficiaries later on.

Reinstatement Clause

This clause is a little 50/50. It protects both you and the insurance company.

In the event that the policy is terminated because of nonpayment, the policyowner may reinstate their policy by paying all past premiums plus interest.

However, proof of continued insurability, such as going through another medical exam, may be required.

Free Look Period

While not technically a “clause”, a policyowner can return theirs within a certain period if they are not satisfied with the policy’s terms and conditions. The policyowner will then be fully refunded.

Grace Period Clause

Each policy has a grace period, a certain amount of time typically 31 days, in which a policy will still remain active even if the premium is not paid.

If the grace period ends and there is still not payment made, the policy will be terminated.

If the insured dies during the grace period, the death benefit will still be paid but the premium owed may be deducted.

Incontestability Clause

The insurance company has a specific amount of time, typically two years, to dispute the validity of statements made on an application.

If they discovers falsehoods on the application, they can terminate the policy.

After this period is over, they can no longer challenge statements made on the application and must pay out in the event of the insured’s death.

Beneficiary Clause

This simply allows the policyowner to name the recipients of the death benefit.

Survivorship Clause

This states that the policyowner can elect to postpone the death benefit payout to their beneficiary.

For example, the policyowner can state “My spouse is my primary beneficiary, but I want to make sure she is survives at least 30 days after I die before she receives the death benefit payout.”

Spendthrift Clause

This protects beneficiaries from having the death benefit payout be confiscated by creditors.

The spendthrift clause does not apply to lump-sum settlements, and the policy owner must elect a settlement option before his or her death.

Compare Term Life Insurance Quotes & Apply Today

If you own a life insurance policy and haven’t taken the time to carefully look through the details, now is a good time.

Even if you’ve read through the details, review your policy occasionally so you don’t forget any important details, ensure your coverage is adequate, and check that your beneficiaries are correct.

If you are looking to purchase life insurance, start by getting a free, anonymous term life insurance quote today. Quotacy’s friendly agents are happy to review any questions you may have on certain clauses or life insurance in general.