When reviewing insurance coverage, you’ll often hear the term “policy provisions”. Since people are often not familiar with this term, let’s see what it really means.
To put it simply, the policy provisions are where you will find the policy owner’s rights. There are, of course, other provisions, governing nearly all other aspects of insurance policies, especially where life insurance is concerned. In other words, all laws under which policy owners depend, to protect their rights, are supposed to be written in black and white and stated in the policy provisions section.
Policy provisions are usually located on the page after the “face page” of an insurance policy.
Policy provisions are the preliminary factors that people look into whenever they are considering purchasing a particular insurance policy. It is important that as a person buying an insurance policy, you consider policy provisions first, before signing any contract.
Nowadays, people are getting smarter, knowing that they have to be practical about anything that concerns their hard-earned money. Therefore, people who wish to protect the future of their families, even after they are gone, will absolutely want buy life insurance.
Life insurance is usually bought to replace the loss of earnings brought about by the owner’s death. All too often a person puts off purchasing this insurance coverage and the family is left with an inadequate income.
If the person had bought a life insurance policy, the disbursements that the family would receive, at the time of the owner’s death, would most probably be enough to supplement their remaining resources.
However, not all life insurance policies are created equal. Since everything involves money, careful consideration should be taken in order to ensure the dependability of the life insurance chosen. We have already looked at these in previous chapters.
In order to make it easier and to give the policy owner ample time to go over the details, most life insurance policies have a “10-day free look period.” With this feature, an individual may evaluate, study and do any necessary research, regarding the policy provisions that are included in the life insurance that he has purchased.
The 10-day free look period is generally stated on the “face of the policy” and is commonly described as the “right to examine.” If the policy owner has realized that the particular insurance policy does not best fit him, all he has to do is to return the policy to the same agent or company from where he purchased it.
Insurance companies assume that this 10-day look period offers enough time, to the policy owner, to identify whether the policy will work best for him or not.
One very important provision, that is often not considered a provision, is choosing the beneficiary or beneficiaries. Remember, provisions are a listing of the policy owner’s rights and every policy owner has the right to designate specific beneficiaries. Beneficiary designations will define the primary recipient(s) of your life insurance profits.
Beneficiary designations are not limited to individuals. Beneficiaries can also be a legal entity, a corporation, a business, a charity or any of a number of other entities. A beneficiary can also be a minor child. When choosing a minor to be beneficiary, it is important that the policy owner assign an adult as the child’s custodian, based upon the owner’s preference.
It is also important to remember that a policy owner can modify his beneficiary at any point in time. To make that change, the policy owner just has to sign a new beneficiary designation form and forward it to his insurance company.
However, there are certain conditions where this provision may not apply. For instance, if a policy owner had previously designated his beneficiary as an irrevocable one, it would then be necessary for the owner to obtain the concerned person’s consent, in order to make the necessary changes in the policy provisions. With revocable beneficiaries, changes can be made even without the consent of the designated beneficiary.
Should he or she choose, the owner may also name more than one primary beneficiary and more than one dependent beneficiary. In fact, some insurance companies allow their policyholders to name up to a maximum of four primary beneficiaries and four dependent beneficiaries.
When designating beneficiaries, it is important that everything be stated by the policyholder and clearly written, in order to avoid any possible questionable beneficiary designation. Here is an example of a common provision issue that you should know about.
When designating beneficiaries, policyholders may not necessarily state the name of his/her beneficiary. As long as the policyholder has fully identified his/her designated beneficiary, no problems are expected to occur.
However, if certain conditions arise, such as one of the designated beneficiaries having died prior to the policy owner, it is important that a clear definition of the “customized beneficiary designation” be included in a “per stripes clause.” Given all these things, it is really important to understand everything that is stated in your policy provisions.
Always remember that however good or bad your policy turns out to be, will depend on the insurance company that writes it. Whether a policy provision is good or not, its overall performance will still depend upon the quality of the insurance company writing it. To get the best choices for both coverage and price, it is always the right move to contact your independent insurance agent for the help that you need to make the tough decisions!