This lesson focuses on the following topics:
•POLICY FEATURES
•POLICY CLAUSES


POLICY FEATURES
Policy Effective Date
Policy effective date is the date stated in the policy from which:
• Full protection takes effect as of the policy effective date.
• The Incontestability Clause’s contestable period begins.
• The suicide clause begins.
Backdating Policies
• Backdating is the practice of allowing the policy effective date to be set in the past.
• The maximum number of months for backdating a policy is six.
• For most companies, backdating is good for sales. For instance, reducing the age of
the proposed insured by a month can result in lower premiums.
• It can also allow applicants into the acceptable age range for policies that have age
limits.
• Furthermore, by aligning with the policy owner’s income pattern or dates, it can
make payments convenient.
Policy Provisions
Policy provisions act as contractual provisions defining the limits of a certain life
insurance policy.
Policy Clauses
Ownership Clause
According to the ownership clause, the policy owner possesses all contractual
rights in the policy while the insured is still alive. Such rights include:
􀂃 Selection of a settlement option
􀂃 Naming and changing of the beneficiary designation
􀂃 Assigning ownership of the policy to someone else
􀂃 Selection of dividend options
􀂃 Canceling the policy and selecting the non-forfeiture option
􀂃 Taking out a policy loan
Entire Contract Clause
According to the Entire Contract Clause, the Life Insurance document, the
attached application, and riders constitute the complete contract between the
insurer and policy owner.
Important Points:
• To exercise these rights, the policy owner typically does not need the
beneficiary's consent.
• No statement can be used by the insurer to void the policy unless the
statement is a material misrepresentation and is part of the application. In
addition, any officer of the company cannot change the terms of the policy
unless the policy owner agrees to the change.
Incontestability Clause
Under the Incontestability Clause, the company is given a specific period of time,
usually two years, to find out any cause for contesting the policy. After the
contestable period has expired, the insurer cannot contest the policy.
Suicide Clause
A typical Suicide Clause states that the face amount of the policy will not be paid
if the insured commits suicide within a specific period of time, usually two years,
after the policy is issued. The only payment is a refund of the premiums.