Most people hate the thought of reading a life insurance policy (or any insurance policy, for that matter). However, it's worth the time to understand exactly how your policy works. Let's go through it together.

A life insurance policy is actually a legal contract. It's made up of three parts: your application, the legal provisions, and a page that describes both the policy you've selected and any options or riders you've purchased. Here's a bit more information about what you'll find when you go through your policy:

The Parts of a Life Insurance Policy

  • A cover page that identifies the insurance company and the type of plan. It offers your right to return the policy within a certain time period if you're not satisfied, and is signed by an insurance company officer.
  • A schedule of benefits and specifications page. It describes the amount of benefits, the premium and other charges, the insured, the issue date, the policy number, and the premium class (e.g., preferred, standard).
  • Tables showing future premium projections or guaranteed cash values, depending on the type of policy.
  • A section for the definitions of the terms used in the policy.
  • A section that explains your rights as an owner. As the owner, you have certain privileges of ownership, including the right to transfer or assign the policy, the right to change the beneficiary, the right to receive the cash value and dividends (if applicable), and the right to borrow against the cash value (again, if applicable).
  • A settlement section that includes instructions on how to make a claim and information about the choices your beneficiary has regarding the death benefit.
  • Riders (benefits you added to the standard policy) or endorsements (changes to the standard policy), if any. These will be attached to the policy along with a copy of your application.
  • Policy provisions. Despite the lack of a uniform contract, most states have enacted legislation that makes certain policy provisions mandatory, and the commissioner of insurance must approve the final wording adopted by the insurance company. Even if certain provisions aren't required by law, competition between companies generally forces them to be very similar.

Need help understanding your current policy? Looking for a new policy? Call me or email me today!