Standard Policy Provisions

Life insurance policies contain standard provisions required by state law and industry practice. Understanding these provisions is essential for the exam and for explaining policy terms to clients.

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Entire Contract Clause

The entire contract clause states that the policy, together with the application (if attached), constitutes the entire agreement between the insurer and the policy owner.

Purpose

Key Points

• The application must be attached to the policy
• Oral statements by agents are not part of the contract
• Only written provisions in the policy are enforceable
• Changes require written endorsements or riders

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Insuring Clause

The insuring clause (also called the insuring agreement) is the heart of the policy—it describes the insurer's promise to pay.

What It Contains

Example Language

"We will pay the death benefit to the beneficiary upon receipt of proof of death of the insured while this policy is in force."

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Free Look Period

The free look period gives the policy owner time to review the policy and return it for a full refund if not satisfied.

Standard Terms

Purpose

• Allows review of actual policy terms
• Protects against high-pressure sales
• Provides time to compare with other options
• Required by state insurance law

Exam Tip: The free look period typically begins when the policy is delivered, not when it is issued or applied for.

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Grace Period

The grace period is the time after a premium due date during which the policy remains in force even though the premium has not been paid.

Standard Terms

Important Points

• Policy cannot be canceled during grace period
• If insured dies during grace period, death benefit is paid
• Overdue premium is deducted from the death benefit
• After grace period expires, policy lapses

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Reinstatement Provision

The reinstatement provision allows a lapsed policy to be restored to active status.

Requirements for Reinstatement

What Happens Upon Reinstatement

• A new contestability period begins (typically 2 years from reinstatement)
• A new suicide exclusion period may begin
• Cash value is restored
• Policy terms remain the same as before lapse

Reinstatement vs. New Policy

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Incontestability Clause

The incontestability clause limits the time during which the insurer can challenge the validity of the policy.

How It Works

What "Incontestable" Means

After the contestability period:

• Policy cannot be voided for misstatements on application
• Even fraud does not allow the insurer to deny claims
• Only exceptions: lack of insurable interest, impersonation

Exceptions to Incontestability

Exam Tip: After 2 years, the policy is incontestable. The insurer must pay even if the insured lied on the application (with narrow exceptions).

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Misstatement of Age or Sex

The misstatement of age or sex provision addresses what happens if the insured's age or sex was stated incorrectly on the application.

Effect of Misstatement

Example

• Insured stated age as 35, actual age was 40
• Premium for age 35: $500/year
• Premium for age 40 (correct): $700/year
• Premium paid would have purchased only $357,000 at age 40 rates
• Death benefit adjusted from $500,000 to $357,000

Key Point

• The policy is NOT voided—it is adjusted
• This provision is NOT subject to the incontestability clause
• Adjustment can be made even after 2 years
• Can work in either direction (increase or decrease)

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Key Takeaways

• Entire contract clause: Policy + application = complete agreement
• Insuring clause: Insurer's promise to pay the death benefit
• Free look period: 10-30 days to review and return for full refund
• Grace period: 30-31 days to pay overdue premiums
• Reinstatement: Lapsed policy can be restored (with conditions)
• Incontestability: After 2 years, insurer cannot void for misrepresentation
• Misstatement of age/sex: Benefit adjusted, policy not voided