Payment of Premium Provisions

Key Life Insurance Provisions

1. Mode of Premium

Definition: Specifies the frequency of premium payments (monthly, quarterly, semiannually, or annually).Details:

• More frequent payments generally result in higher overall costs.

• Policyowners retain the right to change the payment mode.

• Payee: Premiums are payable to the insurance company.

2. Grace Period

Definition: A time period following the premium due date during which the policy remains in force despite nonpayment.Duration: Typically 30-31 days, but may vary based on state law.Conditions:

• If the insured dies during the grace period, the death benefit is paid minus any premiums or loans due.

• Coverage ceases if payment is not made by the end of the grace period, and the policy lapses.

3. Automatic Premium Loan (APL)

Purpose: Prevents the unintentional lapse of a policy by borrowing against its cash value to pay overdue premiums.Features:

• Must be elected by the policyowner and can be cancelled at any time.

• Becomes effective at the end of the grace period.

• Applicable only to cash value policies.

• Treated as a standard loan, accruing interest annually.

4. Reinstatement

Definition: Allows a lapsed policy to be reinstated, typically within 3-5 years of lapse.Requirements:

• Policyowner must pay all overdue premiums plus interest.

• Insured must provide evidence of insurability.Impact:

• Restores the policy as if the lapse never occurred.

• Initiates a new incontestability period.

These provisions provide flexibility and protections, ensuring policyowners can maintain their coverage even during financial challenges.