Reading your newly bought life insurance policy is similar to reading ancient hieroglyphs. You have signed your name, paid your first premium and got a bunch of papers as heavy as a brick. The legal language used in this document is hardly surprising. However, let us try to decode the document and figure out what you have bought.
First of all, find out the Declaration Page. It is your cheat-sheet with all the info about your document. It is the first page where you can find everything.
There you can see face amount. It is the amount of money you can receive from your company in case of your death. Your premium amount is also mentioned there. In other words, it is the price you have to pay for your safety net. If you found any mistake in these amounts, do not hesitate to call your agent.
Find the “Insuring Clause.” This is the guarantee of the company to provide you with your benefit. The formulation used in this clause is rather formal. In simple words, it states that the company is going to pay the death benefit provided that you fulfilled your duties.
After that find the “Exclusions” section. Here you should expect to be bitten by the fine print. In most cases, the company excludes suicides in two years after you bought the policy, war deaths and deaths caused by aviation accidents unless you are a commercial pilot.
You can also find the “Riders” section. Here you will not see additional people riding your policy but rather additional options you have chosen to customize the insurance plan. The Waiver of Premium rider is a nice choice since in this case the company covers the premiums in case of total disability that prevents you from work.
If you have chosen the Whole Life or the Universal Life, check the “Cash Value” section. It is an accumulation account gradually growing. You can use this account to borrow money later. This option is not available for Term life insurance.
The “Free Look” provision must be included in most states. This provision provides you with the opportunity to study the policy for 10 days to decide if you like it. Should you find out that you do not like it, you can return it and get your money back. This is the only chance you have to change your mind without any extra payment.
Do not spend your time reading the definitions. They are formulated so long simply because lawyers want to take space. Read the description of what happens with the money.
This task is rather difficult. However, it is necessary to make sure you spent your money properly.