Life Insurance Clauses

Life insurance policies protect your loved ones financially when you’re not around. There are different types of life insurance that you can purchase. A pure term plan if you’re looking for only death coverage. Unit Linked Policy is for those who need investment as well as life cover. And these life insurance policies come with certain clauses. So, do learn about these life insurance clauses so that you can buy the right product for yourself.

List of Life Insurance Clauses

You can check out the policy brochure and look out for the below Life Insurance Clauses.

Nominee Clause

As you know, a life cover pays a lump sum of money to the nominee. But who is the nominee? Well, it is the person you have appointed to receive the money in the event of your death. Who can be a nominee for life insurance? Your children, wife/husband or parents can be nominated for a life insurance policy. You can change the nominee during the policy term by sending a request to the insurer. If you make your children the nominee of your life insurance plan and he/she is below 18 years, you need to get an appointee who will receive the payment on behalf of your children should they remain below 18 years even when you die.

If there is no nominee, the insurer will follow an established legal procedure to avoid legal disputes. So, your spouse, son, father or mother, who are Class I legal heirs will receive the claim amount.

Note – Life Insurance clauses for nomination are applicable as per the provisions of Section 39 of the Insurance Act 1938.

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Suicide Clause

This life insurance clause applies to ensure the policy benefits are not misutilized. So, if you commit suicide within one year from the date of policy inception, the insurer won’t pay the death benefit. In such a case, the total paid premiums are refunded. Do read the terms and conditions of your life insurance policy and see if suicide is covered after 12 months or not.

Survival Period Clause

If you get a life insurance plan with critical illness coverage, a survival period clause will apply. This is a period that the insured has to survive post the diagnosis of critical illness. So if you die within the survival period, your family won’t get the policy benefits. These benefits come after completing the survival period. The length of such a period may vary from insurer to insurer and is generally 15 to 30 days.

Free Look Period Clause

A period of 15 or 30 days is available to the insured to read the terms and conditions of a life insurance plan. So, if you cancel the policy during the free look period, you can receive a 100% refund of your paid premium. You will be entitled to an amount equal to the premium less proportionate risk premium, medical examination expenses and stamp duty.

The free look period is 30 days in case of the following distance marketing modes

• Telephone-calling
• Short Messaging Service (SMS)
• Email and interactive television (DTH)
• Direct postal mail, newspaper and magazine inserts

Grace Period Clause

A grace period clause of thirty days is applied from the due date of premium payment. It is applicable for all premium paying modes except monthly mode, for that, the grace period is fifteen days. During the grace period, the life insurance company will accept your premium without any late fee. Plus, the policy coverage continues during the grace period. And in case of your death during the grace period, the company will deduct the due premium from the death benefit.

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Surrender Clause

The insurance company allows you to surrender the policy if you meet this clause. In the case of a single pay option wherein the premium is paid in a lump sum, your life insurance policy acquires a surrender value immediately. However, for limited and regular pay, the policy acquires a surrender value after two or three years of continuous payment. As per a recent directive of the Insurance and Regulatory Development Authority of India (IRDAI), life insurance companies have been asked not to levy surrender charges when a policyholder terminates the policy after five years.

Revival Clause

The revival clause of a life insurance policy allows an individual to get the benefits back within a predefined period. A policy lapses due to non-payment of premium, and this clause allows reinstatement. To receive the policy, you need to pay the entire due premium along with late payment charges. The company requires new fitness and medical certificates for the revival of the policy.

Once policy lapses, the same can be revived within five years from the due date of the first unpaid premium. Check below to know the late payment fee-

No. of Days the Policy is in Lapse StatusLate Fee
Up to 60 daysNIL
61 to 180 daysRBI Bank Rate + 1% p.a. compounded annually on due premiums
> 180 daysRBI Bank Rate + 3% p.a. compounded annually on due premiums

Note – If you don’t revive a lapsed policy, the policy terminates and no benefit is payable to you and the nominee.

Lock-in Period Clause

In a ULIP policy, this clause applies. You will get a partial withdrawal facility in a ULIP plan. But you’re allowed to use this facility after continuous coverage of five years. When the lock-in period is complete, you can do partial withdrawals.

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