Like any other legal contract, a life insurance policy carries provisions and duties which must be fulfilled by the parties to facilitate the execution of the contract as intended. Inconsistence or failure to fulfill the obligations can result in rescinding the policy or in non payment of benefits upon the death of insured.
The Life insurance policy includes exclusions which will results in voiding of the contract if the provisions are violated. Death by suicidal will results in avoidance of the contract, if the death occurs with 2 years of the policy period in most states. Deaths due to drunk driving, felonious activities, intentional overdosing of drugs and cause of own death results in contesting of the policy by insurance company.
The policy excluded the death resulting from aviations accidents unless the insured was traveling as a fair paying passage on a regular scheduled airline. The provision is used when the insured is traveling on non commercial airline or is a pilot or a crew of an airline.
During war time the insurance company may insert the war exclusion clause. The clause states the company will only be liable for return of cumulated premiums paid or cash value on the policy which ever is greater in case of the death occurring because of military services or war time conditions. If an insured is killed in military action and the policy included a war exclusion clause the insurance will contest paying the policy, and will only refund premiums or cash value on policy whichever is greater. Policy is generally included during war time and the practice in the industry is to lift the war clause after the war emergency has been lifted.
If the insured job involves hazardous occupation, the policy holder should refer to the underwriting guidelines of the insurance company to ensure the insured is covered from the hazardous occupations. The company might decide not to cover individuals who are involved in hazardous occupations, hobbies and sports. The hazardous occupations such high voltage line repair mechanic may not be covered and individuals who participate in high risk sports and hobbies such as scuba diving or car racing may not be covered. If a company decides to cover hazardous activities it usually does so at a rated premium rate.
The ownership of the policy is controlled by individuals or entities who might be insured or not. The control is determined by insurance interest which is shown by blood or business relations. Spouses can insure the partner’s life because of the insurable interest for the loss of income the partner generates, but a church or charity cannot insurer the life of a donor because there is no business or blood relationship. The partners can cross insure each other to safe guard their business interest and creditors can take a policy against the debtor to safe guard the debt payment incase of the debtors death.
There are rights which are entitled to the policy holder. A control right designated to the policy holder is the power to designate and change the beneficiary. The policy owner can follow different procedures in executing his right under the policy control; the owner can decide to exercise absolute assignment transferring all policy rights and benefits to another person. Absolute assignment is irrecoverable and transfers policy control and benefits to the assigned person. This is an action utilized by terminally ill person in need of cash to pay hospital bills which sells the policy by transferring and assigning the policy to a company which becomes the new owner of the policy and names it self as the beneficially. The policy can be used as collateral to provide security for the debt against the policy owner and assignee. In case of death or default the assignee in this case the creditor receives stipulated cash value or death benefits. A collateral assignment is reversible when the debt is paid.
The contract provision states the policy consists of any of the attached paper and there is no document which can be altered or referenced to the policy. Modifications on policy should be requested in writing and should be signed by the officer of the insurance company. The policy holders should safe guard the provision to prevent contest of the policy.