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Life Insurance Terms & Provisions Here is a list of provisions and terms to become familiar with before purchasing a life insurance policy. Assignment provision: Policy owner can assign or promise all or portion of death benefit to an individual. Automatic premium loan (APL): Automatically pays premiums from policy's cash value to prevent policy from lapsing. Beneficiary designation: Those policy owner designates to receive death benefits. Cash surrender value: Terminates policy's coverage and pays policy's cash value to policy owner in a lump sum. Extended term insurance: Uses policy's cash value to pay premiums for original policy face amount without further premium outlay; new policy is term insurance. Grace period: Extends period to pay premiums without lapsing coverage (average grace period is 31 days). Incontestability clause: Insurer guarantees distribution of death proceeds after policy has been in force for two years of insured's life. Non-forfeiture provisions: Enables owner of permanent insurance to discontinue paying premiums without forfeiting policy cash values. Policy loan: Permanent insurance policy owner can borrow money from insurer at interest rate lower than bank or similar source. Unpaid loan balance is usually subtracted from accumulated cash value at time policy is surrendered or from death benefit if death occurs before loan is repaid. Reduced paid-up insurance: Uses cash values to buy a new policy for a reduced amount and new policy requires no further outlay. Simultaneous death provision: Assumes beneficiary dies first if death is simultaneous. Policy's proceeds distributed according to policy owner's wishes rather than those of beneficiary. Suicide provision: Company's liability is limited to returning premiums if insured commits suicide during first two years policy is in force. < PREVIOUS NEXT> #38599