How to Read Your Life Insurance Policy

We review the important details and terms contained in a typical life insurance policy so you can review your coverage with confidence.

You’ve made the important decision to protect your family with life insurance, congratulations. Once you sign your policy papers and pay your first premium, you’ll either get a physical or electronic copy of your policy that lays out all of the details of your coverage. Now, it’s important to understand how to read your life insurance policy and understand the coverage that you’ve secured.

Declarations Page

The first few pages of your policy will provide a summary and likely include a high-level look at the coverage you’ve purchased. You’ll find the basic information of your policy here- the benefit amount, your payment amount and other details.

After the summary pages, you’ll find the declaration page. This page will contain additional information and it may be multiple pages. Things you’ll find in the declaration page(s) include:

• Personal information
• Benefit amount: This is the amount paid upon your death
• Policy type: Specifies whether you have a term or a permanent policy
• Premium amount: How much you pay for the coverage
• Policy issue date: The date the policy is issued
• Policy number
• Risk class
• Attached riders
• Beneficiary
• Name of the insured
• Name of the policy owner

Policy Terms and Definitions

This section of your policy might also be known as the general provisions. It’s dedicated to decoding some of the language that you’ll encounter as your read through your policy.

Coverage Details

Also know as the insuring agreement, this section put to use all the terms and definitions from the previous section, and it summarizes the promises the insurance company is making to you and that you’re making to it — specifically how much you’re going to pay for your policy premiums and how much life insurance the company will pay out to your beneficiaries in the event of your death.

Some of the important information you can find in this section of your policy includes:

• Premium and payment information
• Ownership and conversion rights

Beneficiaries

Perhaps the most important aspect of your policy, your beneficiaries. Exactly who would receive a payout upon your death is spelled out in this section. You’ll also be able to see and update your contingent beneficiaries, what percent of the death benefit your beneficiaries will receive, and how the death benefit will be paid out.

Life Insurance Riders

Supplemental coverage that you add to your policy is known as a life insurance rider. Most of these optional add-ons come at an additional cost and can give you some financial protection while you’re still living.

A few examples are:

• Disability income rider: This type of rider replaces a portion of your income if you become disabled and cannot work. It’s not typically as robust as a disability insurance policy but it can help.
• Waiver premium rider: If you become disabled, this type of rider waives your policy’s premiums for up to six months.
• Term conversion rider: This would allow you to convert a term life insurance policy to a permanent life insurance policy at the end of the term. It may be included in your policy at no additional cost.
• Chronic illness rider: This type of rider would pay out part of the death benefit to cover the costs of long-term care services, such as a nursing home, should you need this type of care due to aging or critical illness.

Review Your Policy

If you’ve had significant life changes or you don’t fully understand your policy, take time to sit down and review your current life insurance coverage and assess whether you have the coverage you need to protect what matters most. Reach out to your local Farm Bureau agent and create a customized policy that works for you and your family.