Key Characteristics of the Life Insurance Policy “Face Page”

Almost all life insurance contracts have a similar format; there will be a “face page” and both required and optional provisions on succeeding pages. Most contracts also have a page that contains the definitions of terms used in the contract.

The face page contains: the basic promise of the insurer to pay a stated amount upon the insured’s death; a statement as to the type of policy that is issued (e.g., term or whole life), the length of time premiums are payable (most provide premiums that are payable for a stated period or until the insured’s death) and whether or not dividends are payable; a table of contents guide to the other provisions of the policy; and a statement regarding any additional benefits. It must contain the signatures (facsimile is sufficient) of the president and secretary of the insurer.

Certain provisions are required by state law to safeguard the interests of the policyowner and the beneficiary. These almost universally required provisions include:

1. one-month grace period for premium payments;

2. incontestable clause;

3. suicide clause;

4. misstatement of age adjustment clause;

5. dividend clause;

6. extended term and paid-up insurance clause; and

7. policy lapse and reinstatement clause.

Some states prohibit the insurer from inserting certain types of provisions for the same reasons. There are prohibitions in various states against such provisions which:

1. limit (to less than the period fixed by that state’s general statute of limitations) the time in which a suit may be brought against the insurer;

2. permit backdating the policy more than a specified period of time (usually six months);

3. allow a forfeiture of the policy for failure to repay a policy loan;

4. make the insurer’s agent the client’s agent; and

5. cut back the insurance ostensibly provided on the face page.

Almost all states forbid the use of the term “warranty” (a statement guaranteed true in every respect) and now hold that a statement by an applicant or by the insured is a “representation” (a statement that must be true only as to facts material to the risk). The distinction is crucial to the protection of the policyowner and his or her beneficiaries. A warranty is part of the contract but a representation is not.

Therefore, the breach of a warranty makes the contract rescindable by the insurer but in the event the insurer proves misrepresentation by the applicant and/or insured, the insurer cannot rescind the contract—unless the fact misrepresented is material to the acceptance of the risk. Almost every state requires that the policy itself must provide that —in the absence of fraud—all statements by or for the insured are deemed to be representations and not warranties.

Each policy contains an entire contract provision stating that the policy—together with the copy of the application that is attached and is legally a part of the policy—is the entire contract. The insurer agrees in this provision not to fight a lawsuit on the basis of any statement unless that statement is made in the application and a copy of the application was attached to the policy when it was issued. The insured and/or policyowner is then put on notice that no one (including the agent, the insured, or the policyowner) has the authority to waive or change a provision in the policy. 

Many states allow (and some require) an insurer to insert a provision on the face page of the policy that provides a free look—a trial examination period to examine and decline the policy within a given period of time (usually ten days, but in some cases as long as twenty days). If declined, the contract would be deemed void from inception and the insurer would be obligated to return the policyowner’s money (typically without interest).

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