Page 61 - A Canuck's Guide to Financial Literacy 2020

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Non-Forfeiture Options

Life insurance policies have provisions in place that try to prevent the lapse of the policy.
This is true for policies with accumulated cash value. The individual can use this cash value
for "reduced paid-up insurance", "extended term insurance" or use the cash value against
the premium also known as an automatic premium loan.

Dividend Clause

Dividends are yearly distributions paid by the insurance company. The dividends are not
guaranteed but depend on factors such as mortality rate, morbidity experience, investment
earnings, expenses, etc. If the company has strong year end financial results and lower-
than-expected number of claims, a policyholder dividend may be paid out.

Conversion Clause

Life insurance contracts may have conversion clauses which allow the policy holder to
convert the policy. For example, an individual converting term to permanent. Premiums at
conversion could be increased due to renewal at attained age or stay the same as
conversion could happen at "original age"

Renewable Term Provision
A policyholder may be able to renew their term policy for extended number of years but the
rates will be at insured's attained age. The coverage term will be extended without having to
re-quality for new coverage but renew is contingent on the policy being up to date.

Beneficiary Designations
A beneficiary is the recipient of the death benefit. More than one beneficiary may be named
and the final proceeds would be split in accordance to designated percentage. Beneficiaries
could be primary beneficiaries, secondary beneficiaries or tertiary beneficiaries.

Misstatement of Age
A major factor in determining the premium is age. Life insurance companies have policies in
place that they could undertake if they determine the applicant misstated their age during
the underwriting process. The misstatement of age provision allows insurance companies to
adjust the premiums to reflect your age.