Contrary to at first glance, there is often fine print in life insurance policies. In its basic form, life insurance appears to be a rather simple subject. Unlike auto, boat, motorcycle, business, or homeowners insurance, life coverage would seem to be totally straightforward: You pay premiums while you're alive and when you're no longer on the planet, your beneficiaries receive the proceeds.

Unlike disability or health insurance, it would seem that there is little area for debate regarding the insured's eligibility for coverage when it comes to life insurance.

However, a life insurance policy has many areas of fine print with which you should become familiar. While it is normally true that the basics of a life insurance policy are straightforward and elementary, some lesser-known critical issues may be explained in what might be termed "fine print."

For example, you should look for the premium payment grace period information specified in your life insurance policy. Why? Suppose the worst happened to you and you neglected to make a premium payment on time. Your beneficiaries may not receive any proceeds because your life insurance policy has lapsed.

This is just one example of fine print issues that need be examined to give you the knowledge you need to manage your life insurance costs and policies successfully. Other fine print issues, like level premium payment term, guaranteed renewability, exclusions from proceeds payment (sky diving, auto racing, extreme sports competition?), and ability to reinstate coverage after a policy lapse, need examination.

If, after reading the fine print in your life insurance policy, you are confused or unsure about some issues, call and ask your local agent about the specific items in question. He/she should be able to explain these issues and translate the sometimes complex insurance language to simple English.

How the fine print might seriously affect your life insurance coverage

Here are a few fine print issues that could affect your life insurance costs and coverage if they are misunderstood.

Level premium term

How long will your premiums remain at current levels? One year, five years, ten years or more? You probably understand that as you get older, your life insurance costs will increase. But there are programs that will guarantee a level premium for long periods. Learn what your life insurance policy provides for premium adjustment.

Excluded or prohibited activities

Excluded or prohibited activities might void your life insurance policy. One of the life insurance premium calculation components is your occupation and lifestyle. If you are a professional race car driver, your premium will be much higher for the same amount of insurance than for a Certified Public Accountant.

Hobbies and other lifestyle issues might also increase your premium. However, read your life insurance policy to see what, if any, activities are not covered. For example, you are a bank manager, a relatively low risk, but you enjoy skydiving on weekends. Should your parachute not open one weekend, your life insurance policy may – or may not – cover you.

Coverage renewal issues

Life insurance policy language explains your options at the end of the term of your current coverage. You might need to re-apply and undergo a complete new medical exam. Only completing an updated medical questionnaire may be needed in other cases. Or you might have a guaranteed renewal clause in your fine print.

As you might guess, a guaranteed renewal provision is your best option since it disregards any negative medical issues you may have developed since your current life insurance policy was issued.

Ability to increase coverage

Do you have any options to increase your coverage amount during or at the end of your original life insurance policy term? You might receive a large promotion, have a set of twins to add to your family, purchase a more expensive home, or develop a medical issue.

Increasing the amount of your life insurance coverage may be wise. Does your current coverage permit increases or do you need to purchase an additional life insurance policy to get more coverage?

Always read the terms

These are only a few important provisions that often live in the fine print area of your life insurance policy. Even if you use company-provided group life coverage as part of your plan, read your insurance certificate and learn what provisions or conditions are in the fine print.

For example, group life insurance often allows you to convert this coverage into a larger whole life or term life policy. In other cases, the fine print allows you to purchase other policies from the same company with reduced medical examination needs or lower life insurance costs. The fine print can be a friend as well as a foe.

See also: No obligation life insurance quotes