provisions, usually requiring an additional premium, that are appended to an insurance contract. These include Waiver of Premium (WP), Disability Income (DI), accidental death clause, policy purchase option (PPO). The young family with children may wish to consider these clauses since the breadwinner is seven to nine times more likely to become disabled than to die at a young age.

loan from an insurance company secured by the cash surrender value of a life insurance policy. The amount available for such a loan depends on the number of years the policy has been in effect, the insured's age when the policy was issued, and the size of the death benefit. Such loans are often made at below-market interest rates to policyholders, although more recent policies usually only allow borrowing at rates that fluctuate in line with money market rates. If the loan is not repaid by the insured, the death benefit of the life insurance policy will be reduced by the amount of the loan plus accrued interest.

value in life insurance policies that entitle the insured to these choices:

(1) to relinquish the policy for its cash surrender value. (Note that in the beginning years the cash value may be minimal because of expenses such as agent's commission, premium tax, and the cost of putting the policy on the insurance company's books.)

(2) to take reduced paid-up insuranceinstead of the cash surrender value.

(3) to take extended term insurance for the full face amount instead of the cash surrender value.

(4) to borrow from the company, using the cash value as collateral.

Each policy provides a table illustrating the first 20 years of its guaranteed cash values.

individual who will receive an inheritance upon the death of another. The proceeds of an insurance policy may be in the form of a lump-sum or annuity.

statements by an insurance applicant concerning personal health history, family health history, occupation, and hobbies. These statements are required to be substantially correct; that is, applicants must answer questions to the best of their knowledge.

policy that pays a specified sum not related in any way to the extent of the loss. The term applies to a life insurance policy rather than to a contract of indemnity because the former does not purport to restore an insured (or beneficiary) to the same financial position after a loss as prior to the loss. The sum of money that a life insurance policy pays as a death benefit is a definite amount that may or may not have any relation to the quantitative value of the death. Thus, the life insurance policy is deemed to be a valued policy.

provision in a life insurance policy that death benefits will not be paid in the event an insured dies from warrelated causes; or in lieu of a death benefit there is a return of premiums plus interest, or a refund equal to the reserve portion (cash value) of the policy. For example, during the Vietnam War, if a whole life policy with a war exclusion clause had a face amount of $10,000 and an insured died as the result of war-related injuries, the beneficiary would receive the cash value of the policy. This clause cannot be added to a policy that had none originally. If it is included in a policy bought in time of war, it is typically removed by life insurance companies at the end of the war and, once removed, can never be restored.

elements common to all life insurance policies. While state insurance laws do not prescribe the exact words that must be in a life insurance policy, certain standard provisions must be included to provide specified basic benefits for an insured, who cannot be charged extra for them. Additional benefits can be provided, if the insurance company desires. Standard provisions include the beneficiary; grace period; incontestable clause; nonforfeitability (cash surrender benefit, reduced paid-up benefit, extended term benefit); policy loanreinstatement; suicide clause; war exclusion clause.

limitation in all life insurance policies to the effect that no death payment will be made if an insured commits suicide within the first two years that the policy is in force. This clause protects the company against adverse selection-that is, purchase of a policy in contemplation of planned death in order for a beneficiary to collect the proceeds.