in insurance, the restoration of coverage after a policy has lapsed because premium payments have not been made. Typically, life insurance can be reinstated within a three-year period if premiums are paid and subject to evidence of continued insurability.

choice of one of the following available to a life insurance policyowner (or beneficiary, if entitled to receive a death benefit in a lump sum at the death of an insured):

1. interest option-death benefit left on deposit at interest with the insurance company with earnings paid to the beneficiary annually. The beneficiary can withdraw part or all of the principal of the death proceeds, subject to any restrictions the policyowner may have placed on this option.
2. fixed amount option-death benefit paid in a series of fixed amount installments until the proceeds and interest earned terminate.
3. fixed period option-death benefit left on deposit with the insurance company with the death benefit plus interest thereon paid out in equal payments for the period of time selected.
4. life income option-death benefit plus interest paid through a life annuity. Income continues under a straight life income option,as long as the beneficiary lives; or whether or not the beneficiary lives, under a life income with period certainoption.

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.

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.

addition to a life insurance policy stating that when an insured becomes disabled for at least six months, premiums due are waived. Depending on the rider, the insured may begin to receive a monthly income (usually 1% of the face value of the policy), or only the premium may be waived. The length of time that income payments will continue depends on the definition of disability in the policy. During the time that premiums are waived, the life insurance policy stays in force, so that if the insured dies, the beneficiary receives the face value of the policy. Cash values continue to build, and if the policy is participating, dividends continue to be paid.

provision in a life insurance policy that permits the policyowner to name anyone as primary and secondary beneficiaries. The policyowner may change the beneficiaries at any time by simply writing the insurance company and sending the policy for endorsement if that is requested.

period of time provided in most loan contracts and insurance policies during which default or cancellation will not occur even though payment is due.
Credit cards: number of days between when a credit card bill is sent and when the payment is due without incurring interest charges. Most banks offer credit card holders a 25-day grace period, though some offer more and others fewer days.
Insurance: number of days, typically 30, during which insurance coverage is in force and premiums have not been paid.
Loans: provision in some long-term loans, particularly eurocurrency syndication loans to foreign governments and multinational firms by groups of banks, whereby repayment of principal does not begin until some point well into the lifetime of the loan. The grace period, which can be as long as five years for international transactions for corporations, is an important point of negotiation between a borrower and a lender; borrowers sometimes will accept a higher interest rate to obtain a longer grace period.

falsification of birth date by an applicant for a life or health insurance policy. If the company discovers that the wrong age was given, the coverage will be adjusted to reflect the correct age according to the premiums paid in.

in a life insurance policy, benefit in addition to the death benefit paid to the beneficiary, should death occur due to an accident. In double indemnity, twice the face value of the policy will be paid to the beneficiary; in triple indemnity, three times the face value is payable. Accidental death caused by war, aviation except as a passenger on a regularly scheduled airline, and illegal activities is generally excluded. Time and age limits are usually applicable, as for example, the insured must die within 90 days of the accident and be age 60 or less.

section in a life insurance policy stating that after the policy is in force two years, the company cannot void it because of misrepresentation or concealment by the insured in obtaining the policy. For example, when asked on the application if there is a history of diabetes in the family, the applicant writes no, knowing that his or her father and mother both have diabetes. This does not void the policy after two years. However, if the age of the applicant had been understated-say, to obtain a lower premium-the company will recalculate the benefit according to the correct age.

methods of handling policyholder dividends. In a participating life insurance policy, dividends are paid to the policyowner according to which of the following options is selected: (1) applied to reduce premiums; (2) paid in cash; (3) purchase increments of paid-up life insurance; (4) left on deposit with the insurance company to accumulate at interest; or (5) purchase extended term life insurance for one year in the amount a dividend can buy (Fifth Dividend Option). Some health and property insurance policies have dividend options.

feature in a life insurance policy allowing a policyowner to freely assign (give, sell) a policy to another or institution. For example, in order to secure a loan, a bank asks to be assigned the policy. If the insured dies before repayment of the loan, the bank would receive a portion of the death benefit that equals the outstanding loan, the remainder of the death benefit being payable to the insured's beneficiary. The fact that life insurance is freely assignable makes it a useful financial instrument through which to secure a loan. The insurance company does not guarantee the validity of the assignment.

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.

provision in a life insurance policy that protects its proceeds from the beneficiary's creditors. On payment, the beneficiary loses the protection of the spendthrift trust clause and the beneficiary's creditors can then bring suit to attach the proceeds.

protection given to life insurance beneficiaries by state laws, under which the benefits of a life insurance policy usually cannot be attached by creditors of an insured and/or beneficiary. These laws are based on philosophical concerns- dating back to the founding of the U.S., and the Homestead Laws- that a widow and children should not be made to pay for the financial sins of the father.

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.