“Standard provisions” in the context of insurance policies, including life insurance and living benefits insurances (such as disability insurance, critical illness insurance, and long-term care insurance), refer to the set of clauses or conditions that are commonly included in insurance contracts by insurers. These provisions are designed to establish the rights and obligations of both the policyholder and the insurance company, providing a framework for the operation of the policy. Many of them, such as the grace period, reinstatement and incontestability, are set by law: by the provincial insurance acts and, in Quebec, by the Civil Code of Québec.
Key aspects of standard provisions include:
Grace period
A specified period after a premium due date during which a payment can be made without penalty, and the policy remains in force. For life insurance, the law sets it at no less than 30 days.
Incontestability clause
After a policy has been in force for a certain period (typically two years in Canada), the insurer cannot contest the policy’s validity based on misstatements by the insured, except in cases of fraud.
Misstatement of age or gender
If the age or gender of the insured was misstated, the benefits payable may be adjusted to what the premiums paid would have purchased at the correct age or gender.
Policy loan provision
For policies with a cash value component, this provision allows the policyholder to borrow against the policy’s cash value under specified terms.
Beneficiary designation
The right of the policyholder to name or change the beneficiary who will receive the policy’s benefits.
Reinstatement
This allows a policyholder to reinstate a lapsed policy under certain conditions, such as providing evidence of insurability and paying overdue premiums.
Conversion rights
In certain types of insurance, such as term life insurance, this provision allows the policyholder to convert the policy to a permanent one without providing evidence of insurability.
Exclusions
Specific conditions or circumstances under which the policy will not provide benefits, such as suicide within the first two years of the policy or death resulting from participating in illegal activities.