Understanding your life insurance policy

Once you officially have life insurance, you’ll get a policy that goes into the nitty-gritty of your coverage. We’ve broken down what it all means.

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Nupur GambhirSenior Editor & Licensed Life Insurance ExpertNupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

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Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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Getting life insurance coverage is an important step in securing the financial health of your family if you die and can no longer provide for them. Understanding your policy to make sure you know how your life insurance works is the next step to maximizing its benefits.

When do you receive your life insurance policy?

Once you sign your policy papers and pay your first premium, you’ll get either a physical or electronic copy of your policy, which lays out the fine details of your coverage.

Your life insurance policy is a binding document, and as such it has a lot of legalese, but it’s nothing you can’t handle. Still, we’re here to break down some of the nitty-gritty for you and answer all your questions.

Each insurer’s policy will look a little different, but this article lays down what you should expect.

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How do you read a life insurance policy?

Life insurance policies have a lot industry-specific jargon, but there are a few key things you’ll need to review in your policy:

  • Your personal information: Make sure your name, birth date, and all other personal information is accurate.

  • The death benefit: The death benefit should match the amount you are purchasing. Check for mistakes now to avoid hiccups down the road.

  • How much you pay: You'll want to double check that the premiums are accurate, as that is the rate you'll be paying monthly or annually.

  • When your policy becomes active: This is the date your coverage becomes active and your policy is in force.

understanding your life insurance policy

Declarations page

This section goes by a few different names — it’s often also called either policy specifications or schedule of benefits — but the content is the same: you’ll see the executive summary of your policy and all the important details.

Here’s what will be included that you need to know.

The insured or the policyholder

This is usually the same person — you — but you could be buying a policy for someone else, in which case you’re the policy owner and they are the insured.

Essentially, the policyholder is defined as the person who owns the policy and pays the policy premiums, while the insured is the person whose death would prompt the death benefit payout.

Policy type

There are two main types of life insurance — term life insurance and permanent life insurance. The type of coverage you bought will be listed in your policy.

Policy number

This number allocated to your policy is good to know — it allows you to identify or confirm your policy when needed.

Policy issue date

The policy issue date is the day that your life insurance application was approved and you were extended an offer for coverage. Your policy doesn’t actually go in force until your policy’s effective date.

The effective date

The effective date of your policy is the date your life insurance policy goes in force and you have life insurance coverage.

This is the most important date on your policy. If you die before your policy’s effective date, your beneficiaries will not receive the life insurance payout, even if you die after your policy’s issue date and you were approved for coverage.

Premium class or rate class

Your rate or premium class is based on the health classification you received during the underwriting process, which determines the cost of your life insurance policy and how much you pay in premiums.

This is done through a comprehensive evaluation of your medical history, family history, lifestyle, and background, after which you receive one of five classifications:

  • Preferred Plus

  • Preferred

  • Standard Plus

  • Standard

  • Substandard

→ Read more about health classifications

Term length

If you have a term life insurance policy, the length of your coverage will be listed within the policy. Term life insurance policies typically have term lengths between 10 and 40 years.

Other types of life insurance that offer permanent coverage — for example, whole life insurance and universal life insurance — don’t have a term length because they never expire as long as you pay your premiums and don’t elect to cancel the policy.

Life insurance riders

Riders are policy add-ons that provide supplemental coverage under special circumstances. Any life insurance riders that you purchased or were included in your policy at not cost will be listed.

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Policy terms and definitions

Also known as general provisions, the policy terms and definitions section of your life insurance contract is devoted to decoding some of the language that you’ll encounter in your policy.

Here are some of the terms you’ll probably see on your policy:

Death benefit

Probably the reason you’re buying life insurance in the first place, the life insurance death benefit is the amount of money that will be paid out to your beneficiary or beneficiaries if you die. The amount of coverage you have is also called the face value.

You’ll be able to see your coverage amount — which can be increased or decreased as your needs change, though with additional underwriting.


The recipient of your policy’s death benefit. Your beneficiary can be one person, multiple people, or even an organization.

Coverage date or policy date

The date that your policy is considered to be in force, or active. If you die after the policy’s effective date, then your policy will pay out the death benefit to your beneficiaries.

Insurance age

The age you are classified as by the life insurance company. It will either be your actual age or your nearest age, depending on the life insurance company.


Your premiums are the amount you pay for your policy monthly or annually. Charging premiums is part of the way life insurance companies make money.


A non-participating denotation indicates that the policy doesn’t receive any dividends issued by the insurer.

All term life insurance policies will see a non-participating denotation because they don’t have a cash value component, whereas some whole life insurance policies do.

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Coverage details

Also called the insuring agreement, this section puts to use all the terms and definitions from the previous section, summarizing the promises the insurance company is making to you and that you’re making to it.

Specifically, it spells out how much you’re going to pay for your policy premiums, and how much the life insurance company will pay out to your beneficiaries in the event of your death.

Premium and payment information

You’ll always know exactly how much you owe for premiums.

  • For term life policies with level premiums that don’t change as you age, you’ll see the cost of paying your premiums monthly or annually.

  • For permanent policies, which may have variable premiums, your policy will showcase a table with the premiums over time.

Other information included here will be about the grace period — the time you have to make a payment after your premium due date, during which your policy will remain active — and reinstatement terms, which will detail when and how you can reinstate your policy if it lapses.

You might also see any exclusions — for example, a suicide exclusion, which notes that the policy won’t pay a death benefit if you die by suicide within two years of your policy being in force.

Ownership and conversion rights

Many policies allow the owner of the life insurance policy to transfer your policy, sell it to a third party, or convert it to a permanent life policy at the end of its term.


Your life insurance beneficiaries — those who will be filing the death benefit claim — will be spelled out and can be updated in this section.

Along with seeing who’s who in your policy, you’ll also be able to see and update your contingent beneficiaries, what percent of the death benefit your beneficiaries will receive, and if the death benefit will be paid out per capita or per stirpes. Any updates you make to your life insurance beneficiaries will also be reflected in this section.

Other considerations regarding beneficiaries

Life insurance riders

You can add supplemental coverage to your policy with life insurance riders. Most of these optional add-ons come at an additional cost and can give you some financial protection while you’re still alive (often called living benefits).

Here are some common life insurance riders that may be built into your policy or that you can opt-in for.

  • Disability income rider: A disability income rider replaces a portion of your income if you become disabled and can’t work.

  • Waiver of premium rider: A waiver of premium rider waives your policy’s premiums if you become disabled and are unable to work for up to six months.

  • Term conversion rider: Term conversion riders allow you to convert a term life insurance policy to a permanent life insurance policy before the end of the term. It’s usually included in your policy at no additional cost.

  • Accelerated death benefit rider: If you’re diagnosed with a terminal illness, an accelerated death benefit rider pays out a portion of the death benefit to you while you’re still alive to cover associated medical expenses or the cost of care.

  • Long-term care rider: A long-term care rider pays out a part of the death benefit to cover the costs of long-term care services. (Not to be confused with hybrid long-term care insurance, which is a combination of traditional life insurance and long-term care insurance.)

  • Critical illness rider: A critical illness rider pays out a lump sum that is subtracted from your death benefit in the event that you develop a serious illness.

  • Child rider: A child rider pays out a small death benefit if any of your children die while your policy is active.

Frequently asked questions

How do you read a life insurance policy?

A life insurance policy is a technical document with a lot of jargon, so read it carefully to make sure you understand all the information it contains. Double check your personal information, the death benefit amount, premiums, and when the policy becomes active.

What are some common life insurance definitions and terms?

Your beneficiaries are the people who receive the life insurance funds. Meanwhile, the death benefit is the amount of money your beneficiaries receive. Another important term is the policy premiums, which is how much you pay monthly or annually for the policy.

What are the contents of life insurance policy?

A life insurance policy contains everything you need to know about your coverage — when it begins, when it ends, how much you pay, and how much coverage you have.


Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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