Buying life insurance is a prudent and selfless decision but make sure that you understand your policy, its terms, conditions, limitations and exclusions before you accept the policy. Any ambiguity should be clarified in writing.

All life insurance policies have an Incontestability Period - this is a time limit (usually two years) on the life insurance company's right to dispute a policy's validity based on incorrect information provided in the application. Even though an inspection report is obtained and in some cases a medical examination is done, the company depends a great deal on the answers given on the application when deciding whether or not to issue a policy. If an applicant fails to disclose information that would cause a policy not to be issued or to be rated the policy may be withdrawn or a claim may be denied - that is as long as the policy is still within the contestable period.

After two years have passed with the policy in force the life insurance company no longer has the right to contest the policy. The incontestability of the policy therefore gives the policy owner all the rights as stated in the contract itself. Claims will be paid and the policy can no longer be withdrawn even if a misstatement in the application is discovered. This limit doesn't apply in cases of fraud.

Life Insurance contracts also have a suicide clause which specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a specified period of time (usually two years) after the policy is issued.

Many people don't realize that if they replace an existing life insurance policy with a new policy they have to go through a new suicide and incontestability period.

Another thing to keep in mind when reviewing your life insurance contract is policy exclusions; an "exclusion" is a statement in an insurance policy which describes a condition or type of loss that is not covered by the policy. A common exclusion in life insurance contracts is an exception for accidental deaths caused by "act of war" or "while in active military service". Applicants who participate in hazardous activities such as skydiving or acrobatic flying may also have exclusions for death as a result of these high risk activities. Another exclusion to be aware of is life insurance contracts which limit policy pay outs if the person dies or is injured in a restricted country. Many insurance companies will either add a surplus premiums or exclusion for frequent visits to what they deem to be a high risk region. It is crucial that the insured understands this information and is made aware of it by his broker.

The application wording can be different with each insurance companies and this can have a direct impact on the policy exclusion. An example of this Company A ask if "the insured has or plans to travel outside ouside North America in the next 12 months" while Company B ask if "the insured has or plans to travel outside ouside North America in the next 36 months" This variation can cause Company B to be put in an travel exclusion not found in Company A's contact.

You can find more Life Insurance Tips on my Life Insurance Canada tips section