My friend, I hope you draw some helpful insight from this guest post from Money.com! Here, we’ll dive into some important considerations on life insurance.
The discussion of getting life insurance is an uncomfortable one, which is understandable. It must be done, though. While it is frightening to consider the possibility of losing someone dear to us or be it our time, a conversation has to be had, and a plan needs to be made in advance to avoid having to deal with unnecessary obstacles.
When a loved one like a parent passes away, it’s hard enough trying to heal from their loss, but potentially getting denied access to the life insurance benefits to remain afloat can only add to that pain. As a result of getting denied, this can put our families in financial peril. This can, however, be prevented! Life insurance claims might be turned away for various reasons, but there are different ways you can implement to help your family have financial stability.
Before we go further, it’s crucial to understand how life insurance works to avoid any problems.
Do you know what life insurance is and how it works?
Table of Contents
Upon the policyholder’s death, the insurer agrees to pay the designated beneficiaries a certain quantity of money. The death benefit is a lump amount paid after the insured person has passed away.
The death benefits and the premiums are the two most fundamental parts of life insurance.
- If a policyholder dies, the insurer agrees to pay a lump amount to designated beneficiaries, known as the death benefit or face value.
- When you buy an insurance policy, you pay a premium to the insurer. The premiums are based on the expected life expectancy of the insured. High-risk individuals like the elderly and people with chronic illnesses pay higher rates, as do those who buy a permanent life insurance plan with more considerable benefits.
In the following, you’ll see a few scenarios in which life insurance claims may be denied, as well as tips on how to prevent them and debunking a few misconceptions.
Failure to make payments on time & Mistakes in your application
Most of us have had to deal with late penalties and missed payments in the past, and we would be at risk of having our service terminated because of this. Insurance providers are no different. However, they do understand that things happen in life (such as illness or a loss of employment) and will provide you a grace period during which time you can catch up on your payments.
Also, if you are applying to get a new policy, including all relevant information is essential. If you make a mistake or purposefully omitting pertinent information might result in your family’s coverage benefits being rejected outright when they go to make a claim.
If suicide happens while the life insurance policy is still contestable
Suicide is a tragedy that no family wants to go through, but assessing whether or not the policy will be nullified takes some looking into.
Most insurance policies come with a contestability period of two years, but this varies by provider. Your application and benefits qualifications will be examined thoroughly by the insurance provider for the duration of this period to ensure everything is in order.
If a policyholder tragically passes away from their actions during this period, then there is a possibility that the amount they had already made on their premiums will be returned to their listed beneficiaries in place of receiving the death benefits.
(To be extra sure of this, verify your state’s regulations and your life insurance policy’s guidelines.)
Affected by excessive alcohol or drug consumption or drunkenness
According to where you live in the US and the circumstances of the policyholder’s death, the insurer may determine a reasonable cause to deny an insurance claim IF drugs or alcohol were involved.
The reason for this is that, through a proper investigation, it can be determined from several factors if either of these substances is directly linked to the insured’s cause of death or not. For example:
- An insurance claim will most likely be granted if the deceased had some alcohol in their system but was not determined to contribute to their death.
- People who have had a negative response to medication while under the care of a medical professional.
(As with the previous section, before choosing a life insurance plan, make sure you read the fine print and consult with an expert to be sure how your policy treats these exclusions.)
Lastly…
When challenging a claim, keep in mind that you may have to take it to court. Since most of us aren’t experts at the ins and outs of these insurance companies’ tactics and regulations, you should consider hiring a lawyer to defend you and help present your case correctly. If you find yourself in a financial rut, there are some alternative payment options you can work out.
Either pay your attorney an hourly rate or, often the more preferable option, you agree to a payment plan.
Even if it is uncomfortable to talk about, getting life insurance is one of the best ways to protect your family if the unthinkable happens.
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