The Hidden Truths About Life Insurance: Read This Before Paying Your First Premium
To most of us, life insurance is not really all that essential…until, of course, it is. There are a lot of really great reasons to get life insurance for yourself, a loved one, a business partner, etc… Still, there are A LOT of really great reasons to be informed first. I have dedicated my legal career to working for clients who need help with their life insurance claims for several different reasons (which I layout for you in a later post). Over the years, I have repeatedly told my colleagues and even some clients that I wish I could put out a PSA to future clients. My PSA would let them know what they should know before they send in that first premium payment. So here it is, my own personal PSA to future clients.
1. BUYING LIFE INSURANCE REQUIRES YOU TO DO YOUR HOMEWORK
First, take the time to do your research on the different types of life insurance policies. There is a policy for almost any person in any situation. Still, you need to be realistic about the amount you can afford to pay in premiums and how much involvement you want to have in the policy’s performance. When I say “involvement,” I mean the types of policies with either an investment element or a varying premium. Honestly, these types of policies can be so difficult to understand that I sometimes have difficulty. Therefore, I highly recommend reaching out to a life insurance agent or broker who can advise you about what might work best for you. However, I can tell you that I see a TON of lapsed variable policies because of the unpredictability from month to month and year to year. Beware of the variable life insurance policy if you don’t intend to be diligent about reading and understanding the annual statements.
2. LOST OR DESTROYED POLICY DOCUMENTS ARE A NIGHTMARE
Second, keep copies of your documents either electronically or otherwise in a safe place that can be located by your loved ones/beneficiary. Think of it this way… you have a life insurance policy naming your significant other as the beneficiary. You pass away unexpectedly, and your significant other knows that they are the beneficiary but do not have the name of the insurance company, or the policy number. First, your beneficiary will be involuntarily subjected to the world’s worst scavenger hunt for the policy documents. When they realize the documents are nowhere to be found, they will call an attorney’s office and plead for help. Unfortunately, there is very little an attorney can do if they can’t identify the insurance company that issued the policy. To avoid putting your beneficiary in this predicament, keep a copy of your: policy, application, beneficiary designation, billing notices, and any other correspondence regarding the policy in a safe place that can be accessed by your beneficiary.
3. PARTIAL TRUTHS ARE LIES IN THE EYES OF AN INSURANCE COMPANY
Third, tell the whole truth on the application for life insurance. This might sound like a no brainer, but you would not believe the number of clients I’ve had in the past that got burned by disclosing some or none of the insured’s medical history. The motive is to avoid being charged higher premiums or being denied coverage altogether. Two things are worth noting under this specific topic: 1) it is generally considered insurance fraud to knowingly provide false information on an application for life insurance for any reason; and 2) if the insured passes away within the first two years after the policy is issued, the insurance company can conduct a “contestability investigation.” A contestability investigation allows them to verify all answers on the application and deny your claim if they find out that ANY information is incorrect. That’s right if the Insured fudges something so small as their height or weight on the application for life insurance, the insurance company can and will deny payment of life insurance benefits.
Don’t worry though, if you have made a claim for life insurance, but it has been denied for one of these reasons, all hope is not lost. That’s what life insurance lawyers are for after all!
