5 Mistakes That Can't Claim Life Insurance

5 Mistakes That Can't Claim Life Insurance - Having a life insurance policy is one of the best ways to ensure financial security, be it you, or your family to be useful after your death. But if you are not careful, your victims may never get the payouts they deserve.

But do not worry, if your life insurance policy application submission is rejected. Read the following article, to learn the information

1. Lying on your life insurance application

They say the truth hurts, but it can hurt even more if you lie on your life insurance application. While it may be tempting to deny that you're a smoker, or that you've been treated for a particular disease or medical condition, you could find your policy null and void.

Life insurance companies consider these factors when setting rates -- or determining whether to ensure you at all.

If your life insurer finds out you lied, it's considered "material misrepresentation," and your application for life insurance will probably be denied.

If the policy has already been issued, there's typically a two-year contestability period. If your insurer finds out during that time that you've lied, the policy may be canceled or you might face higher premiums.

If the lie is particularly egregious, the insurer could deem it fraud, even after the two-year contestability period is up, and the policy could be rescinded.

2. Failing to pay and letting your policy lapse

Just because you miss a payment doesn't mean your policy is dead in the water. Life insurance companies typically offer policyholders a 30-day grace period for payment, and some companies extend that to 60 days. During that time your policy will still be in effect.

Even after the grace period is up, you usually can get your term policy reinstated, but if the lapse has been long you may need to undergo another medical examination.

If you have a permanent life insurance policy, the insurer might use the cash value in the policy to cover the premiums and prevent a lapse in coverage.

The important thing to remember is if your policy lapses and is not in force when you die, your beneficiaries are out of luck.

3. Failing to tell loved ones about your life insurance policy

If you never tell your beneficiaries about your life insurance policy, it doesn't mean the insurer won't pay them after your death, but it does make it a more difficult process. While most life insurance companies conduct database checks for the death of policyholders so beneficiaries will get paid, not all of the insurers do so promptly. That's why it's wise to be sure your loved ones know about your policy and where to find it after you're gone.

In some cases, beneficiaries are unaware they are named on a policy, and proceeds go uncollected for years because some insurers are not diligent about tracking down survivors of policyholders. Several large life insurance companies have entered into settlements with states to improve their practices. Legislators are also addressing the issue, with several, including Maryland, New Mexico, and New York, among others, passing laws that outline the steps companies are required to take to find people owed benefits.

4. Not naming a secondary and final beneficiary

It is important to name secondary and final beneficiaries. If your primary beneficiary dies before you, policy proceeds will go to the second beneficiary you have listed. If the secondary beneficiary has passed away when you die, then the death benefit goes to the final beneficiary.

If you don't have anyone waiting in the wings, it doesn't mean the money disappears. In that case, the proceeds will go to your estate. However, if the estate is subject to probate, your survivors may have to wait a long time to get the death benefit.

5. In some cases, death due to risky behavior and suicide

Life insurance policies typically have a two-year exclusionary period for suicide, so your beneficiary typically would receive whatever you paid in premiums, but not the policy's face amount. So-called "suicide clauses" vary by insurer and are designed to discourage people from buying life insurance when contemplating suicide.

If you're involved in criminal activity, and you're killed while committing a crime, your beneficiary will still receive the proceeds from your policy.

However, if you don't disclose to your insurer when you apply for a policy that you have a high-risk hobby, such as sky-diving or auto racing, and you die while doing it, your insurer may decline the claim.

FAQ: Mistakes That Can't Claim Life Insurance

1. What are common mistakes that can void a life insurance claim?

Non-disclosure of Medical History: Failing to disclose pre-existing conditions can lead to claim denial.

Misrepresentation of Facts: Providing inaccurate information on the application can invalidate the policy.

Lapsed Policy: Not paying premiums on time can cause the policy to lapse, making it ineffective.

2. Can changing jobs affect my life insurance policy?

Generally, changing jobs does not impact your life insurance policy unless you switch to a different insurer or change your coverage. Always inform your insurer of any significant life changes.

3. What happens if I commit suicide?

Most policies have a suicide clause, typically stating that if the insured commits suicide within the first two years, the claim may be denied. After this period, the claim is usually honored.

4. Does engaging in risky activities affect my coverage?

Yes, participating in high-risk activities (like skydiving or scuba diving) may lead to exclusions in your policy. It's crucial to disclose these activities when applying.

5. Is it important to update my beneficiary?

Absolutely. Failing to update your beneficiary after major life events (like marriage, divorce, or the birth of a child) can lead to disputes and delays in claims.

6. Can I change my policy terms later?

While many policies allow for amendments, changing terms could affect your coverage. Always consult with your insurance provider before making changes.

7. What documentation do I need to file a claim?

Typically, you will need the death certificate, the policy document, and any relevant medical records. Check with your insurer for specific requirements.

8. How can I avoid mistakes that may lead to claim denial?

Be Honest: Always provide accurate information on your application.

Review Your Policy Regularly: Keep your policy details up to date, including beneficiaries and coverage amounts.

Communicate with Your Insurer: Reach out with any questions or concerns regarding your policy.

9. What should I do if my claim is denied?

Review the denial letter for specific reasons. You can appeal the decision by providing additional documentation or clarification. Consult with a legal expert if necessary.