I have written several posts on the subject of beneficiary rights if a claim happens during the incontestability period. This is a little talked about subject that can truly cause problems for those who are engaged, are life partners, have used life insurance as collateral on a personal loan or for some who own business life insurance such to fund a buy/sell agreement.

Just to review, during the two year incontestability period the company will routinely investigate the claim including acquiring relevant medical records. The problem occurs when the beneficiary doesn’t have legal standing to sign an authorization to release those records to the insurance company. Unless a family member steps forward to help the beneficiary is likely to have to go to court in order to obtain a limited medical power of attorney. This takes time and money.

In the case that started the dialogue on this subject, the death occurred last August. The family wouldn’t cooperate with the insured’s fiancee because of some greed issues. She got the court ordered medical power of attorney in February and the claim was settled and paid today. It’s a good day when claims are paid, but agents and insureds need to both be aware of this pitfall so those good days aren’t unnecessarily delayed.

Bottom line. There are those who aren’t married yet as in engaged. There are those who probably won’t get married, life partners. There are those who can’t get married, gay couples. There are those in business who can be at the mercy of a family. All are reasonably chosen beneficiaries and the life insurance companies don’t have a problem cutting the check, but during that first two years there has to be a plan in place for acquisition of records.

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