There is one question that keeps nagging at the periphery of everyone’s thought process when they purchase life insurance. Is the company really going to write a check to my beneficiary when I die?
It’s a fair question and not a paranoid thought, considering that unlike virtually every other business transaction you will enter into, if things don’t work you’re not going to be around to knock heads and make things right. With life insurance you are truly putting your full trust and faith in the fact that all of those premiums you paid will result in your family being taken care of.
We hear so much about “contestability” of claims that there is also kind of a nagging notion that the insurance companies have kind of written into the contract a way for them to get out. And the perception, one I’ve heard a lot of times, is that life insurance companies are really looking each and every time for a way not to pay.
I understand how that could make sense. If a company could get out of writing checks for hundreds of thousands or millions of dollars, well, the bottom line would have to look a lot better. The piece that most people don’t plug into this puzzle is the fact that life insurance companies know that the whole contract and relationship is built on trust and not paying a claim without very clear justification, especially in today’s social media world, could be the beginning of the end of a company.
I have a friend that spent a lot of years in Prudential’s claims department. I think he really hit the nail on the head when he noted that most companies will pay a claim in the absence of clear fraud, just because they don’t want the public perception of being a company that jerks people around and doesn’t pay claims. The contract and the relationship are built on trust……..
Bottom line. With very rare exceptions life insurance claims are paid and paid in a timely fashion. The companies go even further than I can imagine any other industry going, by paying interest on the death benefit from the date of death to the date of payment (there’s a lot of interest in just a few weeks on a million dollars), and returning all unused premium that was paid. Life insurance companies really do their best to follow through on the trust that you have given them.