If you ask most people if there is going to be a fight that ensues when they file a claim for life insurance, they would say that the chances of coming out unscathed with the money is slim to none. This is a case of a few cases driving the majority of opinions, often when those cases should have been denied a death benefit. I won’t stand or sit here and say that there have been companies that have done wrong for profit, but they are few and far between.
Life insurance policy beneficiaries that happen to be involved in a policy during the incontestability period, the first two years of a policy, may feel like the company is trying to get out of paying. The company has and will almost always exercise the right to contest of investigate both the background and underwriting of the deceased. If the insured just flat out lied during the application process, as in having knowledge of cancer and not admitting it, the company doesn’t have to pay. If there is an error in underwriting, such as the insured being given non smoker rates when they admitted on the application that they smoked, the company will simply charge smoking rates for the policy and remove the excess uncharged rates from the policy proceeds. By the way, the company pays interest on the death benefit from the date of death through in contestability.
Probably the biggest mistake with life insurance claims is not filing them. You can’t file a claim if you don’t know a policy exists. Husbands are especially adept at not letting their wives in on the big secret, as in, where the policies are. Even a better idea is having a back up person so that, for instance, you are in a car wreck and the husband dies and the wife lives but needs help gathering her life together important things like that death benefit won’t be overlooked. While this is a subject that is sensitive, life insurance does pay in the event of suicide as long as it has been in force more than two years, longer than the incontestability period. After that two years the policy will pay the claim for any reason except non payment of premium.
Bottom Line. Don’t believe all the bad stuff you’re heard about life insurance companies. Like anything, a little bit of bad news or hassle can be blown out of proportion. Compare life insurance to something like health insurance has become and life insurance is a 100% solid gold winner. If you have any question please call or email me directly. My name is Ed Hinerman. Let’s talk.