A frequently asked question about life insurance is “how long before the policy becomes effective?” The supposed “waiting period” has evolved from a misunderstanding from two different directions.Along with the waiting period question is also a misunderstanding about excluding medical conditions in life insurance policies. For instance, if a person has had a history of a heart attack or a stroke, will the life insurance policy exclude any benefit if the death is caused by another heart attack or stroke? Again, this assumption comes from a common misconception that life insurance and health insurance are underwritten in the same way.First the waiting period. With traditional life insurance there is what’s known as the suicide and contest-ability period. With a few shorter exceptions this is a two year period where the company does not have to pay for death due to suicide, and they also have the right to investigate and contest death due to other causes. Suicide is pretty straight forward. Contest-ability on the other hand may be a little more confusing, although certainly nothing to fear as long as you and your insurance agent have done a good job up front.

When a company investigates a claim that occurs in the first two years of the policy, they are simply reviewing the records to make sure that nothing was misrepresented or hidden from them when they originally issued the policy. Based on what they find, they can take one of three course of action. They can approve and pay the claim as presented. They can deny the claim if information the uncover, had they been aware of it in the beginning, would have led them to decline to offer coverage. They can also determine based on the new information that they would have approved the policy, but possibly at a higher rate (premium) than what the insured was paying. In that case, the death benefit is generally paid, minus the additional premium that should have been paid. I think it is very important to state emphatically that companies aren’t looking for a way to get out of paying a claim. They want to pay the claim but also want to make sure it is a valid claim.

As for the question about medical conditions! When a life insurance company approves a policy, it is approved at a rate that takes into consideration your risk based on your health. So, while you might pay more for your coverage if you’ve had say, an angioplasty or bypass surgery, you would be fully covered if you were to die from a cardiac event as well as any other cause of death.

If you still have questions about this commonly misunderstood part of life insurance, contact your independent life insurance agent and have them review it in more detail. Make sure your questions are answered.

This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.