One of the most common misconceptions is that there is a waiting period before the insurance would pay. Most people say they’ve heard life insurance doesn’t pay if you die in the first two years of a policy.
The confusion lies somewhere between two different types of life insurance policies and the public’s concern that life insurance companies are less than honorable.
The truth is that “guaranteed issue life insurance” does, in general, have a two year period before it becomes fully in force. If death were to occur during that two years no benefit would be paid, but all premiums plus interest would be returned. Keep in mind that the only people that buy guaranteed issue life insurance are those who cannot qualify for a fully underwritten term of universal life policy, or those who fall for advertising telling them they can get insurance without an exam or medical questions.
That truth gets mixed up with the “two year suicide and contest-ability period” that pertains to all fully underwritten life insurance policies. During that two years the company would not have to pay if the insured were to commit suicide or die from something that they misrepresented on the application.
Claims during that two year period will almost always be reviewed. If you’ve told the truth and your agent has done a good job, they will always get paid.
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.