For most of us, life insurance plans seem like a simple and straight forward financial product. As a policyholder, you apply for an insurance policy with a specific death benefit and when you pass on, your loved ones can enjoy this benefit in full.
However, this process can be more complex than that. In some situations, life insurance companies can deny a claim leaving your dependents with serious financial challenges. Here are a few things you may not know about life insurance plans that will help you make an informed decision in the future.
- Misrepresentation Can Void an Insurance Contract
If you ever find yourself in a dispute with your insurer and the words ‘material misrepresentation’ is mentioned during the dispute, you should know that you may have a serious problem in your hands. What is material misrepresentation in life insurance?
Material misrepresentation is typically a misstatement to a query that was asked during the application process that if the insurance company would have known they would not have issued the policy. However, some rogue insurance companies take advantage of this fact and deny claims based on misrepresentation. Be sure to talk to an expert lawyer if your case has been unjustly delayed or denied.
- Life Insurance Policies Can Expire
Term life insurance policies do expire; however, if you pay all your premiums on time, you will get full coverage for the time that was specified. Be informed about the type of insurance you have and if in doubt talk to an insurance lawyer for clarification.
- Everybody Does Not Need Life Insurance
If you have no known dependents and you have enough money to sustain you and cover for your final expenses and any other outstanding debts when you are gone then you might not really need a life insurance plan. Individuals who need life insurance are those who have people who depend on them and need to be cared for in the event the main breadwinner can no longer contribute to the household budget.
- You Need To Inform Your Family about Life Insurance
Life insurance will protect your loved ones from any eventualities but only if you let it. Once you take out an insurance plan, keep your beneficiaries updated and pay your premiums on time. Introduce your loved ones to your insurance agent so that they will always know who to call. Your paperwork and all other vital documents should be kept safe but be available when your loved ones need them.
- There Are Some Specific Situations That Life Insurance Will Not Payout
Before taking a life insurance plan, be sure to read the fine print before signing on the dotted line. This is because most life insurance documents have disclosed specific circumstances that would deny the beneficiary a payout of the policy if you die.
Suicide is one of the common reasons why an insurance company can refuse to pay the beneficiary. The suicide clause protects insurance companies from individuals who purchase large policies and then commit suicide so that they can benefit their families.
If you die while committing an illegal activity such as crime, the insurance company might refuse to make a payment. Other issues that can cause your claim to be denied include, trespassing, smoking or dangerous activities such as skydiving.