Life Insurance
LexInter | June 23, 2022 | 0 Comments

4 Facts You Should Know About Life Insurance

Are you in the market for a new insurance policy or about to receive a payout as a beneficiary? Most people know the basics about how coverage works, but many don’t realize that there are several key legal issues that can get in the way of a quick payout. In fact, if the insured lied or misrepresented relevant facts on an application for coverage, carriers can cancel a policy when they discover the misrepresentation. Additionally, even if you know you’re a beneficiary on someone’s life insurance, that does not mean you’ll automatically receive a check after they die. There are steps you must take to get the payout.

Further, it’s essential for policyholders to understand that while missed premiums can lead to a policy cancelation, there are exceptions in some coverage that allow for one or more missed payments. Finally, there’s a widespread misconception that governments or national banks are the ultimate backers of life policies, but they are not. Unlike banks and credit unions, whose depositors are insured by the government up to a set amount, insurance carriers are the sole financial backers of all the policies written by the company. Life insurance is a large part of the overall estate planning process so understanding the details of this subcategory will help you with your total plan.

Here Are Some Of The Most Important Life Insurance Facts

False Applications Can Void Policies

False Applications

If an applicant lies or misrepresents facts on the initial forms to obtain coverage, a carrier is legally allowed to deny payouts in most cases, especially if the falsehoods were related to the health of the applicant. There are exceptions, as in cases where someone misspells a word or misstates an inconsequential fact. It’s important to have someone review any insurance application you fill out to make certain that all the information is accurate and truthful.

Beneficiaries Must Apply For Payouts

Apply For Payouts

If you’re in line for a life insurance payout, be ready to file a death claim and give the company a valid copy of the deceased’s death certificate. At death, anyone listed as a beneficiary is legally allowed to receive a payout, but they must follow the proper steps. The steps vary based on the specifics of the coverage and where you live. That’s why it’s imperative to review a complete guide that explains how payouts work and what you need to do to receive a beneficiary check from the insurer.

Missed Premiums Can Usually End The Coverage

You’ll have to read the fine print of your agreement to find out what happens if you stop paying premiums altogether, or just miss a single premium payment. Many contracts contain a clause that allows for one or more missed payments before you’re in danger of losing coverage. Additionally, sometimes a carrier must notify you in a particular way before they cancel your insurance. Check your contract, and if in doubt, ask a company rep about the provision for missed premium payments.

Companies, Not Governments, Are The Financial Backers

Financial Backers

State governments control life insurance companies headquartered in their states. When a carrier financially fails, there are backups in the form of state guaranty agencies and reinsurance provisions, but there is no federal backing of any company. Guaranty associations are groups of insurers that can help bail out policyholders in the event of a bankruptcy on the part of one company within the association.

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LexInter

Lexinter Law, with a team of dedicated authors who strive to provide you with all the relevant and actionable tips on the legal aspect of your life. Our goal is to educate you so that you can make legal action with ease, or find the right person who can help you with your unique personal legal dilemma. Take care!

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