Term Life Insurance Articles
Reasons Money May Be Taken Back After A Term Life Insurance Claim
2010-12-08
A term life insurance policy can help an individual feel confident about the future financial security of loved ones. Yet, this feeling of confidence could be an illusion if the policyholder is not totally forthcoming with information to the insurance company. There are a few reasons that could exist that would allow an insurance provider to deny a term life claim.
First of all, the good news for policyholders is that term life insurance has what is called an incontestability clause. This clause states that after a specified period that the policy has been in force, the term life insurance provider cannot challenge or cancel it unless the policyholder has stopped paying premiums. The specified period is usually two years; however, in some states, it is only one year. This basically means that after two years, as long as you pay your premiums, your family will receive the benefits if a term life claim is made.
If the policyholder passes away before the policy is in force for two years, an insurance provider can contest a term life claim. One reason for an insurance provider can contest a term life claim is fraud. Insurance fraud on the part of the policyholder is intentionally deceiving the insurance company. This could involve lying or purposefully withholding information that is relevant. An individual must accurately and thoroughly inform the insurance provider of their medical history and current health status.
For example, if an individual is a smoker, but denies this when asked by the insurance agent, the claim can be contested on the grounds of fraud if the policyholder dies within two years of the date on the policy.
Another reason an insurance provider can contest a term life claim is material misrepresentation. This differs from fraud in that it is not intentional. It is a misrepresentation if a person forgot or did not understand a question and provided the wrong answer. For example, an individual can suffer certain conditions as a child that disappears as an adult, such as allergies or asthma. As a 30, 40 or 50 year old, it is difficult to remember your last attack of allergies when you were 12.
The key to this is that the misrepresentation is material or important. If the insurance agent had known about the childhood allergies, it would not have made a difference in their decision to provide the applicant with term life insurance. In such a case, the allergies are not material.
Being open and honest about your medical history and current health status is vital when applying for term life insurance. After all, the insurance is worthless if your loved ones are denied benefits when making a term life claim.
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A term life insurance policy can help an individual feel confident about the future financial security of loved ones. Yet, this feeling of confidence could be an illusion if the policyholder is not totally forthcoming with information to the insurance company. There are a few reasons that could exist that would allow an insurance provider to deny a term life claim.
First of all, the good news for policyholders is that term life insurance has what is called an incontestability clause. This clause states that after a specified period that the policy has been in force, the term life insurance provider cannot challenge or cancel it unless the policyholder has stopped paying premiums. The specified period is usually two years; however, in some states, it is only one year. This basically means that after two years, as long as you pay your premiums, your family will receive the benefits if a term life claim is made.
If the policyholder passes away before the policy is in force for two years, an insurance provider can contest a term life claim. One reason for an insurance provider can contest a term life claim is fraud. Insurance fraud on the part of the policyholder is intentionally deceiving the insurance company. This could involve lying or purposefully withholding information that is relevant. An individual must accurately and thoroughly inform the insurance provider of their medical history and current health status.
For example, if an individual is a smoker, but denies this when asked by the insurance agent, the claim can be contested on the grounds of fraud if the policyholder dies within two years of the date on the policy.
Another reason an insurance provider can contest a term life claim is material misrepresentation. This differs from fraud in that it is not intentional. It is a misrepresentation if a person forgot or did not understand a question and provided the wrong answer. For example, an individual can suffer certain conditions as a child that disappears as an adult, such as allergies or asthma. As a 30, 40 or 50 year old, it is difficult to remember your last attack of allergies when you were 12.
The key to this is that the misrepresentation is material or important. If the insurance agent had known about the childhood allergies, it would not have made a difference in their decision to provide the applicant with term life insurance. In such a case, the allergies are not material.
Being open and honest about your medical history and current health status is vital when applying for term life insurance. After all, the insurance is worthless if your loved ones are denied benefits when making a term life claim.
