7 Ways Life Insurance Will Not Pay Out

Last updated October 22, 2018

7 ways life insurance will not pay out

When purchasing a new life insurance policy, many people don’t consider that there could be a specific situation life insurance fine print where the policy does not pay out to the beneficiary.

A life insurance policy is a contract, and just like any contract, you should read the fine print before signing it. The fine print is where certain exclusions are made known, where specific circumstances would not allow the beneficiary to receive the payment on the policy if you die.

In other words, you can’t simply take out a life insurance policy and assume you have a guarantee that a certain amount of money will be paid no matter what. Common sense will tell you that it probably doesn’t work like that, but here are seven specific ways life insurance will not pay out.

1. Suicide

One of the more standard yet alarming instances where a life insurance policy will not pay out is in the case of suicide. Depending on what state you live in, there will be a suicide clause, meaning if you commit suicide within that time frame, the beneficiary would only get the premiums back, but not the death benefit.

Depending on your state, there may be a time frame in which suicide would prevent a pay-out.

This suicide clause is actually an incontestability clause, that window of time where insurance companies can investigate and deny claims. The period is typically two years in most states and one year in others, and it begins as soon as the insurance policy goes into effect. For the life insurance company, it protects them from people who take out a large policy, then commit suicide for the “betterment” of their family’s financial situation. It seems like a bizarre and unbelievable act to most people, but it used to be more commonplace than you would think—before this incontestability “suicide clause” went into effect.

2. Smoking or Another Health-Related Issue

The incontestability clause comes into play again if you were somehow less than forthright about your past smoking habits or if you somehow forgot to mention that you had high blood pressure. If the insurance company finds out otherwise during this one- to two-year period, they have a right to cancel your policy.

Asking if you smoke or if you have ever smoked is a pretty standard question on any life insurance policy. Maybe you quit smoking a couple years ago, but the insurance company will still ask if you used to smoke and how long ago you quit. It matters because the effects of smoking are long term. Your classification as a non-smoker could be satisfied by not smoking for a couple years, but depending on the insurance company, as many as five or 10 years might need to pass before you are in the clear to be labeled as a non-smoker.

Where something like high blood pressure is concerned, this is a perfect example to be completely honest when filling out a life insurance application. Let’s say you don’t mention that you have high blood pressure on your application, then you die in a manner that has nothing to do with your high blood pressure—maybe a car accident—within the period of contestability. The insurance company could come back to the fact that you did have high blood pressure and it could have been the cause of the death. See how that works?

Keep in mind that while this contestability period is in force for a specific period of time—one or two years—there is also a material misrepresentation clause, and that’s permanent. This refers to intentionally withholding information from the insurance company that would have resulted in having your application denied. In other words, you lie on your application in order to improve your chances of being approved. A good example, again, is smoking. This rule would apply even in the event that a claim has already been filed.

3. Dangerous Activities

You may have heard of a professional athlete who has a certain clause in their contract that does not allow them to participate in what is considered a dangerous activity. It could be fairly obvious, like skydiving, or even something more common, like riding a motorcycle.

The same applies to a life insurance policy. Think about it. Life insurance is all about risk management. If you are actively involved in jumping out of airplanes with a parachute (that may or may not work) on your back, you are a higher risk applicant than someone who doesn’t involve themselves in that kind of activity. So be honest about your dangerous hobbies or lifestyle when asked. If you are actively involved in one of the dangerous activities listed on the application, you can still do it, but you will need to pay for that protection.

4. Illegal Activities

This goes back to that common sense statement, but it’s worth mentioning anyway. If you die while committing a crime or participating in any kind of illegal activity, the life insurance company can refuse to make a payment. So, if you are killed when you are in the midst of stealing a car, your beneficiary won’t be paid.

That’s fairly obvious, but this next point might surprise you. What if you are doing something illegal and you don’t even realize it, like walking on private property? Trespassing is a crime, even if you didn’t know you were trespassing. So if you die while doing that—let’s say you have a heart attack while being chased by a big dog—your claim could be denied.

5. Act of War

Some life insurance policies have an Act of War exclusion in them. It’s not designed to exclude soldiers. Rather, it’s in place to deny claims for those civilians who are killed in wars or by acts of war, like journalists who finds themselves in the midst of battle on a regular basis or people who travel to regions of the world where conflict and battles are going on.

6. Living Outside the United States

Ways life insurance does not pay out — living outside the United States

Here’s one you may not have considered. Let’s say you take out a life insurance policy while you are living in the United States, then you move to another country. There could be a clause that excludes the payment of a death benefit if you are not living in the U.S. at the time of your death. Be sure to look for any mention of this in your contract, especially if you see yourself leaving America in the near future.

7. Fraud

When it comes to life insurance, honesty is always the best policy.

The insurance company is going to investigate the cause of your death; you can be sure of that. They will look at the events that led to your death and then compare them to your original application. If they find that you had certain health conditions or that you were involved in dangerous activities all the way back to the time of your original application and you didn’t mention them, the company can deny payment on the claim.

Read the Fine Print and Get Insured With Confidence

This is, by no means, a comprehensive list of the ways life insurance won’t pay. They are some of the more common instances, however.

Bottom line, be completely honest and don’t ignore the fine print details on your life insurance policy. You don’t want to be responsible for losing the benefits on that policy because you “didn’t know” or because you thought you could get away with something by being less than honest. The best advice is to be sure to read your entire insurance contract—yes, especially the fine print—before you sign it.

If you are unsure of anything, just ask. That’s what the licensed, professional True Blue agents are here for, to guide and direct you to the insurance policy that is best for you. They will read the fine print with you and help you to understand what it all means, especially as it pertains to your particular situation.

When you are ready to apply—or even if you just have questions—simply pick up the phone and call 1-866-816-2100.

As an independent insurance agency, True Blue Life Insurance deals with all of the top insurance companies, so we will work to get the best price for you and address any concerns you may have. We deal with the insurance companies on your behalf, and the policies are issued immediately or within 48 hours, depending on the insurance provider you choose.

Finding a life insurance policy that’s perfect for you is what we do, but we read the fine print, too. Let’s talk about your needs and what we can do to help you.

98 replies
  1. Megan Buechel
    Megan Buechel says:

    My father carried life insurance through Kroger for years. When he died they told me that as the sole survivor they don’t have to pay me anything. What is the point of him paying for the insurance if I cannot collect? Help me please. I believe I have 2 years and in April 2017 it will be 2 years. Call me at 7736837742 Thanks

    Reply
    • jesus
      jesus says:

      I’ve been doing a lot of research and from what I have read, I have yet to find an insurance company that isn’t filled with crooks!!!! Jesus Christ what a nightmare it must be to pay life insurance for years just to die and leave such unspeakable burdens to your loved ones!!! Such evil in this earth.At this point I’m just thinking of putting money in my savings every week. better than trusting these THIEVES that will call you 24/7 to sell you insurance and will be all super nice in the beginning in order to get your money but then when its time to pay out just disappear or find loop holes to not pay. What scum of the earth!!!

      Megan I hope that all went well and that you were able to stick it to these big corporations that think they can get away with whatever they want just because they have money!! give us an update!!! hell email me @jesusrosas083112@gmail.com if you did manage to get what was rightfully yours.

      Reply
      • Kinabu
        Kinabu says:

        There’re no “loop holes.” You just have to read the fine print and make sure you understand the terms and conditions of the contract before appending your signature. If you don’t understand any part of the terms of the agreement (or contract), make sure you seek clarification before signing the contract. Once the insurer issues the policy and delivers it to the insured, the contract is binding.

        When a claim is reported, the insurance company would investigate to ascertain that the claim for which the insured is seeking, is in consonance with the terms of the contract. If an insured violates any of the terms of the agreement, this could lead to denial of benefits. For instance, if an insured goes to rob a bank 2 months after obtaining a life insurance police, and dies in the process; the insurance company would decline benefit because the cause of the insured death wasn’t legal.

        Reply
        • will
          will says:

          That is crap, my wife just passed away, the life insurance she was paying into is now trying to say that she was not insured with them for life insurance, yet I have papers saying other wise, they keep giving me all kinds of ******** (edited by admin) stories after for 90 days. now they are telling me she never had life insurance with them. what do I do this life insurance company is a Quebec Canada company and they are very big and all over Canada.
          I hate to think of all the people who are paying into there life insurance company
          not knowing that the payment will never come with out there love ones having to put up a fight and paying most of there money into layers.

          Reply
          • Luke Kinton
            Luke Kinton says:

            Hi Will!

            Sorry to hear about your wife’s passing. I can understand how this issue only adds more to the overall stress level.

            Canada has a different set of rules and regulations regarding life insurance. While there are strong similarities between the US and Canada insurance laws, each jurisdiction brings its own different scope of differences. In this situation, reaching out to regulators and ombudsmen may be you next best recourse.

            Since we are licensed for the United States, we don’t have much advice on what to do in Canada; however, I did find a resource for you to look at from the Canadian government that may assist you.

            https://www.canada.ca/en/financial-consumer-agency/services/insurance/make-complaint.html

            I hope this helps in some small way!

            -Luke

      • Bill
        Bill says:

        I am finding out the same thing, After getting a whole life insurance from American Family Insurance, my agent that seems like a nice guy.. and claims to have my interest in mind …say’s that the sign up forms that I filled out for the insurance.. is actually the full policy.. HUH ?. He said there is no written Whole life insurance policy showing all written limitations and covenants…
        That’s weird since I once was insured from my job..and I asked for the policy in full and they gave me the policy and it had very many pages describing coverage and limitations completely.

        Because he is not forthright I will be cancelling the policy, and I went thru this whole physical and questions to get it.

        Bill
        Illinois

        Reply
        • Luke Kinton
          Luke Kinton says:

          Typically, what you fill out from an agent is an application. From there, once underwritten, the policy is delivered to you for review. This can be done in person, through the mail, or delivered electronically depending on the company. I’m not sure about the experience this agent has, because insurance is a legal contact and is life insurance policies required to be given to the insured during their “free look” period. You may have made the right call on this one.

          At True Blue, we do things by the book and ensure transparency when working with clients. There is 0% guess work when it comes to your life insurance and our agents make sure you have all the information you need, even after the policy is purchased. As a life insurance professional, I apologize for the lack of service you received from that agent and encourage you to reach out to us if you are ever needing coverage in the future.

          -Luke

          Reply
  2. Pat
    Pat says:

    We took a nother ins policy out with colonial penn life we had one policy with them .i ask the lady on the phone if my husband die in 3 months will he be covered she said yes .but he die 10 months later.that he was cover for the full amount. Now they dont want to pay.what can i do about it.

    Reply
    • Brian Greenberg
      Brian Greenberg says:

      Colonial Penn’s guaranteed issue product has a 2 year limited benefit period. All guaranteed acceptance policies have this. The limited period depends on the company, typically either 2 or 3 years. If the insured passes due to a health related death (non-accident), the company returns all the premium paid, plus interest.

      The representative should have been very clear on this on this limitation of the policy, it is not good business practice to not explain this to customers.

      https://www.colonialpenn.com/life-insurance-information/

      If you have it in writing that the agent told you the incorrect information, email works too, you can contact your state insurance department for assistance.

      Reply
      • deborah whitty
        deborah whitty says:

        what if the person dies with the two years and it was from an accident and was signed up from my work and did not even know about the two year clause

        Reply
        • Luke Kinton
          Luke Kinton says:

          Hi Deborah!

          This is one of the main reasons why I advocate against using an employer based life insurance policy as your sole source of protection. While it may be “free” or cheap, they own the policy and can make changes to it as they see fit without being required to get employee input or permission.

          Even if he/she didn’t know about the 2 year clause, that would not change how the policy payouts.

          I do recommend you follow up with a licensed attorney if you feel that there was any legal issues involved with situation.

          Hope this helps!

          -Luke

          Reply
  3. D.v.
    D.v. says:

    Just recently got Fidelity life insurance on myself .. I left fiance as beneficiary I am only 29 but am afraid of a car wreck happening honestly (many bad drivers I’m always having to avoid in my area) any ways I have awful family members that have robbed my home 2x now the second time they were prepared for me to show up with knives and etc. I have to keep moving but they always find out where I am .. if they do manage to kill me while robbing me next time, will my insurance still Grant my fiance the benefits?

    Reply
    • Brian Greenberg
      Brian Greenberg says:

      Yes. Your life insurance policy should pay your fiance. Fidelity sells a few different policies including a term policy and an accidental death benefit policy. The accidental death policy does not cover deaths from health related causes. If something happens while someone is robbing your home or on the road in your car, it is considered an accident. Most companies do have an exclusion in which they do not pay out if you die while committing a felony.

      Reply
  4. C R Eller
    C R Eller says:

    Our father passed away two years ago. Prudential denied a claim before we even filed one and has to date not paid. He was in a MVA on his own property and died a week later from a slow brain bleed. They requested police report, autopsy report. They were told we had none of those things and gave them copies of his medical records. There was no substance abuse. We are at wits end. How do we make them pay?

    Reply
    • Brian Greenberg
      Brian Greenberg says:

      I recommend you contact an attorney specializing in denied insurance claims. There are many questions they will need to ask about the particular policy you had. Was it a policy through work? Was it an accidental death benefit policy? Did the claim occur within the first two years of the policy issue date? I recommend you contact http://www.lifeinsuranceattorney.com/. Their phone number is (800) 330-2274.

      Reply
      • Brenda
        Brenda says:

        I Found that this statement is wow! I just found out a Relative had life ins on me. I did NOT know until by accident an Ins statement was left laying on my Dining table. Can I sue them?

        Reply
        • Luke Kinton
          Luke Kinton says:

          Hi Brenda,

          As I am not a lawyer, I can not comment on which legal action is best. However, I do recommend you contact the insurance company that wrote the policy and get clarification on the policy that was written without consent. From there you may want to discuss the matter with an attorney who specializes in insurance to get additional direction moving forward.

          Hope this helps!

          -Luke

          Reply
    • Brian Greenberg
      Brian Greenberg says:

      No. Insurance companies are very strict regarding who you can get a policy on. They must have “insurable interest”. Anything outside your immediate family or business is typically off limits.

      Reply
  5. Scott Lee
    Scott Lee says:

    Aunt had Univeral LIfe for 50k, 21 year old policy. found out today after beinig told on June 2nd by Transamerican that I would receive 42k, that I would only be getting $52. why would this happen? I have a bill for the day she died and never receved anything stated policy was not active. Isnt the reason for UL to make payments off interest? Why would rep from Transamerica tell me 42K and then I get email today from compliance officer stating $52.00
    Please help me understand

    Reply
  6. Melda
    Melda says:

    Midland life insurance dont want to pay because they need a report of death of us citizen abroad. I tried to get this while i am in US but the US embassy wanted document I dont have in US and now the insurance dont want to pay even though i paid the premium for over 2 decades.

    Reply
    • Brian Greenberg
      Brian Greenberg says:

      This is a tough one. It is very hard to collect on an insurance policy without a death certificate. Can you get the death report from the country needed and then fax/email/mail the report to Midland? I know it sounds like a bunch of hoops to jump through, though I think the insurance company needs a death certificate in order to legally pay the claim.

      Reply
  7. Mary
    Mary says:

    You hear about all of these sad baby died in hot car stories. If they had insurance would it pay out to the family if this happened?

    Reply
    • Brian Greenberg
      Brian Greenberg says:

      She may be wanting to make a change to the policy and only the owner can make changes.
      Sometimes it is stipulated in a divorce decree who the owner of the policy must be and who the beneficiaries are.

      Reply
  8. Charlie
    Charlie says:

    My father passed away two years ago and still don’t know where his life insurance policy is located and with what company. He told me before me passed away that he took out a policy and I was the beneficiary. Just wondering how I would be able to locate the policy? Since I can’t find anything. I’m overwhelmed…

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Sara!

      Our recommendation is based largely on what you are needing. Generally speaking, term life insurance works well for just about everyone and provides great coverage for the money.

      Almost every life insurance policy will cover both accidental death and death by natural causes. Why don’t you give us a call at (866) 816-2100 and we can walk you through some options?

      -Luke

      Reply
  9. Dianne
    Dianne says:

    Truly that they do not explain clauses. My daughter took out a policy on July 5, 2017 – for her, her two young daughters and her spouse. MY daughter has NEVER been a smoker. Tragically, on July 8, her 3 month old daughter (my granddaughter) was at the babysitter’s and sitter claims she laid her on her back but found her face down. She died that day (3 days after the policy) and death certificate says SUID and cause is undetermined. AS you can imagine, my daughter went through something horrific and was put on Xanax for her nerves and began smoking. So, for whatever reason, the insurance company said they needed to complete the application process and get my daughter’s blood and urine. Well, guess what? of course it came back that she had nicotine. So, they put her in a higher bracket and had her pay the differrence in now the higher premium. Insurance company (Farm Bureau in Texas) has denied the claim. This is a tragedy in itself.

    Reply
  10. mandee
    mandee says:

    My husband has been paying life insurance premiums through his paycheck with his employer all year. When we signed up for benefits for 2018 I was told he didn’t have life insurance for 2017. I feel if he had no contract they should refund his payments. Am I correct? Btw, the same goes for spouse and vision insurances.

    Reply
    • Brian Greenberg
      Brian Greenberg says:

      It sounds like you are definitely due a refund if they were indeed deducting the payments from his paychecks. You may need to get verification of his payment stubs from his employer.
      Insurance is regulated by both state and federal agencies, so I think it will be smooth getting your money back.
      If they give you the run-around, ask to speak with their compliance department because you want to file a formal complaint.

      Reply
  11. cecil carter
    cecil carter says:

    Could 1 get insurance I have had a lung transplant and am on kidney dialysis
    I’am a young 63 and I am healthier then I was 10 years ago.

    Reply
  12. Cindy
    Cindy says:

    My husband was killed by a falling tree I have sent the insurance company everything they ask for x2 . Just received a letter asking me for full coroners autopsy report with toxicology . As I have told them due to the injury he had they only did an external and no toxicology , They have Sheriff’s report and lots of other documentation . Can they not pay due to this. Heartbroken

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Cindy!

      I’m sorry to hear about your husband and the current problems you are having in getting the insurance company to pay out the claim. It is pretty standard for insurance companies to request information like this; however, they should be some internal process to be able to review and payout the claim with the information you have provided. If you haven’t already talked to them, I would call the person assigned to review the claim and talk more in-depth about not having the toxicology report to see if there are other work arounds available. Not every death gets a full autopsy and toxicology report, so there may be another way that this claim can be processed without the requested results.

      If you have already called and they are still refusing to issue payment, you can reach out to your state’s Department of Insurance for further recourse on this matter.

      -Luke

      Reply
  13. kim
    kim says:

    Does a life insurance company have to notify a client that the amount of there policy has changed or decreased over time and if so wouldn’t they have the client sign a new policy?
    stating that this is the amount that they will have to pay each month to keep the premium.

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Kim!

      It depends on which way you are looking at it. If you are talking about the face value (death benefit), unless it is a policy like a decreasing term or maybe a universal life policy, the death benefit will typically remain fixed at the agreed upon amount. Another factor in this is contestability. If the insurance company is inside the (usually) 2 year time-frame for contestibility and they see that there was misinformation in the original application (e.g saying you are a non-smoker, then they find out that you are), they reserve the right to redo the policy based on the new information or cancel the policy all together.

      If you are talking about change in premiums (the money paid to keep the policy active), then that depends on the policy itself. If the policy isn’t a “level” policy, meaning the premium is locked at that rate, then the premiums can be raised and lowered at the company’s discretion. These type of products aren’t as popular as they used to be, as more people are opting for level policies.

      I could give you more insight if I knew what type of policy it was and had the entire policy in front of me to review. When I work with clients, I hardly ever encourage policies of this nature. Nine times out of 10 a simple, affordable level term life insurance policy will work just fine for someone.

      I hope this helped.

      -Luke

      Reply
  14. Michelle
    Michelle says:

    Hi there, my father passed away last thursday (died in his sleep) and had taken out a very small 5K policy 10 months ago. The initial denial from the insurance company is for “policy not being in effect long enough” there is nothing in the fine print of the policy stating this – have you ever heard of this? The policy in fact states it is in effect from the date of the first premium payment. We are simply just asking for it to be paid out to cover his cremation. Thank you

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Michelle!

      I am sorry to hear about the loss of your father.

      Given the lack of information about the policy itself, it is really hard to give a definite answer as to why it is being denied as such.

      Since it was a $5k policy, chances are this was some sort of low level final expense/guaranteed issue policy. Often times these policies have a “graded benefit” period (usually 2 years) where there is no coverage for health related deaths, only accidental. Most companies will offer a return of premium with interest, but that isn’t to say that there aren’t companies that do not provide that option. It all depends on what is written in the policy.

      In some cases, these types of policies are predatory in nature, whether it be from a sales perspective or an operations perspective. Agents that represent companies that refuse to pay out tarnish the reputation of the entire industry, making good agencies who value honesty and integrity (like True Blue) have to work harder to restore customer trust in what we do.

      You are right in that coverage begins on the date of the first premium payment and if there is no language defining minimum time-frame before a benefit is eligible to be paid out, you may have a compliance issue on your hands. Since the industry is heavily regulated at the state level and insurance policies are merely legal contracts, discussing this matter with an attorney or the state Department of Insurance may be your next best step.

      Before you go the legal route, give the insurance company a call to get more clarification on where it states in the policy about the length of time the policy needs to be in effect before it pays out a benefit.

      I hope this helps and you get this resolved quickly.

      -Luke

      Reply
  15. Angela Byers
    Angela Byers says:

    I purchased UL Policy in dec 2015 they sent medical examiner got cleared and policy went into affect feb 2016 underwriting I assumed ? I went for annual Pap smear in February found out I had cyst or mass in the same month February? Had hysterectomy in March 04 and came back stage three cancer I have paid the policy for two years now battling cancer will policy pay in the end

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Angela!

      I am sorry to hear about your current condition.

      Based on what you have told me, the policy is past the standard contestability period and SHOULD pay out without concern. After this period, there is very little insurance companies can do to change or cancel the policy. Generally speaking, at this point the insurance company can only cancel the policy for lack of payment.

      Hope this helps.

      -Luke

      Reply
  16. alicia houston
    alicia houston says:

    I recently put in a claim for my late father’s life insurance pay out being his immediate next of kin and stand in POA I just found out that someone else non related was listed as his beneficary his ex girlfriend. Does she receive the pay out even though I am his next of kin and all of his caretakers know what a horrible person she was to my dad can they award her the money

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Alicia,

      Generally speaking, whomever is listed on the policy will be given the death benefit (life insurance payout) regardless of relation and is not always contestable by others as it was a contract made early on. There have been cases in the past where people have tried to challenge a policy’s payout to a beneficiary, but in order for that to happen successfully there has to be some legal technicality regarding that contract. Overall, if the person is listed as the beneficiary then they will receive the proceeds.

      As we are not licensed to advise on legal matters, we can’t comment on legal remedies to challenge this payout. We do recommend you reach out to a licensed attorney in your jurisdiction who is versed in insurance law to see if there is a way to challenge this payout.

      Hope this helps.

      -Luke

      Reply
  17. Isabella
    Isabella says:

    The provisions of the whole life insurance policy and universal life policy will pay the death benefits even if applicant lies on the application but only if the death occurred after how many years?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Potentially. However, some insurance companies may review documentation surrounding the death to see if there is a policy exclusion or situation that allows them to not pay the death benefit. This isn’t an overly common occurrence but it can happen. For instance, if someone dies from skydiving and the policy states it is an excluded activity, they are not obligated to pay. If the company feels something isn’t right, they will not hesitate to investigate.

      Your question is a major reason why we advocate for complete honesty when applying for life insurance. Lying on a life insurance application to save a few dollars can create an adverse situation upon death that can be a nightmare for your survivors. It is also important to keep in mind that many of the WL and UL policies with larger death benefits are traditionally underwritten, meaning there is a medical exam required to help minimize the amount of risk the company takes on and to keep the company from insuring someone incorrectly.

      -Luke

      Reply
  18. Tiffany
    Tiffany says:

    Hi! My father passed recently. He has 2 policies and the funeral home contacted the insurance company. The insurance company is contesting the policies as they have been active less than 2 yrs. The funeral home does not accept contested policies for payment so my family has the burden of paying his funeral expenses. We are not prepared! My father has been applying for, paying on and cancelling policies for the past few years. Can we file claims to get refunds of premiums on these policies to recoup some of the funeral costs? I don’t think any of the policies are term life. I was only able to identify companies by checking my fathers bank statements.

    Can clerical errors by insurance agent void a policy?

    Anyone reading this please put your policies in a secure location and tell a trusted family member where they are. The only reason I knew of some of my father’s insurance is that I could access his bank records. I have found some policies after an exhaustive search. Your loved ones have enough to deal w/ sadness/shock of your death, funeral arrangements, your property. If you have been responsible and eased their burden by having active insurance, for the love of all that is holy secure them and tell someone where they are!

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Tiffany!

      I’m sorry to hear about the struggle you are having regarding your father’s policies and I know it can be a struggle dealing with end of life preparations. Let me try to help you understand some of what is going on:

      “The insurance company is contesting the policies as they have been active less than 2 yrs”

      In this situation, you may be looking at either a graded benefit or an excluded cause of death. For example, death by suicide generally carries a 2 year non coverage in most states. Other policies may say other causes of death may not be covered for X amount of years. It depends on the policy itself. If we are dealing with a graded benefit, that policy may not cover anything health related for the first 2 years but may issue a refund (and sometimes with interest) in the event death was from natural causes. Most graded benefit policies will cover accidental death up to the full face amount. Without seeing the exact policy, it is hard to give an absolute.

      “Can we file claims to get refunds of premiums on these policies to recoup some of the funeral costs?”

      If there are provisions in the policy that allow for this, then you would want to follow up with the company. Some companies are better than others when honoring their obligations (especially dealing with refunds of premium) and in some cases I have heard beneficiaries complain about the amount of time it takes to get the refund in premiums. One company in particular has numerous complaints against them for taking up to 2 years to refund premiums that they were obligated to refund. This is why it is key to use companies that have demonstrated a high level of customer satisfaction and to do your research before purchasing a policy.

      “Can clerical errors by insurance agent void a policy?”

      Not likely. Insurance agents compile the information to be sent to the company and the underwriters are the ones who confirm and verify the information. Usually any clerical errors are caught and remedied early on in the process. Rarely does a policy written become voided based on an agent’s error, unless there is a issue of illegality involved.

      It is always important to make sure your important documents are safe and secure. In this technologically advanced era, even scanning and saving documents on flash drives or in the cloud can help minimize the hassle for loved ones in the event of your death.

      Hope this helped!

      -Luke

      Reply
  19. Barbara Smith
    Barbara Smith says:

    I have life insurance through my employer. My husband died in December of 2015. Dependents and spouses were covered at $2000 which I wasn’t even aware of. With my husband’s death, I was in a total fog and never even checked into coverage at work. When benefit enrollment opened again in December 2017 and I was on Medicare I logged in to cancel BCBS and saw I had been entitled to $2000 at the time of my husband’s death. I contacted HR and she said apologized and said she should have told me about it but will be reaching out to the broker and see if it could still be paid. They have a difference insurance company now. I never heard back and forgot about it until last week when I had to search benefits again and I saw the email I had sent to her. She once again apologized and said it fell off her radar and she would be looking into it now. Is it possible to collect this late? I don’t want to make any problems for the HR person as I believe it was an honest error, at the same time $2000 would certainly help me financially. Are there time deadlines to collecting? Thanks

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Barbara!

      I am sorry to hear about the recent back and forth regarding your husband’s life insurance policy. To answer your questions, the policy should payout regardless because there isn’t a technical time limit for filing claims. Request that the HR person pull a copy of the actual policy and read over it to see what the details of the contract are regarding this issue. I would encourage you to work with HR to get the payout and if they give you a hard time about it, then I would discuss your concerns with a lawyer or the Department of Insurance in your state.

      For more reading on this, look at this link: https://life-insurance-law.com/statute-of-limitations-for-filing-a-life-insurance-claim/

      I hope this helps some.

      -Luke

      Reply
  20. Tammy Babcock
    Tammy Babcock says:

    My mother passed away on April 30th. She had a term life insurance policy since 1999 with AIG which turned into AGLI. We went to the funeral home with all of the information but since she didn’t name a beneficiary all of us 4 daughters had to fill out forms. We did this and the funeral home sent it with return receipt. They received it on May 22nd. Then they tell the funeral home they need someone that knew all of us girls all of our life to fill out a form and it had to be notorized. We took care of this and they told the funeral home once they received it, it would take about 10 days for the payout which will pay the funeral home then the rest split up by 4 and sent to each of us. Yesterday was the 10th day since the received the final paper they needed. The funeral home calls them and they say it is still in review and now they say it could take another 2 to 4 weeks to pay out. This is unacceptable when a loved one pays so you don’t have a burden and yet it has been almost 2 months since her death and we are still fighting AGLI.

    Reply
    • Luke Kinton
      Luke Kinton says:

      Tammy-

      I am so sorry to hear about your experience with AIG and the recent passing of your mother.

      The issue you relay is one that is more common than it should be. One thing I like to remind clients periodically about is reviewing any life insurance policies they may have to prevent issues such as this. When situations like this arise, it can be lengthy and emotionally draining if the proper paperwork isn’t correct.

      If you feel the company isn’t stalling on their payment, you could contact the Department of Insurance in your state or discuss the matter with an attorney who is familiar with life insurance law to get their recommendations on the next best course of action.

      I hope this helps a little.

      Best regards,

      Luke

      Reply
      • Matthew M
        Matthew M says:

        Hi Luke.
        My mother recently passed in June and her and my father had a term life insurance policy they had been paying for almost 20 years. She got really sick in January and it simply slipped their minds to continue paying at the time as she was in and out of the hospital. My father called the life insurance to request it be re-instated if he did the back payments. They refused. Is there nothing else we could do even with hospital paperwork or anything?

        Thanks!

        Reply
        • Luke Kinton
          Luke Kinton says:

          Hi Matthew!

          I am sorry to hear about your recent loss.

          Sadly, at this point, there may not be much that can be done. Generally, life insurance companies can’t cancel a life insurance policy unless it is for non-payment. The company will often send notifications via mail (usually) if a policy is on the verge of lapsing and encourage you to keep the policy active by making a payment before a certain date. After it goes past that date, the policy is considered lapsed and the company is no longer obligated to provide the coverage.

          If you feel there has been a technical error of some sort, then discussing this issue with an attorney who is versed in your state’s insurance law may be a good course of action. There may be something in the state law that may help you out.

          If this policy was canceled for any other reason, then I would say you may have some level of recourse; however, a term policy lapsing for non-payment is extremely common and rarely retroactively placed back into force, especially after the death of the insured.

          Hope this helps a little.

          -Luke

          Reply
  21. Pam
    Pam says:

    I took out a life insurance plucky on my husband when he became terminally ill. Explained all about his heath and was honest. When he passed I was two days shy of it being two years. They would not pay ! They have no heart. That’s just wrong.

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Pam!

      I’m sorry to hear about your husband and I totally understand your concerns.

      Without seeing the actual policy, I can’t comment on it specifically. Based on what you are stating, this sounds like it may have been a guaranteed issue type of policy with what’s called a “graded benefit”, meaning that there is no coverage for death due to medical/ natural causes (only accidental) for the first 2-3 years, depending on the policy. This lack of coverage during the graded time period should have been explained by the agent who wrote the policy.

      Because policies like this don’t have underwriting attached to them to limit risk, life insurance companies create the “graded benefit” period to act as a buffer to prevent paying out for death benefits that may have been avoided with some level of underwriting in a more standard type of policy application. This type of coverage is very common, especially in the senior market, and most people are fine with it as long as it is explained properly by the agent.

      -Luke

      Reply
  22. mike
    mike says:

    Hi Luke, My dad has dementia he missed May June July 2018 payments, will they work with us? Or is it 30 days to bad? Once a policy gets canceled is it gone for good?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Mike!

      I would reach out to them and explain the situation. They may be willing to do something as long as the arrears are paid up, but that is dependent on them and the state law that governs the insurance policy.

      If they do, I would make sure that someone in the family takes point on this issue and makes sure the premiums are paid. Depending on the policy and premium, paying it on a yearly basis may help prevent accidents like this from happening in the future as it is only something you have to remember to pay once a year.

      Best of luck!

      -Luke

      Reply
  23. Rich Holsapple
    Rich Holsapple says:

    I have had a good life insurance policy with my employer for 9 years. However, the company I work for has changed contracted life insurance companies several times. Each time during the open enrollment period I go through the process to get the higher level of coverage. My question, does the incontestability time period restart with each change to a new insurance company? I other words, even though I have been covered through my employer for 9 years, if I died today would the insurance not pay out due to it being a different insurance company starting 1/1/2018 that my employer used?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Rich!

      You are definitely asking a good question. You may be overthinking this a little though.

      If I understand it correctly, your company jumps to other insurance carriers for their group life policies periodically. This is not uncommon, depending on the rate changes in the market place.

      First, contestability isn’t a period of non coverage, instead it is a window of time that the insurance company has to challenge the validity of the contract based on the info provided in the application. If you are a smoker, but tell them you are a non-smoker on the application, you may run into issues in getting the full death benefit covered if the insurance company finds out there was misrepresentation in the application.

      “if I died today would the insurance not pay out due to it being a different insurance company starting 1/1/2018 that my employer used?”

      I think this may be part of the confusion. In this situation, the life insurance company responsible for paying out is the one you are covered under on the date of your death. During open enrollment, you may elect new coverages but they usually won’t take effect until a later date. (Most companies have an October open enrollment period for the employees to choose their coverages that will then take effect on 1/1 of the following year.)

      In this example, Company A provides life insurance coverage for 1/1/2018 to 12/31/2018 and Company B provides coverage for 1/1/2019 to 12/31/2019. If you die on 2/13/2019, Company B will be responsible for the coverage and will not care anything about previous coverage from Company A.

      This is one of the reason why group life insurance should be considered only a “perk” and not your main source of protection. If you obtain your own individual policy that you have full control over, you never have to worry about changes your employer makes to the group policy and have ultimate say over the amount of protection you carry.

      Hope this helps a little!

      -Luke

      Reply
  24. Dawn
    Dawn says:

    My grandmother has been very sick since Christmas. She has lung cancer, never smoked. She received a cancellation notice from AIG dated July 13, 2018 staying the policy expired on July 12, 2018 without any value. My grandmother passed on July 23rd. We had no idea that she had this policy until this notice. She was literally on her death bed when it arrived. After digging in her papers I discover the original contract and she had been paying this since 1960. All that I can figure is that it is a semi annual payment that is due in October and April of $10.03 each and it may not have been paid in April because of her illness. I’ve tried to talk to someone but they won’t speak to me. Death certificates are slow and what can be done now to correct this.

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Dawn!

      I’m sorry for your recent loss and I know this can be quite the emotional time for you and your family. My sincere condolences.

      Without seeing the policy myself, I can’t really comment on anything outside the information you are giving me. Based on what I am seeing with the limited info I have, this sounds like a whole life policy (very popular during the time she bought the coverage) which may not have had much if any cash value accumulation in the policy.

      Since it appears the policy payment was due in April, it leads me to believe that the policy lapsed. Insurance companies will send out notices to prevent this from happening; however, since the policy was what appears to be right about 3 months behind in payment then I am lead to believe this is the cause for the policy being officially cancelled for non-payment. Basically, they cancelled the contract because they never received the payment due and all benefits of the policy are no longer in force.

      If the policy was actually paid in April, then you may want to discuss this issue with an attorney. Otherwise, if payment was not made and no one responded to any mail sent by the company, then there is little recourse to reinstate the policy and claim the benefits.

      Again, without seeing the actual policy, I can’t say for certain this is the case.

      I am sorry for your loss and I wish there was more I could do in this matter.

      -Luke

      Reply
  25. Sarah H.
    Sarah H. says:

    Hello! If I have a fully underwritten term life policy, can I transfer it to a terminally ill relative so that they will have some coverage? Their family may need more than a guaranteed issue policy will pay. Thanks so much.

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Sarah!

      Sadly, life insurance is not something you are able to transfer to cover a different individual. Each policy is written and underwritten with information provided from the “insured” (in this case, you) and covers only that person.

      In this case, even a guaranteed issue policy may not work. Most of these types of policies have a “graded benefit” which is small window of non-coverage (usually 2 years) for any death due to medical/natural reasons and only covers the full face amount in the event of a death by accident. If someone dies of natural causes in the first 2 years, the premiums are refunded plus interest.

      I hope this helps a little bit.

      -Luke

      Reply
  26. Peter
    Peter says:

    I use to smoke socially when I drank about 10 yrs. ago. I could swear I mentioned that during my phone interview. I looked at my contract and i’m under “non-smoker”. Is that because I haven’t smoked in so long? Question reads, have you ever smoked? Will this cause a problem when I die? Should I call and make sure this will not cause a problem? I believe you mentioned they record the interview, can I get a copy for proof that I mentioned I used to smoke? Also, I have vagal nerve damage for surgery and have digestive problems which they’re aware of. 4 months after contract I was told I have a non-functioning gallbladder with stones. They wanted to remove my gallbladder but I declined due to my previous surgery gone wrong. If I get sick and die as a result from the gallbladder, can they decline payout? I also haven’t been taking my HBP medication due to my health insurance lapsing, I’ve just obtained my insurance back and will go back on. Would this cause a problem. Insured by American National.
    Thanks

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Peter!

      “I use to smoke socially when I drank about 10 yrs. ago. I could swear I mentioned that during my phone interview. I looked at my contract and i’m under “non-smoker”. Is that because I haven’t smoked in so long? Question reads, have you ever smoked? Will this cause a problem when I die? Should I call and make sure this will not cause a problem? I believe you mentioned they record the interview, can I get a copy for proof that I mentioned I used to smoke? “

      Basically, after roughly 2-5 years of no nicotine usage most companies no longer consider you a smoker. It varies by company, but since you are past the 10 year mark AND you divulged the information honestly, I see no reason to be concerned. Underwritting took this into account when they wrote the policy. As far as getting a copy of the proof, I would reach out to their customer service to see if they can provide any document that confirms that.

      “Also, I have vagal nerve damage for surgery and have digestive problems which they’re aware of. 4 months after contract I was told I have a non-functioning gallbladder with stones. They wanted to remove my gallbladder but I declined due to my previous surgery gone wrong. If I get sick and die as a result from the gallbladder, can they decline payout?”

      Based on the information you are giving me, you will be covered. Unless this was a problem you were aware of prior to obtaining insurance, I see no reason what grounds the company would have to deny paying out.

      “I also haven’t been taking my HBP medication due to my health insurance lapsing, I’ve just obtained my insurance back and will go back on. Would this cause a problem.”

      Same as above. Once the policy is in effect and the contestibility period is over, there isn’t much the life insurance company can do unless there was fraudulent misrepresentation on the original application. Life happens as does health issues and companies are aware of this.

      As long as you are honest when you apply and do not try to hide material information, there are very few reasons for an insurance company to deny covering a claim.

      Hope this helps!

      -Luke

      Reply
  27. greath smith
    greath smith says:

    Thankyou for all your efforts that you have put in this. Very interesting information. I like this site very much so much superb information.

    Reply
  28. Jim
    Jim says:

    I am writing this due to some questions I have about my deceased mothers’ life insurance policy. She had a 20 yr term life insurance policy for 100k. Since 4/2000 I was the only listed primary beneficiary. Because of the agreement I had with my mom I paid the premium up until her death. Sadly, my mother passed away last month. After contacting the Life Insurance Co., I come to find out an Alternate beneficiary received the payout. Additional information could not be provided as they themselves have different answers. My understanding per their policy and practice is that a POA can only initiate change of beneficiary if the POA is 6 months old. There was no change. Also how can a change of beneficiary be initiated if my mother had Alzheimer’s deeming her incapable of having the requisite capacity to sign legal documents? Maybe Undue influence? I thought there was some restrictions in place. And are there no measures in place to contact the only listed primary beneficiary? My limited understanding is that since it’s been paid out that it’s up to me to seek specialized attorney. Any ideas/suggestions? Thanks

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Jim!

      First, I am not a lawyer nor am I licensed to give legal advice. Everything I am going to discuss here is for basic informational purposes and should not be construed as legal counsel.

      This is a pretty complex situation you are laying out here and yes, an attorney is going to be your best course of action here. Preferably one with in-depth experience in your state’s insurance laws.

      “How can a change of beneficiary be initiated if my mother had Alzheimer’s deeming her incapable of having the requisite capacity to sign legal documents?”

      In general, unless there is legal documentation on file that clearly states that a person is not legally able to make decisions for themselves, it isn’t something someone would proactively ask about. That being said, without that documentation the insurance company would have allowed her to make changes on the beneficiary. As far as the POA question… I have no insight on that at all.

      “And are there no measures in place to contact the only listed primary beneficiary?”

      Beneficiaries will only be contacted if they are listed as such at the time of death. In most every case, the insurance company has little interest in who gets the money. In my experience, beneficiaries are not contacted if there is a change on a life insurance contract.

      The only time I have seen payouts going to someone other than the primary beneficiary are:

      1. If someone wasn’t actually listed as primary
      2. Primary beneficiary was a minor
      3. Primary beneficiary caused the death of the insured
      4. Primary beneficiary is dead or unable to collect

      Honestly, I would contact a lawyer and also request a copy of the entire file from the life insurance company… from signed application to the last transaction… and see what exactly happened. The lawyer can then best inform you of the course of action that is best for you.

      This is a horrible situation to be in. I hope this helped a little.

      -Luke

      Reply
  29. Carla
    Carla says:

    I am a beneficiary of a family trust. Mom and Dad have passed away and my two sisters are trustees. I know they have been deceptive with hiding a bank account and not listing it as trust property. I think I remember Mom had a life insurance policy which has also not been listed as an asset. As I am only a beneficiary, I have no idea who the life insurance carrier is. How can I find out about the policy as who and when it paid out to?
    Thanks

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Carla!

      Anytime you begin dealing with trusts, having an attorney who is knowledgeable on the laws that govern trusts is key. In this case, since you feel the trustees may not be operating honestly, consulting and retaining your own attorney may be the best solution. If he/she feels there may be dishonesty or lack of fiduciary trust, there may be a need to get the courts involved. Either way, going at this alone may not yield the best results.

      Hope this helps!

      -Luke

      Reply
    • Hate True
      Hate True says:

      HI Carla, Can you tell me how much did it cost to setup the Family Trust? I am interested in creating one for my family.

      Thank you in advance.

      Reply
  30. Richard
    Richard says:

    If my wife has life insurance and I am named as the primary beneficiary and lets say both my wife and I died in an auto or other accident, how do we ensure our minor son would receive the benefit? The life insurance carrier says we can not name him as a secondary beneficiary? They say to name someone else (a guardian) who would then give him the money but we do not have such a person to name. If we had a Will that states any life insurance proceeds go to our son would that cover it? if yes, what should we just leave the secondary beneficiary section blank?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Richard!

      This is an extremely common question across the industry. In this case, the insurance company is on the right track.

      First, your life insurance and will are two separate entities. Your policy’s beneficiary will receive the proceeds, regardless of what the will says.

      Second, leaving the secondary blank forces the benefit into probate and up for the courts to decide the fate (in this scenario).

      Since there is a minor child involved, a will is vital. You could do it yourself; however, a licensed attorney will be the best option because he can best help discuss what options you have available to you under the law in your state regarding your estate, your child, and life insurance benefits. He may recommend appointing a guardian ad litem or something similar, but he may recommend looking at forming a trust. It really depends on your circumstances.

      Personally, we just reworked our end of life plan and the strategy for what would be best for our 4 kids. It isn’t easy and can be a tricky situation.

      As far as the minor child, if you do not choose someone to take over his guardianship, then the choice is 100% up to probate courts to decide. If there is a life insurance policy paying benefits to your estate because the primary expired as well, then that is up to the them as well.

      I highly encourage you to review this with an attorney to make sure your end of life plan is as issue free as possible.

      -Luke

      Reply
  31. Elizabeth
    Elizabeth says:

    Is it ethical for a life insurance company to ask the named beneficiary (after filing a claim) whether the decedent had any other life insurance policies? I can’t understand the reasoning for how a life insurance company would be entitled to this information.

    My ex-spouse died, and we have four minor children. In our divorce settlement, we are each required to keep life insurance (because of the children), and the settlement instructs that each will name the other spouse as trustee (beneficiary) on behalf of the children’s financial support. The exact verbiage in our agreement is: “[Non-custodial parent] shall keep and maintain in full force and effect a policy of insurance on his life having a death benefit of not less than $XXX,000, naming [custodial parent] as trustee for the children so long as [non-custodial parent] has support or other obligations as set forth herein.”

    After reading the settlement, the life insurance company has stated that “the children may have an interest in this benefit.” I am the named beneficiary, because the children are minors. The settlement also conditions that the benefits will be used solely for the financial support of the minor children, and that if the surviving parent does not fulfill his/her fiduciary duty to this agreement, the children may at some future point file suit.

    So my ex named me as beneficiary on two life insurance policies (one through his employer, and a second policy independently). And I named him. I was named sole custodian of the children, and he was the sole financial support source for the children. Now his employer life insurance is asking for a copy of our settlement (which I gave them), and is asking me to answer the question of whether my ex had other life insurance policies besides this one, to fulfill his obligation to maintain $XXX,000 amount of life insurance.

    They are also asking me if I am claiming the benefit “individually or on behalf of the minor children”, and whether a trust has been established for the children’s benefit. Our attorney used the word “trustee” (i.e. Spouse 1 will name Spouse 2 as trustee, and vice versa) and I think they are getting tripped up on the word. We did not establish a trust. We pledged to act informally as the trustee (fiduciary) of the life insurance benefits, ensuring that the monies are solely used for the financial support of our four children.

    So their question of whether I am claiming the benefit as an individual or on behalf of the children almost feels like a trick question. I am claiming it as an individual because I (not the four children) am the named beneficiary. But our settlement governs the use of the monies and I am bound to that obligation, to utilize the monies “on behalf of the children”.

    If it is standard course for a life insurance company to inquire about the insured’s “other arrangements” with life insurance companies, then I will disclose that information if I have some legal obligation to do so. But if they are just trying to figure out whether to honor their contract with my ex-spouse, which includes his naming me as beneficiary (in a state – IL – where beneficiary designation of a spouse is not automatically revoked upon divorce), but they are NOT legally privy to this information about other policies, then I will not answer their question.

    I can’t help but feel like it is sort of dodgy behavior on their part, getting tripped up on semantics in our settlement, but at the end of the day, a.) I am the named beneficiary on a life insurance contract in a non-community property state, and b.) it is the divorce settlement that dictates my obligations to the children regarding the benefits, and judges my adherence to this; not the life insurance company. Do I have any obligation to answer their question about additional life insurance policies? (if you respond, feel free to edit for brevity)

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Elizabeth!

      Very interesting situation you have in play here.

      The way I am understanding it, you are correct in assuming the insurance company is ” getting tripped up on semantics in our settlement”.

      In this case, it isn’t “semantics” as much as it is the legal language in the settlement. Since court orders trump business contracts, I think the company maybe making sure they are paying out the correct way. Since the order states you are the “trustee”, they may be looking for an actual trust to submit the payment to For Benefit Of the minor children in order to keep themselves in line with the court order and prevent any additional legal issues.

      You run into the similar issues when you wrap in investments that are passed to minor children upon death without an established trust.

      As far as the questions about other policies, they may also want to see how the other (if any) are paying out. Also, from a fraud perspective, if there were multiple policies from other companies all with the same beneficiary, they could be a need for them to verify and possibly investigate the claim. I don’t see how they can compel you to release this information because, as an ex spouse, you may not even have access to that information.

      In this situation, I would recommend contacting the attorney you used for the divorce and explain to him the situation. He can contact their legal department and discuss what the hold up is, from a legal perspective. If they want a trust established for the payout, he could also help provide direction there. In a couple of hours, he could have this taken care of for you.

      Based on the info I have, that word “trustee” could be tripping things up.

      Hope this helps.

      -Luke

      Reply
  32. Donna
    Donna says:

    I recently received a phone call from Lincoln Heritage Life in reference to a life insurance policy they said my husband had with them. My husband died in 2013 and I had no idea this policy existed. They told me they just found out that my husband had passed and they had been using the cash value to pay the premiums. Because it has been five years there is only $135.00 left and if I would send his death certificate they would send it to me. They would not tell me how much the policy was for originally. This week they did send me a reminder letter that has the policy number on it but their website does not allow you to reference the policy. Is this legal? Why would I not be entitled to the policy amount? It just seems underhanded that once the cash value ran out they all the sudden know he is dead. Do I have any rights here?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Donna,

      This issue is extremely common in the whole life insurance industry. You have to remember that insurance companies don’t proactively go looking to give money away and in order to get money from them, there has to be a claim placed against the policy.

      THe way most WL policies work is that any cash value built up is used to pay the premiums in the event of nonpayment to keep the policy active. This is a standard practice and totally legal, as it is laid out in the policy contract before the insured signs the policy.

      What makes me scratch my head is how this went unnoticed for 5 years, largely because many life insurance companies will send some sort of letter letting the insured or owner of the policy know if premium payments were missed. While I don’t expect them to proactively check death records, sending basic information to the policyholder regarding the cash value balance is a fairly common practice.

      All in all, yes… this is legal. As far as any additional rights you may have, your lawyer may want to look over the policy and see if there is any type of violation of your state’s insurance law on their part. You can also file a complaint with your state’s insurance commissioner and have the matter investigated by the regulators of the industry.

      Hope this helped a little.

      -Luke

      Reply
  33. Rosie
    Rosie says:

    Hi, My husband and I I just started new jobs and they both offer life insurance through a company, My husband and I are currently shopping for life insurance. We are wondering what route we should take. Would it be best to go with our employer insurance or find a company.. we have 5 kids so we definitely want to protect our family in case of an emergency ?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Rosie!

      I highly encourage every person to have their own personal, standalone policy. A group insurance policy is a nice perk, but they rarely pay out. Since the policy is owned by the employer, they can change the benefits, the company, the amount they contribute, and so on with no real input from you. Also, many of these policies only offer 2-3x your yearly income which is not enough to protect the futures of 5 kids.

      What happens if you leave your job or are laid off? Employer benefits are gone. Rarely do you find a policy that is portable like retirement plans are.

      As a side benefit? Sure, but make it a point to have your own policies in force as well. A simple 20 year term life policy often runs less than what you would spend taking the family out to dinner once a month.

      Our agents can shop the market for you and find one that fits both your needs and your budget. Don’t hesitate to run a quote and find out.

      Hope this helped!

      -Luke

      Reply
  34. Wendy Haynes
    Wendy Haynes says:

    I signed up with Prime over 30 years ago and thought I was on the decreasing term plan @ 40.00 mo. For some strange reason i was put on the Custom IV 10 Term plan about 10 years ago @ 72.87 per mo. My policy terms 10/18, and I have been offered continuation options , 288.00 per mo with same coverage, then after 10 years decreasing until age 100 or 304.00 mo keeping the same coverage til 100 years. I contacted my agent, who gave me additional options with pricey premiums , a bit lower. I had some difficulty contacting the agent, emailed him with no response, had to get a customer service agent to get him on the phone. I expected more from him in the area of customer service. He seemed a bit disconnected and not really concerned about my coverage issues. I asked him to send me an email with the quotes , never got them. I am thinking about going to another company. Any advice?

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Wendy!

      I rarely make it a habit to bash a company, but Primerica is one company I would drop in a heartbeat. I only say this because I used to sell for them back when they were part of Citi and since they broke off, it is not a company I feel is best for the customer.

      First off, any agent that offers a decreasing term product as a viable solution is not to be trusted, in my opinion. These types of policies have very few practical applications in insurance strategy because (in almost every policy I have seen) you pay the same dollar amount for the entirety of the time it is in force, but the benefit goes down.

      Secondly, if the agent sold you on $40/m policy but instead you found out you now have a $72.87/m policy, there is something shady going on. They get paid on a % of the commission (as do their MLM higher ups), so pushing you to a higher cost policy only means they benefit more. Another great reason to look elsewhere.

      Also, these “Agents” rarely are “professionals” in that they do not have advanced knowledge and training in the insurance world. Their training is largely on aggressive and manipulative sales tactics, not on the actual policies or other types of policies on the market. When dealing with your finances, is someone who does insurance “part-time” the best way to go?

      Our agents here can help find a policy that suits your needs and your budget. I am also sure we can find something that is a bit more competitive or makes better sense than $288/m.

      Hope this helped a little.

      -Luke

      Reply
      • Andrew
        Andrew says:

        Hi Luke, can you guarantee people will get a pay-out from life insurance policies? Is it right to sell people insurance without disclosing that the likelihood of them being paid is not guaranteed?

        Reply
        • Luke Kinton
          Luke Kinton says:

          Hi Andrew!

          Payouts are never blanket guaranteed because there are exclusions that you must be aware of in a policy. If you die from a skydiving accident and the policy excludes coverage for that activity, there will not be a death benefit because the contract has that exclusion. However, if the policy is paid up to date and the death is not from an excluded activity or circumstance, there are very few reasons why the life insurance policy wouldn’t pay out.

          The main reasons why life insurance doesn’t pay surrounds lack of payment and misrepresentation on the application itself which is why we encourage everyone to be honest and not hide information while applying for life insurance.

          It is important to remember that all insurance policies are contracts, according to the laws of the state where the policy is written. While some insurance companies can be slow to pay or refuses to pay at times, there are legal grounds in many of these situations for the beneficiaries to pursue legal action. This also is one of the main reason we aim to work with the most reputable life insurance companies who make the claim process as simple as possible.

          I hope this helped clear some things up.

          -Luke

          Reply
  35. J. Meier
    J. Meier says:

    I work a state job that just recently changed its life insurance company for the first time in decades. So they had an open enrollment period that said you could get up to 500K optional life and 100k optional life for my spouse without evidence of insurability and such amount for dependents so I got the max on everything without having to have any questions asked. The only question asked was about tobacco and I answered honestly as we both use tobacco. It has been almost 2 years as of 1/1/19. Can they come back and bring up things that were never even asked about during this “special” open enrollment thru met life if something were to happen? I cant even seem to find anywhere a certificate of coverage on optional life only on ADD.

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi J!

      Since that was the only question on the application and you answered honestly, I can’t see any reason for there to be issues down the line.

      Group term is a nice perk, but keep in mind two things:

      1) Your company buys coverage in bulk (much like buying something at a wholesale club) and at a much cheaper rate, which is why it is so inexpensive. The company, not you, owns the policy and can make changes as they see fit. Something is better than nothing, but it is important that you realize that you don’t have control of the policy and rarely can you take it with you if you were to leave the company.

      2) These polices are cheap because, statistically speaking, you are more likely to need the coverage when you are not covered. For example, if you become terminally ill and cannot work, you lose your benefits including life insurance.

      For these reasons I tell everyone I work with to invest in some affordable term life insurance outside of your company and consider the group term more like the perk that it is, instead of the ultimate solution for life protection.

      Overall, it sounds like you should be in the clear based on the info you gave; however, if you have more questions about the policy then the benefits administrator in your company’s HR department could give you clearer insight overall.

      Hope this helps!

      -Luke

      Reply
  36. John Flowers
    John Flowers says:

    Hi Luke,
    I am a prospective kidney donor (I have been cleared to donate my kidney to a friend but the date has not been finalized) that would like to get life insurance, per my wife’s request BEFORE surgery. The date could be in 2 months, or 2 years, depending on my friend’s condition. So, will this scenario affect my policy premium for term/whole life insurance? Do I have to disclose this information even though it has not happened yet and there is a possibility it may not happen for year(s)? If I do not disclose, will my policy payout be denied in 10 years if I die from causes not related to the donation?
    Please help!
    John

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi John,

      This is where you start getting into a very grey area when it comes to overall ethics.

      Most companies will ask if you have any surgeries planned or scheduled when you are applying for life insurance. Technically, you don’t have any future, concrete scheduled surgeries, only the plan to eventually have to have one. Nothing is absolute, from the way I am understanding this, merely a possibility.

      For example, companies will ask if you plan on flying a plane in the next 2 years. Most of the time, the answer is no. But what if someone who was obsessed with getting their pilot’s license in the future ends up getting one a year after the policy takes effect? At the time of application, there wasn’t the intent to misrepresent your future plans because… they weren’t actually plans. But would the insurance company still pay out?

      In this case, agents will ride the fence between disclosing vs. not. Some will err on the safe side and say yes to disclose (which could result in a denial for coverage with some companies) and some will say not too because there isn’t a committed or scheduled solution solidified and the recipients’ condition could change or your health could change before the surgery. There are still a large number of variables in play.

      Short answer: Honesty is the best policy. Reach out to one of our agents about this and see what they can do.

      Hope this helps.

      -Luke

      Reply
  37. Norma Gonzalez
    Norma Gonzalez says:

    Mother just passed. In looking for documents, we found her policy. The policy has her nickname. She used her nickname a lot. Her social security card has her nickname but her ID and passport have her full name. For example if her full name was Patricia—she had Patty on these forms/cards. Will the insurance company refuse to payout, since he’s used her nickname? The insurance agent who sold her the policy should have used her name from her identification card, right? It’s a small $20k policy—barely enough to cover funeral. Stressing. Response urgently needed. 11/26/18

    Reply
    • Luke Kinton
      Luke Kinton says:

      Hi Norma!

      I don’t see this causing a major issue for the claim, especially for the small amount of coverage. Derived monikers (“Luke” vs. “Lucas”) from a longer name are extremely common and rarely cause a large issue when it comes to enforcing a policy like life insurance. This type of logic also comes into play with policies written under maiden names.

      Yes, the agent didn’t do his due diligence and ensure that the policy was placed in the correct legal name of the applicant; however, I do not see any grounds for the company to not pay the claim.

      Hope this helps.

      -Luke

      Reply

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About Brian Greenberg

Brian started his financial career working for Metlife Insurance Company. Using his internet skills, he decided to pursue a better way to provide customers with life insurance by building a quoting engine and underwriting fulfilment process. With True Blue Life Insurance, Brian is licensed to sell life, health, and annuities throughout the United States. He is committed to constantly improving the online life insurance process.