Life insurance isn’t one-size-fits-all, there are many factors to take into consideration when selecting a policy. Not only do you need to decide what kind of coverage you need, but you also need to make sure you have the right amount you’re covered for. Then there’s also the matter to consider when life insurance doesn’t pay out.
Yes, it sucks to consider that your life insurance claim may be denied, but if it ever would be, it would likely be due to the following reasons that are important to be aware of (most of which can be avoided).
You Pass Away During the Contestability Period
Think of the contestability period like the probation for a job you were just hired for. It’s the life insurance provider’s way of making sure you’ll “work out.”
Depending on how your policy was set up, this is usually between 1-3 years and is in place to prevent people from making fraudulent claims. If all the info submitted for the claim is accurate, then you can still receive a payout, but if any isn’t, then your claim has the potential to be denied.
You Pass Away From a Type of Death That’s Not Covered on Your Policy
You Pass Away From a Type of Death That’s Not Covered on Your PolicyLife insurance, like all kinds of insurance, is all based on risk. When it comes to life insurance specifically, if you happen to die while engaged in risky behaviours or activities your life insurance may not pay out.
Many of these “risky” activities are ones where injury could be self-inflicted like skydiving or bungee jumping. Other important activities that may be more pertinent include “acts of war” which may prevent you from getting a payout if you’re planning on or are currently serving in the military.
Some of the most common types of death that aren’t typically covered by life insurance policies are those from pre-existing health conditions. For example, if you had some kind of health ailment before you applied for a policy, and you passed away as a result of it, the insurance company wouldn’t pay out the death benefit since the passing was predictable and deemed uninsurable.
This is exactly the reason why it’s so important to read the fine print in your life insurance policy before you agree to the terms. In doing so, and making sure you’re properly covered, you prevent serious stress and problems for your beneficiaries down the road.
Information You Provide to Your Life Insurance Provider Is Intentionally Inaccurate
Unlike fudging the weight of fruits and veggies a bit at the self-checkout, when you provide info to your life insurance provider it’s important to be accurate and honest.
There be serious ramifications if you don’t tell the truth on your application like preventing your beneficiaries from getting a payout. You could even be found guilty of insurance fraud in more severe cases.
Most of this comes down to being honest about your medical history and disclosing any use of drugs/alcohol/cigarettes or other harmful substances in addition to any medical conditions. In doing so, you ensure you can get the best coverage possible and that your beneficiaries won’t have any problems claiming your policy when the time comes.
You Don’t Pay Your Premiums
You Don’t Pay Your PremiumsMoney isn’t always easy to come by when frustrating life events come along, but paying your life insurance premiums on time is incredibly important. If you miss a payment, your entire policy could be cancelled.
Fortunately, many life insurance providers have a grace period for late payments, but if you anticipate that you won’t be able to pay your premium on time it’s best to reach out to your provider and let them know. Many are more than willing to give you some additional time to pay as long as you let them know far enough in advance (i.e., not the day your premium is actually due).
Overall, as long as you read the fine print of your policy, ask any questions about how your payout could be denied, and pay your premiums on time you can stay covered and ensure your loved ones are financially protected.