Will my life insurance benefit really get paid?
Many people feel cynical about big corporations in general, and insurance companies in particular. It’s almost as if we expect to not get what we paid for.
A lot of this is unfortunately based in personal experience. It can be hard to get claims paid on your home, auto, medical or disability insurance policy. Sometimes the insurance company is in the right, but other times it just seems they want to welch on the deal.
What about your life insurance?
I see the life insurance contract as being more reliable. There are a few reasons for this. First of all, you are underwritten at the time of application only. The company looks at all your risk factors – health, medical history, finances, etc. – only when they process your application. They assess the risk – and cost – of insuring you at that time only.
This means that if you are a healthy non-smoker leading a tranquil life when you apply, that is how you will be underwritten. After the policy is issued, you could become a chain-smoking. bungee-jumping mercenary, and they will be stuck with you – at the original premium and terms of the contract.
Of course, you have to be honest on the application. If you have plans on changing your lifetsyle, or any indications your health is changing, you have to disclose them. If a claim is filed in the first two years, the company could conduct an audit to confirm you had not provided fraudulent or misleading information. If so, they have grounds to not pay out the benefit.
In addition, a claim may not be paid in the first two years if the cause of death is suicide. Here the carrier wants to make sure the insured had no nefarious plans when they applied.