Loopholes in life insurance
Having life insurance coverage is important, especially if you are the only source of income for your family. Knowing and understanding how life insurance works is essential in guarantying that your family’s claim will actually be paid after your death.
Many people do not realize that their life insurance may be of no use due to the many loopholes that can render a life insurance policy worthless.
1. Lying on a Life Insurance Application
Misrepresenting or not disclosing any information on a life insurance application may result in a claim denial in the future.
Every state now has laws which allow insurance companies to contest policies that are less than 2 years old and cancel those policies where material misrepresentations were made during the application process.
Thus, if you did not disclose your medical history or misrepresented your age, income, occupation or anything else on the application, the insurance company will deny your beneficiary’s claim if you die during the first two years of the policy effective date.
Unfortunately, this happens to even those applicants who made an innocent mistake and those whose death was not related to the misrepresented information on the application. We always advise our clients to make sure all questions are answered correctly on an application for life insurance.
2. Driving While Intoxicate
It comes as a surprise to many policyowners that their life insurance contracts have exclusions for felonies, misdemeanors, and other illegal activities. One of such activities is driving while intoxicated.
If a person dies in an accident caused by the insured’s drunk driving, the insurance company is likely to deny the claim. Driving while intoxicated at or above the state’s legal limit is a common exclusion in many policies.
3. Illegal Drugs
Taking illegal drugs or prescription medication without a valid prescription can also render your life insurance useless.
If an insured’s cause of death is related to taking illegal drugs, the insurance company may deny the claim
.
4. Suicide or Self-Inflicted Injuries
Usually, the suicide clause specifies that the insurer will not pay death benefits if the insured dies within the first two years from the policy’s effective date as a result of suicide or self-inflicted injuries.
It is assumed that if the insured commits suicide after the first two years of the policy purchase date, a suicide was not planned at the time the policy was taken out.
The importance of having adequate life insurance coverage cannot be overestimated. However, you need to make sure your life insurance coverage is actually worth something at the end of your life. Reading the contract carefully and understanding its terms and clauses is important in order to avoid a denied life insurance claim in the future.
A life insurance attorney can assist you in reading your life insurance policy exclusions and conditions upon which the payment of death benefit depends. At our law firm, we represent beneficiaries whose claims were wrongfully denied by life insurance companies. If you have questions about your coverage or if your claim has been denie