Life Insurance Claim Denials - Five Things to Know

Your life insurance policy is a very important part ensuring that your loved ones and dependents are cared for in the event of your death. However, there are some critical mistakes that people often make that can actually prevent the insurance claim from being paid out at all. Here are the five mistakes you should always avoid.

#1 – Failing to Pay Premiums

The only way that your life insurance policy is going to remain active and cover you in the event of your death is if you make sure to pay the premiums on time every time. You should check with your insurer to see if you have any kind of grace period in the event that you accidentally miss a payment or a financial setback makes you unable to pay your premiums. Similarly, opting to make annual or semiannual payments may help, too.

#2 – Lying on the Application

One of the biggest mistakes people make is actually lying on their life insurance applications. There’s no denying that your premiums will be higher if you smoke, but your insurance company will find out if you’re a smoker and deny your benefits if you’ve lied about it. If you’ve been treated for any condition in the past, if you smoke, or even if you drink alcohol more than moderately, you should state this on the application. It’ll be worth it if the unexpected happens.

#3 – Not Naming Enough Beneficiaries

If you’re married, then chances are that you’ve named your spouse as your primary beneficiary. This is the normal way of things, but there is something to consider: what if both you and your spouse are killed in an accident at the same time? How would the life insurance money be dispersed? Be sure to name not only just a second beneficiary, but also a final beneficiary. This covers all of the possibilities and ensures that your benefits are paid promptly.

#4 – Failing to Tell Anyone that the Policy Exists

Life insurance can be a touchy subject for many families, but that doesn’t mean you have to hide it. Once you’ve purchased a policy, store it in a safe place and tell your beneficiaries about it. This way, should something happen, they know exactly where to go and who to contact to get the process started. Failing to tell anyone doesn’t mean that the benefits won’t be paid because the insurer will track down the beneficiaries, but this process can take a while.

#5 – Engaging in Risky Behavior

Believe it or not, people have rushed out to purchase life insurance policies prior to engaging in risky activities like bungee jumping or parachuting, and there are even some who purchase a policy just days before committing suicide. It is important to note that most policies have a one- to two-year exclusion, meaning that if you die due to suicide or a risky activity, your policy is essentially null and void.

Life insurance is certainly a necessary investment, and taking the time to purchase a policy at all shows that you care about what happens to your loved ones after your death. However, if you make any of the five mistakes above, you might just find that all of your efforts were in vain. 

Emergency Supplies to Keep in Your Car

You likely do everything you can to drive safely. After all, being a safe driver leads to cheaper car insurance premiums, fewer injuries, fewer headaches and an all-around sense of pride. However, the unexpected can and sometimes does happen to even the best drivers. Keeping an emergency kit in your car is a great idea for this very reason.

Some Statistics

First and foremost, it is important to note that some very recent studies suggest that only about 5% of American drivers carry all of the recommended emergency supplies in their vehicles. This may be a bit shocking, but another 96% claimed that they carried what they would consider to be the ‘bare minimums’ or the tools necessary for changing a flat tire and jumping the battery. Finally, about 38% of the people who carry these supplies state that they check to make sure that they are working properly at least once a year – and some check them out twice per year for safety.

What You Need

Snow is a rarity in the warm Florida climate, but that doesn’t mean that drivers shouldn’t be prepared for the worst. After all, the recent polar vortex that swept down from the north placed a big chill on most of the state, and this caused some traffic trouble in places where standing water froze overnight. Highway safety experts recommend that motorists carry all of the following in the trunks of their vehicles: a hazard triangle or road flares, a first aid kit, jumper cables, a windshield scraper, a spare tire (preferably a real wheel and tire rather than a ‘donut’), blankets and a change of warm clothing, high-calorie food that won’t spoil, road salt or cat litter, a brightly colored distress flag, candles, flashlights, and a lighter.

What You Don’t Need

One of the biggest mistakes that people tend to make is loading their vehicles down with items that cannot be properly restrained. When possible, all ‘loose’ items within the vehicle should always be stored in the trunk. Think of it this way: if you’re involved in an accident at even a moderate rate of speed, all of the loose items inside your vehicle essentially become projectiles. This increases the likelihood that injuries will be sustained. Only keep essential items inside the car and put the rest in the trunk.

What to Do if You Get Stranded

If you find yourself stranded at the side of the road, there is no need to panic. First of all, turn on your vehicle’s hazard lights if possible. If you have access to your phone, dial 911 and describe your location as closely as you can. You should never leave your vehicle unless you smell gasoline or there is a fire; help will come to you. Finally, make sure that you drink plenty of fluid and continue to assess your situation. Sparingly use the radio, air conditioner or heat in order to conserve fuel, and be sure to turn a light on inside the car at night (or use a flashlight or candle) so that help can find you.

While everyone strives to drive safely, there is no denying that accidents and Mother Nature sometimes just happen. As such, keeping the right supplies inside of your car and removing the things you don’t need can go a long way to protect you. 

When is Non-Owner's Insurance a Good Idea?

There are plenty of people in Florida who don’t own cars but still drive on a regular basis, especially for those who choose to rent cars regularly to travel. While car rental companies do offer insurance, it is often quite expensive. Non-owner’s insurance may be a better option for some people.

Cost Comparison

When you rent a car, there are some things that will be covered automatically. Of course, the rental company has a vested interest in its automobile, so they’ll provide comprehensive and collision coverage as well as roadside assistance. However, in order to actually get liability coverage (which is what covers any damage to property or injury to other drivers and their passengers), you’ll be expected to pay a rate of $7 to $14 a day, depending upon the company. On the other hand, a non-owner’s insurance policy will cost you a few hundred dollars per year, which is a great investment for those who rent often.

What It Covers

A non-owner’s insurance policy provides only liability coverage. Therefore, should you choose to borrow a friend’s car and you get into an accident, your friend’s insurance policy will be the first place to go to make a claim. However, since you were the one driving the car, you may be sued if any injuries or property damages sustained exceed the limits of that coverage. As such, a non-owner’s insurance policy affords you some extra coverage in this case so that you won’t have to rely on your friend’s insurance alone. In fact, for most of these policies, there are never any deductibles.

Damages Not Included

A standard non-owner’s insurance policy is not going to cover any of the damages to a rental car (or to a car that you borrow, for that matter) so you should prepare yourself in advance for this. If you are renting your car, you can get what is known as a loss and damage waiver that will protect you in the event that the rental car is stolen or damaged in any way while in your possession. If you are going to be borrowing a car, things can get a bit trickier. Talk to your friend or relative about the coverage they have and then sign an agreement that dictates what will happen in the event that you are involved in an accident that is deemed to be your fault.

Additions for Auxiliary Drivers

If you are on the other side of the fence, (that is, if you will be allowing a friend or family member to regularly borrow your car) it may be in your best interest to add the person who will be borrowing your vehicle to your existing policy as an auxiliary driver. While you will ultimately be financially responsible for this increase in your premiums, you will be better protected if something should happen. This is especially true if you will be loaning your car to a teenage driver in your home; most existing policies will not allow anyone in your household to drive your car unless his or her name is listed on your policy as an authorized driver.

There are some cases in which a non-owner’s insurance policy is the best route, but there are still other options to consider. In general, a non-owner’s policy is best for those who rent frequently or who borrow a car very infrequently since it is inexpensive and affords some additional peace of mind at the same time. 

Could Someone Have a Secret Life Insurance Policy on You?

While it really isn’t likely, the idea that someone could take out a life insurance policy on you without your knowledge is a bit unsettling. Here, you can find out whether or not this practice is legal, how and when it has occurred in the past, and other facts about secret life insurance policies.

Is it Likely?

The first thing that you should consider if you are concerned about someone taking out a life insurance policy on you is whether or not it’s truly likely. In most cases, the only motive someone would have to do this would be fraud. Another thing to consider is that life insurance companies go to great lengths to prevent fraud and to protect you, so attempting to purchase a life insurance policy on someone else is incredibly difficult. Finally, there is what is called ‘insurable interest’ by most insurance companies, and this simply means that the person purchasing your policy must be related to you, either by marriage or by blood, or must have a close working business relationship with you.

What Steps does the Insurance Company Take?

Most of the time, insurance companies absolutely require the insured to participate in a medical examination prior to the issuance of a policy. For this reason, it is nearly impossible for someone to purchase life insurance on you without your consent; the arrival of medical personnel at your door to take blood samples would surely tip you off. Similarly, insurance companies require the signature of the insured, too, and it is highly unlikely that someone would be able to intercept every piece of correspondence and forge your signature. These things make the issuance of a ‘secret’ policy next to impossible.

The Parent – Child Relationship

The only real, legal way for someone to take out a life insurance policy on someone without their knowledge occurs when a parent takes out a policy on a child who is younger than 15 years old. This is because the insurance companies do not require a child younger than 15 to provide a signature and most child policies do not require medical exams. Of course, if the policy remains in effect and the parents don’t tell the child, then it is truly possible for a parent to have a life insurance policy on his son for 40 years or more without that son’s knowledge.

The ‘Dead Peasant’ Uproar

Up until 2006, it was entirely legal for businesses to take out life insurance policies on their employees and then cash them in upon the employee’s death with no mention ever made to the deceased’s family.  They were called ‘dead peasant’ policies because many of the deceased had no life insurance of their own and their families were left to bear the burden. In fact, for many large and well-known corporations, the ability to purchase these policies was a solid way to generate tens of millions of dollars per year in revenue. Of course, in recent years and with the increased light that was shined on the practice, it was outlawed in 2006.

In conclusion, if you’re wondering whether or not someone out there has taken out a life insurance policy on you without your knowledge, the answer is likely no. There is simply too much red tape and too many laws in place to allow for it to happen.   

Five Things to Know About Your Life Insurance Contestability Period

The contestability period associated with your life insurance policy is a period of time, usually one to two years in length, beginning directly after you purchase your policy, during which your insurer can investigate the information on your application and ultimately approve or deny claims. Understanding some things about this period can help you make better decisions for your loved ones.

#1 – Your Benefits Must Be Paid if You Die During the Contestability Period

A common misconception is that if you die during the first one or two years after having purchased your policy, the insurance company can refuse to provide your loved ones with benefits. This is simply not the case. If you die during the contestability period, your cause of death is covered under the policy, and you provided 100% accurate information on your application, then your loved ones will be entitled to the benefits.

#2 – Providing False Information Hurts Your Loved Ones

Believe it or not, the primary reason why insurance companies fail to pay out benefits when the insured dies within the contestability period is because the insured provided inaccurate or simply untruthful information on his or her application. You should always check and double check your application to make sure that everything is absolutely correct. This way, the insurance company will have nothing to contest upon your death.

#3 – In Some Cases, the Insurance Company will Provide Benefits Anyway

Even if, by some chance, you got a couple of facts wrong on your application, all is not always lost. Due to some recent changes in laws, many insurance companies can essentially ‘correct’ your application after your death, re-calculate your premiums, and deduct any differences from the amount of the benefit that will be paid to your loved ones. In most cases, whether or not this will occur depends upon the size of your claim and the blatancy of the misrepresentation on the application.

#4 – The Contestability Period and the Suicide Clause are Two Separate Things

Another common misconception is that the contestability period and the suicide clause associated with most insurance policies are one and the same, but this isn’t the case. The suicide clause usually states that if the insured commits suicide within two years of the issuance of the policy, no benefits will be paid and all premiums will be returned to the named beneficiary. In most cases, after the two year period, the benefits will be paid in full even if the cause of death is suicide unless the policy specifically states otherwise.

#5 – Contestability Periods can Start Over in Some Cases

Once your initial contestability period is over, you aren’t always out of the woods. There are some cases in which your insurance company can start the period anew. For instance, if you fail to pay a premium on time and are forced to reinstate your policy, then the contestability period can start all over again. Similarly, if you transfer the cash value of your permanent policy into a new policy, this can trigger a new contestability period, as well.

Every insurance company and every policy is different, so it is important for you to check with your agent to determine your contestability period and the payment of benefits in the event of your death during and after this period of time ends.