After signing the papers and purchasing a life insurance policy, most people do not review it, unless it is required as part of any other financial assessment or paperwork. Most insurers suggest reviewing of insurance policies annually, and during major life events, such as marriage, divorce, childbirth, new home acquisition, or significant health changes. How often do you give a thought to yours? Did you read and understand all the fine print when you signed up? Do you know the circumstances for which your policy could be deemed void?
While you may be assuming that you have secured the future of your loved ones by covering them in your whole life insurance policy, there are several reasons due to which they could be left high and dry, when it really matters.
As Edmonton’s leading home insurance brokers, the team at HDF Insurance is well versed in the factors that could render your life insurance policy useless. Read on to know what to watch out for, and how to ensure that your family or nominated members get their dues in the event of your death.
Typical Situations When Insurers Do Not Pay Out Your Life Insurance Policy
Your life insurance policy is a contract that protects your family’s financial future if you die of disease or natural causes. However, here are some situations when your policy will not pay out.
- Fraud: Before paying out the life insurance policy, the insurance company will try to ascertain the exact cause of death, and check for any discrepancies in the information provided at the time of purchasing the policy. For example, if you have not been forthright about a past smoking or drinking habit, or failed to mention a blood pressure issue, and if any of these conditions have in some manner contributed to your death, the incontestability clause comes into play and the insurer may refuse the payout.
- Discrepancy between Your Policy and Your Will: A designation in the will is honoured only when the life insurance policy in question is named in the will. Moreover, the beneficiary name in the insurance policy should also be the same. This is particularly relevant in cases of divorce and remarriages, where you may forget to remove the earlier spouse, or add the new one’s name in both, your will and policy.
- Suicide: Contrary to popular belief, a life insurance policy may in fact cover suicide. However, there are riders and a contestable period of one to two years before the insurance company pays out the policy. These measures have been put in place to protect the insurers from people who take out large policies just before committing suicide mainly to improve the financial health of their families.
- Unpaid Premiums: If you have missed paying premiums on the due date, or within the 30-day grace period, your policy will lapse. The only exception to this may be if your death occurred within the 30-day grace period. In such cases, the insurance company will deduct the premium amount, before paying out the policy.
- Act-of-War or Presence in Restricted Country: Most policies have exclusions for accidental death caused by an ‘act-of-war’. This clause is not meant to exclude those in active military service. However, it is designed to exclude civilians, if they are killed in acts of war, or while traveling to restricted countries, or regions of armed conflict.
- Illegal Activities: If you were committing a crime or an illegal activity when your death occurred, the insurance company may deny the claim and refuse the payout. However, what may come as a surprise is that insurers may deny the payout even if your action was inadvertently illegal. For example, if you walk into a private property, and die on the premise due to an accident, the insurance company may not pay out the life insurance, since you were trespassing, even if unknowingly.
Make Your Life Insurance Premiums Count
At HDF Insurance, we are an independent, full-service brokerage with access to a wide range of life insurance products from hundreds of insurance carriers. Our experienced Edmonton insurance brokers can advise and help you select the policies that best suit your requirements and lifestyle.
For all your life insurance needs in Edmonton and throughout Alberta, rely on the trusted brokers at HDF Insurance. Call us at 1-800-567-2048 or request a free quote online.