How much do you know about life insurance? While you think you may know and understand most of your life insurance policy, there can be a gray area when it comes to matters regarding what is and isn’t covered, and your premiums rates.
To be fully educated about your policy, and to be aware of issues ahead of time, here are some unknown life insurance laws you’ve never heard of, that could come in handy to know:
Regarding Lying About Your Tobacco Use
Lying On Your Life Insurance Policy Can Cost You Major Legal Fees
If you lied on your life insurance application or in your medical exam, and claimed that you did not smoke, when you actually do, you can find yourself in big trouble. Most states uphold laws that allows the life insurance companies to reprimand you for your lies, in a few different ways. Companies are legally able to sue you, demand repayment of lost premiums, or even immediately halt your life insurance policy without refunding you any money. It may have been a small little lite you told to save some money, but it could certainly cost you.
Regarding Your Beneficiaries…
Irrevocable Beneficiaries Have A Lot Of Power
Upon purchasing your life insurance policy, you may have chosen to name your beneficiary as an irrevocable beneficiary, meaning that they have vested interest in the policy, and they get a say in what you do with the policy. So, for example, if you name your spouse as the irrevocable beneficiary of your life insurance account, but then you get divorced, your spouse will still legally have some control over what you can do with the policy, since they are still the beneficiary of the policy. As an irrevocable beneficiary, your spouse can prevent you from switching beneficiaries, or even from cancelling the policy. If you want total control of your life insurance policy, you should probably just name your beneficiary, or beneficiaries, as revocable beneficiaries so that you don’t need consent from anyone else to make changes down the road.
Regarding Fraudulent Life Insurance Agents…
Your Agent’s Actions May Be the Responsibility Of Your Insurance Company
If you have noticed that your life insurance agent made major mistake in your life insurance policy, you can take that up with your life insurance carrier. Under the law of agency, all life, health, and disability insurance companies are responsible for the wrongdoing of their agents. This is helpful to you, the insured, if something does happen and you need to take action. If you chose to take legal action to right the wrong, you would be able to sue, and likely win your case, and the insurance company would be responsible for paying it out, not the agent. This means that you would get more money, and get everything faster. Or, if the carrier wants to avoid going to court, they might just pay you a large sum upfront to make up for the wrongdoing, which is something the larger companies have the funds and power to do.
Regarding Your Current Coverage…
New Policies Are Subject To A Two Year Bad Faith Contestable Period
If you’ve purchased a life insurance policy recently (as in the last two years) you may want to make sure it goes through and is secured with the company. Under the law, some companies choose to honor a two year “Bad Faith Period” meaning that they can revoke your policy within those two years if they find that you lied about pre-existing medical issues, or if your health suddenly worsens after you purchase the policy. Depending on your state and the company you bough your policy with, this can be perfectly legal, and it can hurt you if something were to happen within those first two years. Make sure you are aware of your company’s policy, and that you avoid getting dropped by your carrier by answering all questions honestly and throughout when applying for life insurance.
Your life insurance is extremely important, so it is vital that you know the laws and your rights, in case something were to interfere with your life insurance policy and benefits.