Insurance lingo can be confusing, which can leave you feeling a bit overwhelmed, or even downright turned off if you’re trying to purchase a policy. Trying to understand terms like contestability period, underwriting, accelerated death benefit, and more can be enough to make you want to close your laptop and give up. Don’t worry, though, below are the most commonly misunderstood insurance terms with their definitions, so you can be a life insurance pro in no time!
Accelerated death benefits are a type of rider (see below) that can be added to a policy, which lets you use some of your life insurance death benefits before you pass away. This is usually meant for people who are terminally ill and need money to help pay their medical bills, such as bills for hospice care.
2. Annuity
You (or your beneficiaries) can choose how to receive your benefits after you pass away; an annuity is one choice that will give your beneficiaries an income for life. An annuity allows you to save money on taxes and is flexible in terms of how you get paid, when you get paid, and for how long you receive payments. Annuities are popular among retired people because they can offer protected income for the rest of their life.
3. Contestability Period
During the contestability period, which is a set amount of time after you’ve purchased your policy, your insurer will review your application to make sure you didn’t misrepresent anything; if you pass away during this time, your insurer might investigate (and possibly deny) claims. This period usually starts as soon as the policy is issued and will usually last for around 2 years.
4. Conversion Right
If you miss a premium payment, some insurers will allow you a grace period.
If you have a term life insurance policy, you might be able to convert it into a permanent life insurance policy later on. Policies that include this option are known as conversion right term life insurance policies.
5. Grace Period
If something happens and you miss a premium payment, some insurers will allow you a grace period, or extra time to catch up on your payments, before they terminate your policy. This will usually only last around 30 days, and after it is over, you could lose your policy.
If you want to take out a life insurance policy on someone else (with their knowledge), you will have to prove insurable interest. This means you will have to show that you would suffer some kind of financial harm if the person were to die.
7. Living Benefits
Some life insurance policies will provide benefits while you are still alive, such as the accelerated death benefits mentioned earlier, long-term care benefits, and policy loans.
8. Preferred Rates
Cheaper, or “preferred,” rates are offered by insurers to applicants who are at a lower risk of dying. Life insurance companies decide who to offer preferred rates to by looking at health history, smoking habits, gender, and lifestyle.
This is an additional amount of coverage that you can add to your life insurance policy or an extra option that you can add for coverage, like a long-term care rider.
10. Underwriting
This is the process that insurance companies use to decide if they want to offer you a policy, and what your rate will be. When you apply for life insurance, a professional called an underwriter will look at multiple factors, including your health and lifestyle, and make a decision.
Hopefully, you’re feeling more confident now that you know these common terms, so now it’s time to find the right policy for you! Remember, your family has financial obligations that will not go away when you are gone; they will need your help more than ever with their expenses, and the last thing you want them to worry about is money while they are grieving. There are many great affordable life insurance options to choose from that will provide enough money for your family, for a low monthly price.
The best way to find the right life insurance policy for you and your specific needs is by working with an agent specializing in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.
How often do you sit down and read the fine print before buying or agreeing to something? Far too often, consumers make big purchases or enter into contracts without reading what they’re getting into – and purchasing a life insurance policy is often no different. But when it comes to purchasing life insurance to protect your family, there will be clauses in your policy that you need to pay attention to and read carefully: these clauses are important, and the more you know, the better the decision you can make when purchasing your policy, or when you need to make a claim.
Contestability Period
First, it is important to understand what is known as the contestability period of your policy. This is a period of time, typically one to two years after you purchase your policy, during which your life insurance company has the right to review any claims made after your death. If the circumstances of your death are suspicious to them, or if your insurer suspects that you had an undisclosed medical condition, they have the right to investigate, and possibly reduce your beneficiary’s payout, or even deny their claim altogether.
Common Life Insurance Clauses
All life insurance policies generally have one or more clauses or exclusions written into them. The clauses are meant to help protect you: the whole point of them is to make sure that your policy’s contract is carried out in a fair manner.
Some common life insurance clauses and exclusions include:
Freelook period– This allows you to cancel your policy and get a full refund within a specific period of time, typically 30 days.
Grace period– If you miss a premium payment, you w
ill generally have a grace period, meaning your policy will remain active for a certain period, usually 31 days, giving you a chance to pay your premium before the policy is canceled.
Spendthrift clause- If the person you named as your beneficiary is in debt, this clause will protect the policy payout from being claimed by creditors, allowing the beneficiary to receive the full payment.
Misstatement of age clause- If you lie about your age during the application process, your insurer can raise your premiums, adjust the benefit amount, or decide to terminate your policy altogether.
Entire contract clause- If you make any false statements on your application, your insurance company has the right to terminate the contract and deny any payouts to your beneficiary.
Suicide clause- The substance of this clause can differ among different life insurance companies, but typically having a suicide clause in your policy means that your insurer will not pay out any claims if you die by suicide within a specific period after purchasing the policy – typically two years.
Reinstatement clause- If your policy ends up getting terminated because you have fallen behind on payments, you can reactivate it by paying all of the premiums that you have missed plus interest.
Do You Still Have Questions?
If you still have questions, an experienced life insurance agent can help you.
There is a lot to understand about life insurance policies and all of the rules surrounding them, but speaking to an agent can help make the process easier. A licensed agent from a top-rated insurance company can also help you find the best policy for you: they can help you find an insurer with affordable rates, and give you ideas for how to cut down on costs, as well explain all the ins and outs of each policy.
We have listed some companies to work with that will be able to find you the most coverage for less. Always check multiple sites to make sure you have bargaining power and to know the advantages of each company. Make sure a hard time for your loved ones isn’t made harder by a financial burden, check life insurance rates today.
Sadly, suicide is all too common: in fact, it’s the 10th leading cause of death overall in the United States. Many people think that if someone commits suicide, not only will their family be experiencing unimaginable grief, but their family will also be unable to access their life insurance benefits, because it’s a common misconception that suicide is not covered under life insurance. But that is not necessarily the case: when it comes to suicides, the reason life insurance companies have a “suicide clause,” or an exemption for death by suicide, is to prevent people from buying policies immediately before taking their lives so that their families can receive financial benefits – but that doesn’t mean that suicide is never covered by life insurance.
When Does Life Insurance Cover Suicide?
Suicide rates have steadily increased over the years, which is why life insurance companies have a suicide clause.
Suicide rates increased around 1% every year in the U.S from 2000-2006, and have increased 2% each year after 2006; because of this, life insurance companies have actually changed their policies: while at one point, they never paid out benefits in cases of suicide, most are now better prepared to help family members if it does happen. Life insurance policies now cover suicidal death, as long as it occurs within certain periods:
Life Insurance Suicide Clause
This clause is a provision put into most life insurance policies that outlines the specifics of your coverage if you were to commit suicide. Generally the clause is a 2-3 year exclusion period, which means once you have had the policy for 2-3 years, depending on the insurance company, your family will receive your death benefits even if you commit suicide. On the other hand, if you were to take your own life during that 2-3 year period, the insurance company would have the ability to investigate your death and deny coverage, meaning your beneficiaries would only get a refund on premiums paid towards the policy, not the death benefit. This is meant to prevent any applicant from taking out a life insurance policy and then taking their life immediately after.
In addition to the suicide clause, all life insurance policies have a contestability period, which is also generally the first 2-3 years of the policy. During this period, the insurance company has the ability to contest or deny a claim for a number of reasons, including if they believe you lied on your application, committed an illegal act that led to your death, or that you committed suicide.
Does Life Insurance Cover Physician-Assisted Suicide?
As long as your policy’s contestability and suicide clauses have expired, your life insurance policy might cover physician-assisted suicide, which is generally defined as someone dealing with a terminal illness giving permission to their doctor to administer lethal doses of medication to end their life. There are currently 11 states, and Washington D.C., that have laws protecting the right to assisted suicide:
California
Colorado
Hawaii
Maine
Montana
New Jersey
New Mexico
Oregon
Vermont
Washington
Make sure to check with your life insurance company if you have any questions about coverage, and always be honest when filling out your application. If you have a terminal illness, most companies will deny coverage, but some might still allow you to purchase a policy; however, if you lie about your medical condition, that is grounds for the insurance company to claim fraud, which would leave your family with nothing.
Before you can purchase a life insurance policy, the insurer will conduct an analysis of your physical and mental health. If you are living with depression, you will most likely be able to get a policy as long as you are getting treatment and taking your medication, but the rates and coverage you will be offered will be determined on a case-by-case basis. In addition, if you do not disclose any mental health conditions when you first apply for your policy, your insurance company could deny payouts in the event of a suicidal death.
If you are in crisis, call the toll-free National Suicide Prevention Lifeline at 1-800-273-TALK (8255) – this service is available to anyone, 24 hours a day, 7 days a week. All calls are confidential.
If you are looking for a life insurance policy, the best way to find the right one for you and your specific needs is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.
