The principle focus of life insurance coverage involves delivering a monetary benefit to an insured’s dependents upon the insured’s death. The beneficiaries will receive a specified sum referred to as a “death benefit" following the insured’s passing. Policyholders have many justifications for purchasing life insurance which include income replacement for dependents, indemnification for liability on a loan, funding future buyout of a partnership or business interest after death of an owner, and retirement planning. Because of the diverse objectives that can be met with life insurance coverage, this blog post provides a basic overview of some key features and benefits of many life insurance policies.
The incontestability clause constitutes one of the most important provisions that an insured needs to understand in any life insurance policy. If the insured dies during the contestability period, the insurance carrier can investigate and analyze the policyholder’s medical history and other information provided on the application for insurance prior to making a decision about whether to pay the claim. In the best case scenario, this investigation often substantially delays the beneficiary’s access to benefits. Frequently, the insurer will use undisclosed "material" facts or misrepresentations to deny the claim and potentially rescind the policy. Generally, information is considered “material” if the insurer’s decision to issue the policy on the same or similar terms would have been affected by knowledge of the actual facts.
Along with the financial security provided to beneficiaries, many life insurance policies constitute effective retirement planning because you can borrow against the policy. This type of policy with a cash value can be borrowed against at a reduced interest rate. When an insured passes away before the loan is repaid in full, the unpaid balance and accrued interest will be deducted from the benefits owed to the beneficiary.
Another beneficial provision found in many life insurance policies is referred to as an “accelerated death benefit rider.” This clause authorizes payment of a portion of the death benefit prior to the insured’s passing. This feature of a life insurance policy can be utilized if the insured is diagnosed with a life-threatening illness. The insured might be charged a fee for taking advantage of this option.
There may also be provisions within insurance policies that favor an insured in situations where the policy is terminated by the insured or coverage lapses. Non-forfeiture clauses impose a stated prescribed mandate that surplus cash value be returned when the policy is terminated or coverage lapses. Specific non-forfeiture options include:
Extended Term: The face amount of the policy remains unaffected, but the insurer uses the cash value to make the premium payments until the cash value has been exhausted.
Cash Surrender: The insured receives the accrued cash value of the policy less any applicable fees.
Reduced Paid-Up Insurance: The policy continues based on a decreased face amount. The accrued cash value of the policy is utilized to secure a reduced paid up policy predicated on the amount of the cash value in the policy. This eliminates the insured’s need to make additional premium payments.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].
