Life Insurance FAQs
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| Q. My husband took out a life insurance policy 18
months ago. When I filed the claim, the company denied it, because he stated on
the application that he was a non-smoker when, in fact, he did smoke. The
company is refunding all premiums paid. Can they do this? |
| A. Possibly. Companies may contest statements
made in the application up to two years from the effective date of the policy.
If there was an omission, inaccurate, or incomplete information on the
application that was material to underwriting the risk, the company may rescind
the contract, and refund the premiums. Generally, if a company offers a smoker
policy, then the death benefit should be adjusted to reflect the amount of
insurance that the premium paid would have bought at the smoker rate. |
| Q. What is universal life insurance? |
| A. Universal life insurance is a flexible
adjustable life policy, which incorporates annually renewable term insurance
with an interest bearing side fund (cash value). The insured may vary the
amount and timing of the premium payments to adjust the cash value and/or the
death benefit of the policy. |
| Q. What happens if I get a loan from my life
insurance policy, and never pay back the interest? |
| A. Unpaid interest is added to the loan balance.
If the loan balance ever grows to exceed the amount of policy cash value, the
contract will terminate without value. Also, if you should die before paying
back any loans made against the cash value of your policy, the outstanding loan
balance will be subtracted from the death proceeds. |
| Q. Can anyone insure your life? |
| A. No. In order to purchase a life insurance
policy on anyone, there must be an insurable interest. A relative who might
suffer financial loss if you died, a debtor who may be at risk of repayment, a
business partner, a spouse, son, daughter, or parent are examples of those who
may have an insurable interest. |
| Q. How can I find out if a person who has
passed away had any life insurance? |
| A. This Department does not have that
information on file. There is not a state agency that maintains or
provides this information.
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