Purchasing life insurance can seem overwhelming, and many people put it off. However, you need to consider purchasing a policy to keep your loved ones protected. There are several factors to consider when you purchase life insurance, one of which is the contestability period that some life insurance companies could enact.
When your loved ones or you go to receive a payout from a life insurance policy, you may encounter the contestability period, which could throw a wrench into receiving the payout from the plan.
How Does Life Insurance Policies Work?
The premise of life insurance is simple, you purchase a policy through the insurance company, and after that, you continue to pay the monthly premiums on the plan. You can either purchase a term life insurance or a whole life insurance. With a term plan, they are only effective for a predetermined amount of time, usually ten years, 20 years, or 30 years. After that period is up, the plan is no longer effective. After that, you’ll have to purchase another policy if you still want life insurance protection.
With a whole life policy, the plan is active for as long as you continue to pay the monthly premiums for the coverage. It’s a permanent form of coverage that is perfect for anyone that doesn’t desire to reapply for coverage in the future. The disadvantage to the whole life policies is that they are more expensive than term life insurance plans.
Once the insured person passes away, their beneficiary can receive the payout from the policy, which is where the contestability could come in. This clause could keep your loved ones from getting the payout of the plan, which could leave them with massive amounts of debt and no way to pay for it.
What is the Contestability Period?
The contestability period is a two-year window that starts from the day you purchase your life insurance plan. If you were to die within this two-year period, the insurance company has the right to deny your loved ones the payout from the policy, but it’s not as scary as it sounds. These contestability periods are only used in specific situations, and most applicants won’t have to worry about them.
During the contestability period of the life insurance policy, the insurance company can launch an investigation that will determine if your family will get the payout from the plan or they will be denied. In most cases, the only time that the insurance company employs the contestability clause is if they assume that there was false information on the application or if there was some fraud.
If the insurance company finds that the applicant lied on the application about their health or about any pre-existing conditions that they have, they have the right to dispute the claim and not deliver the payout from the policy. That’s why it’s also important to be 100% honest on your application and reveal any relevant information about your health or past.
Important Notes about the Contestability Period
There are several different factors bout this two-year window that you need to understand what you’re buying your life insurance. There are very few policyholders that will ever need to deal with the contestability period, but if you do, it’s vital that you understand what it is, and what rights the life insurance company has.
If the life insurance company decides that they want to investigate the policyholder and look at the cause of death versus the information on the application, it’s going to slow down the process of getting the payout from the plan. As the beneficiary, you won’t receive the money as quickly, because they want to ensure that you aren’t scamming the company is some way. Once they complete the investigation, then you or your family will be able to receive the money from the plan.
If the company does look into the application to ensure that the information wasn’t falsified or omitted, and they find some other error, but that error doesn’t directly deal with the death or related causes, they will still be required to pay out the policy, but this will be getting into a gray area and could hinder the process even further. If they find other errors, they can then continue to contest the policy, and it will get tricky from there.
Just because someone dies within the contestability period, doesn’t mean that you automatically won’t get the payout from the policy. If the insurance company investigates the insurance claim, and learn that everything is honest, they will still give the beneficiary the money from the plan, even if you were to die the day after that you bought the plan.
Life Insurance – Getting the Most Affordable Policy
Many people realize that purchasing life insurance is critical, but there are millions of people that don’t have the coverage that they need.
Perhaps the main reason that consumers don’t’ get a life insurance plan is because they assume that it will be too expensive for them to fit into their budget, but that’s completely inaccurate.
There are dozens of affordable options for life insurance, and with the right tools, you can pick the most affordable rates on your life insurance policy.
The first thing that you should do before you buy life insurance is to improve your health. One element the underwriters of the company will consider when deciding on your application is your overall health. To get a good deal on your insurance, you need to exercise routinely and eat a healthy diet.
Dieting and exercise will lead to higher results for your medical exam, securing a better rating from the insurance company. Though if you are unable to pass the medical exam, you could choose to apply for life insurance with no medical exam, but you can expect higher premiums.
The next thing that you should do is eliminate any tobacco usage from your lifestyle. Smoking is one of the most common things that people lie about on their insurance application, which can cause serious complications in the future. Don’t try and lie about using tobacco, instead be honest, or try and cut that bad habit. On average, smokers pay twice as much for their life insurance than people who don’t smoke.
If you want to be sure you’re receiving the best rates for your plan, you should consult with an independent brokerage.
Contrary to a captive agent, independent agents work with numerous companies throughout the United States, which means they can give you quotes from several companies at once, without all of the hassles.
Life Insurance and Contestability Periods
The protection and peace of mind you find with a good life insurance policy is unmatched, but it’s vital that you understand the coverage that you’re getting and the different components of your policy.
Not every insurance company is going to attach one of these clauses to the insurance policy, but most policies that are given to high-risk applicants or are guaranteed issue are going to have the two-year period. This contestability period shouldn’t keep you from getting the insurance coverage that you need for your loved ones.
Getting Affordable Life Insurance Coverage
People frequently forego purchasing life insurance coverage under the assumption that they cannot afford it. With the right resources, you can secure lower rates on your life insurance policy.
First things first, bettering your health is imperative. You will burn fat, decrease your heart rate, and lower your blood pressure, all of which equate to decreased premiums for your insurance. Additionally, you should improve your health by eliminating all of your tobacco use. Smokers are going to pay much more on policies than non-smokers.
You cannot get better rates than working with an independent professional. Unlike a traditional agent, independent agents partner with several providers rather than one company.
Instead of having to call dozens of insurance companies, independent agents deliver the best quotes to you.
Life insurance plays a major role in your family’s future, and getting the most affordable and quality policy is easier than ever. Our agents can help connect you with the best plan to fit your needs without the hassle of calling dozens of companies yourself.
Don’t put off purchasing coverage another day.