5 Secrets about Your Life Insurance Policy You Must Know in 2021
5 Secrets about Your Life Insurance Policy You Must Know for 2021
So you got approved for your life insurance policy and made the first payment, you are all done, right? Not quite. There is still the task of reading over the actual policy contract filled with all of its legalese. It isn’t fun but it is important to know the ins and outs of your policy when dealing with such an important document. If you haven’t had the chance to read over your policy yet, this article will go over some of the important aspects you may not be aware of.
1. Your beneficiary must contact the insurance company if you pass away- the insurance company will not contact your beneficiary
Many of the top life insurance companies in the nation recently agreed to pay hundreds of millions of dollars in settlements because they did not pay claims for policy holders they knew to be deceased. In 2012, MetLife, the largest life insurance company in the United States, agreed to pay $500 million to settle a multi-state investigation into unpaid claims payment practices. Unfortunately, it was not just MetLife that failed to be proactive in paying out claims. It is/was a common practice with the major insurers as they paid settlements for similar violations.
What can you do to assure your policy gets paid out?
Make sure you tell your beneficiary (usually a spouse or child) about the life insurance policy and put it in a safe place along with the phone number of the insurance company and your policy #. It sounds like common sense but far too many people fail to do this. Almost every day I would receive calls from a frantic spouse or child trying to see if their family member had a policy with our company. The spouse or child knew their family member had some type of policy but they don’t know from which company or how for much. This is a terrible situation to put your heirs in especially at a time of loss. And since there are over 900+ life insurance companies in America, trying to find the company is almost impossible. When you receive your policy, put it in a safe place and tell your beneficiary where they will be able to access it along with the phone # of the insurance company and your policy #.
2. Don’t forget to make a payment, even one time
It happens, right? You get busy and forget to make a payment for the cable or cellphone bill. No big deal, you will just double up the following month’s payment to make up for it. They need your business so you hold the cards. Well with life insurance it doesn’t work like that. Most policies have a grace period, typically, 14, or 30 days. But after that grace period expires the policy is canceled. Even if you have paid on time for the past 18 years and you miss one payment the company will most likely cancel your policy. It’s not fair, but its business. Sometimes you may be able to reinstate your policy, meaning sign a form that states you are still in the same health now as when you first took out the policy, but if your health has changed in any way, the insurance company will most likely cancel your policy leaving you without any coverage.
Unfortunately, this happens every day. Distraught people would call in to my previous company saying their current insurer just dropped them after “X” number of years of on time payments, because they were late on this one payment. Many times a new health condition has developed making it very difficult to get a new life insurance policy. It can be devastating to realize now you don’t have any life insurance and sadly this scenario happens far too often. Don’t miss your policy’s due date, do an EFT (electronic funds transfer), pay semi or annual payments but don’t forget to make your life insurance payment on time.
3. Update your beneficiary with life changes
Things change in life; sometimes even the love and trust you once had in a family member or spouse can disappear. With the average life insurance policy term of 20 years, the marital status you had at the time of your application may change over the course of time. If you ever find that you no longer in love with or trust your beneficiary, make sure you call the life insurance company and change the name on the policy. Far too often you hear of the ex-husband or ex-wife receiving all of the life insurance proceeds which would have been the last thing the insured would have wanted. I know it isn’t the first thing you may remember in a stressful time in your life, but don’t forget to update your beneficiary if you no longer would want that person who was your beneficiary at the time of the application to inherit all of your life insurance proceeds now. If you have minor children and a divorce occurs, consider setting up a life insurance trust, or naming one of your parents or siblings as the beneficiary.
4. You can convert your term life insurance policy into a permanent policy for free
A great feature available in most term polices contracts (ask your agent at the time of application if that policy has it) is a feature called conversion. This typically allows you at any time (usually up to age 70) to convert any portion of your term life policy into a permanent policy. Why would you want to do this? When you are younger term life is a much better option. You can get the most amount of coverage at the lowest price. However, as we get older our needs change. The children are out of the house, the mortgage is paid down or off and you may start thinking about covering final expenses. The conversion option in your term life policy allows you to convert over as much of the original face amount you would like to a permanent policy without taking a new health exam. In fact, the insurance company will even give you the same rate class as when you originally took out the policy, regardless of your health status today. How cool is that?
This is also a very common scenario I see almost every day. Someone who has a term life policy infoce for a long period of time but it’s about to expire so they are looking for new coverage. However, they have a new health problem that wasn’t there when they took out their policy. Typically in this situation, I will run the numbers and advise them just to covert a portion of their current policy to a no-lapse universal policy which will save them a great deal of money. If you have any new health issues from when you first took out your policy and you are looking to extend or get a new policy, look at conversion on your current policy instead.
5. Many policies today have an accelerated death benefit rider in the policy for free
Many policies today have what is known as an accelerated death benefit rider or terminal illness rider which is added into your policy for free or it can be added for a small fee. This feature allows an insured, who is diagnosed with a terminal illness that results in a life expectancy of 12-24* months or less (depending on the company) to elect a one time 50-percent of the eligible death benefit up to $125,000-$250,000*. (*Check with your company for the exact amount of eligible benefit)
This benefit can be a godsend to help pay for medical costs, missed work, and to avoid depletion of a family’s savings account at a stressful time.
Conclusion
Knowing these important facts about your life insurance policy in 2021 can save you a lot of money and frustration with future problems. Since most policyholders don’t have the time to read over their contract in great detail, knowing these important aspects of your policy will put you ahead of the game. By knowing these five facts, you are better educated about your life insurance policy and can better protect your family, compliments of the Thelifeinsuranceinsider.com
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Photo: Sarah G…
