Will the beneficiary not receive the amount if the insured dies within before the contestability period is over? In that case, should I opt for a graded benefit?
Total Comments: 3
Posted: Tue Feb 26, 2013 01:42 pm Post Subject:
should I opt for a graded benefit?
This is not a question that anyone here can answer for you without knowing more about your situation.
A "graded death benefit" policy is one which starts out with a death benefit much less than the "face amount" of the policy. A $25,000 face amount could be as little as $10,000 in the first year or two. Once the policy becomes incontestable, the full face amount would be payable.
The premiums during the first two years are not lower than after the policy becomes incontestable. That makes a "graded premium policy" a substandard premium contract.
What do you get with a graded premium policy? Usually some concession from underwriting that makes it easier to qualify for the insurance, and a higher premium overall, even after the contestability period is gone. The beneficiary receives a death benefit as long as the policy is in force at the time of the insured's death -- they just won't get the full face amount if death occurs in the first one or two years.
Posted: Wed Feb 27, 2013 01:37 pm Post Subject:
Contestability period is mainly meant to prevent misrepresentations and frauds.
Your life coverage comes into force from the moment you buy the policy, and the beneficiary will receive the amount even if you die the next day.
If you hide facts or pre-existing conditions and that is revealed by the insurer later on, then only the benefits will be denied. Insurers also don't pay if the insured commits suicide within the contestability period.
Graded death benefit is not really helpful, unless you know that you're committing a fraud.
Posted: Wed Feb 27, 2013 02:27 pm Post Subject:
Well, almost everything that "insuranceguide4u" has written above is inaccurate. You certainly would not want to be guided by him in the pursuit of insurance.
Contestability periods do not "prevent" misrepresentation or fraud, they provide the insurance company with one last, limited opportunity to avoid a claim due to a material misrepresentation or concealment in the application and not detected during initial underwriting. Once the contestability period has elapsed (two years in most states, but one year only in a few), then the insurance company must live with the fact that they did not do a god job of underwriting, if misrepresentation or concealment occurred in the application.
If you hide facts or pre-existing conditions and that is revealed by the insurer later on, then only the benefits will be denied.
Aside from the fact that this statement about "only the benefits" makes no sense, the "revealed later on" only applies prior to the policy becoming incontestable. It is not an unlimited opportunity to deny a claim. And as I indicated above, any misrepresentation or failure to disclose must be MATERIAL to the risk, otherwise it has no adverse effect on coverage.
For example, you fail to disclose that you had surgery to repair a broken ankle five years ago. You die in a traffic collision 18 months after your life insurance policy is issued. The fact that you had surgery should have been disclosed when the question asked, "Have you been hospitalized for any reason, had any surgical procedure performed, or received any treatments for cancer, vascular, or orthopedic conditions?" But a surgical procedure to correct a broken bone is not material to the risk of dying, unless related to some other health condition. When, following death, the insurance company learns of the hospitalization and surgery, because it is not a MATERIAL concealment, it will not void the policy, and the death claim would be paid.
Death by suicide has nothing to do with the contestability period. It is covered under the "suicide provision" in the policy, which happens to be the same length of time as the contestability period in most policies. I can understand how a lay person might be confused by this, but a licensed agent should know better.
Taking advice from "insuranceguide4u" could be similar to a blind man taking a sightless person for a walk.
Posted: Tue Feb 26, 2013 01:42 pm Post Subject:
should I opt for a graded benefit?
This is not a question that anyone here can answer for you without knowing more about your situation.A "graded death benefit" policy is one which starts out with a death benefit much less than the "face amount" of the policy. A $25,000 face amount could be as little as $10,000 in the first year or two. Once the policy becomes incontestable, the full face amount would be payable.
The premiums during the first two years are not lower than after the policy becomes incontestable. That makes a "graded premium policy" a substandard premium contract.
What do you get with a graded premium policy? Usually some concession from underwriting that makes it easier to qualify for the insurance, and a higher premium overall, even after the contestability period is gone. The beneficiary receives a death benefit as long as the policy is in force at the time of the insured's death -- they just won't get the full face amount if death occurs in the first one or two years.
Posted: Wed Feb 27, 2013 01:37 pm Post Subject:
Contestability period is mainly meant to prevent misrepresentations and frauds.
Your life coverage comes into force from the moment you buy the policy, and the beneficiary will receive the amount even if you die the next day.
If you hide facts or pre-existing conditions and that is revealed by the insurer later on, then only the benefits will be denied. Insurers also don't pay if the insured commits suicide within the contestability period.
Graded death benefit is not really helpful, unless you know that you're committing a fraud.
Posted: Wed Feb 27, 2013 02:27 pm Post Subject:
Well, almost everything that "insuranceguide4u" has written above is inaccurate. You certainly would not want to be guided by him in the pursuit of insurance.
Contestability periods do not "prevent" misrepresentation or fraud, they provide the insurance company with one last, limited opportunity to avoid a claim due to a material misrepresentation or concealment in the application and not detected during initial underwriting. Once the contestability period has elapsed (two years in most states, but one year only in a few), then the insurance company must live with the fact that they did not do a god job of underwriting, if misrepresentation or concealment occurred in the application.
If you hide facts or pre-existing conditions and that is revealed by the insurer later on, then only the benefits will be denied.
Aside from the fact that this statement about "only the benefits" makes no sense, the "revealed later on" only applies prior to the policy becoming incontestable. It is not an unlimited opportunity to deny a claim. And as I indicated above, any misrepresentation or failure to disclose must be MATERIAL to the risk, otherwise it has no adverse effect on coverage.For example, you fail to disclose that you had surgery to repair a broken ankle five years ago. You die in a traffic collision 18 months after your life insurance policy is issued. The fact that you had surgery should have been disclosed when the question asked, "Have you been hospitalized for any reason, had any surgical procedure performed, or received any treatments for cancer, vascular, or orthopedic conditions?" But a surgical procedure to correct a broken bone is not material to the risk of dying, unless related to some other health condition. When, following death, the insurance company learns of the hospitalization and surgery, because it is not a MATERIAL concealment, it will not void the policy, and the death claim would be paid.
Death by suicide has nothing to do with the contestability period. It is covered under the "suicide provision" in the policy, which happens to be the same length of time as the contestability period in most policies. I can understand how a lay person might be confused by this, but a licensed agent should know better.
Taking advice from "insuranceguide4u" could be similar to a blind man taking a sightless person for a walk.
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