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Life Insurance Asked Questions


Can I challenge a beneficiary?
 

It's difficult, but not impossible, to change a beneficiary after the death of the insured. But going through a dispute can be a lengthy and costly process.
   
How can I find out if my deceased relative had life insurance?
 

Unfortunately, there's no clearing house of information on life insurance policies. But we'd like to offer you some suggestions:

  • Go through canceled checks or contact your deceased relative's bank for copies of old checks. If he or she wrote checks to pay premiums, the insurer's name should be listed on the checks.
  • Check old credit card statements. Your relative may have paid premiums by credit card. ยท Check probate court records for details of your relative's estate. If the estate has gone through or is in probate court, a life insurance policy could show up as an asset.
  • Contact any past employers to see if your relative had group life insurance.
  • Contact other family members (i.e., brothers, sisters, or children) who may have been privy to your relative's finances. Perhaps they will know if he or she had insurance and from whom it was purchased. Also ask your relative's lawyer, banker, or accountant.
  • Track down your relative's auto or home insurance agents. They may have sold him or her a life insurance policy or at least know from whom it may have been purchased.
  • If your relative bought life insurance fairly recently, there might be a trail of the companies to which he/she applied. The Medical Information Bureau maintains a database that might show if insurers requested your relative's medical information within the past seven years. Record searches can be requested through the Disclosure Office of the MIB for a fee of $8.50.

Keep in mind that if no beneficiary comes forward to collect the death benefit, and your relative's insurance company cannot locate a beneficiary, the insurer has to hand over the death benefit to the state within a certain period of time. After the state receives the death benefit, a beneficiary still can come forward to collect the proceeds.

   
Can I borrow money against my life insurance policy?
  If you own a cash value life insurance policy, you can take out a loan against the cash value you have built up in the policy. Of course, you will have to pay back the loan with interest. If you die before you pay back the loan, the balance that you owe will be deducted from the death benefit. If you own a term life insurance policy, you cannot take out a loan against it because you do not build up any cash value in a term policy.
   
If I'm a beneficiary, do I have to pay income taxes on a death benefit?
  No. Death benefits from life insurance policies are free from income tax. However, the death benefit may be subject to estate and inheritance tax..
   
Do all life insurance companies require a physical exam?
  An HMO is a Health Maintenance Organization. As a member of an HMO, you select a primary care physician from a list of doctors in that HMO's network. Your primary care physician will be the first medical provider you call or see for a medical condition. He or she will make any needed referrals to a medical specialist. Typically, these specialists will be part of the HMO network. If you join an HMO, you should find that you have few out-of-pocket expenses for medical care -- as long as you use doctors or hospitals that are part of the HMO.
   
If my application for life insurance is rejected because of poor health, are there any other companies that will insure me?
  Yes, there are insurance companies that specialize in high-risk applicants, although the premiums for these policies can be higher, we can assure you that with our impressive cache of insurance companies, that we will be able to find you the most competitive policy.
   
How quickly do insurance companies usually settle life insurance claims?
  As a general rule, once an insurance company receives a death certificate proving the demise of the insured, the beneficiary usually receives a death benefit within one week. However, if an insured dies within two years of buying a policy, and the insurer conducts a follow-up investigation to determine the cause of death - suicide or if the insured lied on the application - it can take 30 to 45 days before a death benefit is paid. Most life insurance policies have an "incontestable clause" that states an insurer can refuse to pay the death benefit if it finds that the insured lied on his or her application. For example, if an insured died of lung cancer within two years of buying the policy, and the customer wrote on the application that he or she did not smoke, the insurer may have grounds to deny the claim.
   
What happens if I surrender my annuity?
  Surrendering an annuity, particularly during the policy's first five to seven years, will result in surrender fees. We can structure your policy so that surrender or early withdrawal fees are clearly outlined. We'll review the fine print in your policy so you can be sure of the costs associated with surrendering your annuity.
   
What is funeral insurance?
  Section 1035 of the tax code allows for the tax-free exchange between like accounts: annuity to annuity, life insurance policy to life insurance policy, and life insurance policy to annuity. However, you cannot go from an annuity to a life insurance policy.
   
What are the tax implications of transferring cash-value life insurance, annuities, or 401(k) money?
  A physician or other medical professional who serves as a group member's first contact with a plan's health care system. Also known as a primary care provider, personal care physician, or personal care provider
   
Can I sell my life insurance?
  Yes. It's called a viatical contract or life settlement. Viaticals allow people who are terminally ill to sell their life insurance policy for a percentage of its face value. Some viatical arrangements are private, perhaps among family members. These days, viaticals have become big business, with viatical companies luring investors to buy policies in bulk. In addition, "life settlements" or "senior settlement" contracts allow healthy policyholders to get out of life insurance policies that they may not need anymore.
   
Is it possible to find out why a company has either rejected your life insurance application or placed you in a higher-risk class?
  Absolutely. However, insurers are not required to go into detail on exactly what medical condition led to the adverse decision. The ACLI says that insurers do not like to "intrude" on the relationship between applicants and their physicians, and insurers do not want to be in the position of giving an applicant a detailed diagnosis of his or her condition. If the life insurance company has acquired medical information from your doctor, you can ask your doctor for the same information, along with an explanation of your condition.
   
Is a variable life insurance policy or a variable annuity (VA) a suitable financial product for parents to use to save for a child's college education?
 

No, a variable life insurance policy is not a wise choice to use as a savings vehicle for a college education for the following reasons:

  • Although variable life insurance has cash value that can increase over time if your underlying investments in the policy perform well, you are also paying life insurance premiums that are expensive. Those premium payments will significantly eat into the gains you could make on your cash value.
  • Cash value should not be considered a traditional investment because any partial withdrawals or loans that you do not pay back will reduce your death benefit. So if you don't pay the loan back, your beneficiaries will when you die.
  • If you partially withdraw or take out a loan against your cash value, and the withdrawal or loan amount exceeds the premiums you have paid into the policy, you will be taxed on the difference.
  • If you choose to surrender your variable life insurance policy, you also may have to pay a surrender fee to the insurer.

AVA can be considered as a retirement planning tool, not as an investment vehicle to save money for a college education.

   
  "Please refer to your policy declarations page as special terms, conditions And exclusions may apply."