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Life Insurance Policies and Information Updates

Disabled World: Revised/Updated: 2019/01/14

Synopsis: Information news and updates on life insurance products including policy types accidental death and critical illness policies.

Main Document

What is a Life Insurance Policy?

Life insurance (or commonly life assurance, especially in the Commonwealth) is a contract between an insured (insurance policy holder) and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") in exchange for a premium, upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

The face amount on the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (eg. 90 years old).

Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim. The normal minimum proof required is a death certificate and the insurer's claim form completed, signed (and typically notarized). If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.

Purpose of Life Insurance

Life-based Insurance Policies

Insurance Policy Nullification

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause).

Any misrepresentations by the insured on the application is also grounds for nullification.

Most US states specify that the contestable period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the claim.

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