Life Insurance Laws
The topic that applies to laws that apply to life insurance polices are wide and varied. For the purpose of aiding the reader, we will limit the scope of this topic to the essential ones that will most likely affect a policy holder. This article will cover key interest points in the topic of live insurance laws.
To begin, let us state the legal definition of Life Insurance using layman’s terms. This is a mutual agreement, meaning both the insurance carrier and the policy holder agreed to go into contract with one another. The carrier agrees to pay an agreed amount to the beneficiaries or dependents when the policy holder dies. This shall be according to the terms of their agreement. In return, the policy holder will pay in smaller amounts called “premiums” while he or she is still alive. These premiums can be paid immediately or periodically, as the contract states. Proponents that affect this mutual agreement of parties include: the age, health, status and other circumstances in the life of the policy holder.
Life insurance products are subjected to state laws. This implies that insurance carriers must abide by the existing regulations where they conduct business, and policies must also conform to rules in the places where they are sold. Most laws were created to protect the interests of the consumer.
Many states have a provision called a “Grace Period”. This allows for the policy holder to pay overdue premiums and for the policy not be canceled outright upon a missed payment. The owner of the policy usually has 30 days to come up with the amount prior to a cancellation. Some states even require the insurance company to send a notice of cancellation before they can terminate the contract with the policy holder.
“Free Look Period” is a short amount of time given to the policy holder. During this said period, consumers are allowed to decline or back out from the contract at not cost to them. There is refund for the full amount that the consumer paid, should the undecided policy holder change his or her mind. This can range between 10-30 days in most states. Policies that are delivered through mail can sometimes have extended time allowances.
Many states require an insurance carrier to give the death benefit to the beneficiaries within 30 days. As soon as the company receives a proof like a death certificate or a similar document, the process for settling the amount should start immediately. If after the time period, the dependents are not yet paid; the death benefit will start to increase due to interest.
Laws are also there to protect the insurance carrier. In some states, contesting information during the application of the policy holder might disqualify them from reaping the benefits of the policy. It’s best to be truthful with your insurance provider. Also there are varying exclusions for suicide and other high risk activities for different companies and states.
Personal information of consumers is restricted. Medical history and records that determine eligibility cannot be released by the insurance carrier. There is also a genetic non-discrimination law which cannot disqualify an applicant without actual justification. Check your state laws for this because there might be some limits on where the law applies. It can either be for life insurance or disability insurance only.