Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary

Favorable Life Insurance Rates for Non-Cigarette Smokers

by John Darer® CLU ChFC CSSC RSP CLTC

There are several life insurance companies that will allow non-smoker rates for users of cigars, pipes, chewing tobacco, nicotine gum, lozenges and e-cigarettes, even with nicotine in the urine.   In order to qualify you will still need to be a non-cigarette smoker for at least 12 months.

You will still need to complete the normal underwriting process and other risk factors could impact your cost of insurance or whether or not you are insurable.

 

Occasional cigar with buddies OK

 

 

 

Life Insurance Policy Contestable Period is a Protection Against Fraud

by John Darer® CLU ChFC MSSC RSP CLTC

 

What is the contestable period of a life insurance policy?  The contestable period on a life insurance policy is designed to protect the life insurance company and policyholders (in the case of a mutual company) or stockholders (in the event of a stock company) from material misrepresentation and fraud. The actuaries of the insurance company sets its prices in good faith, relying on the truthful recording of answers by applicants and agents.

 

In "The Misrepresentation Defense in Life and Disability Insurance Cases" by C. Edgar Sentell states

"These rules have typically been formulated in terms of whether the misrepresentation was “material.”  In some states, the insurance company’s right to defend or rescind is further limited by an additional requirement that the matter misrepresented actually contributed to the loss, contingency, event or hazard for which the claim is made.  In other words, in a limited number of states, the insurance company may not deny a claim or seek rescission unless a “causal relation” exists between the misrepresentation and the actual loss.  Under such statutes or case law, when there is an applicant who falsely claims to be a nonsmoker, the insurance company can escape liability if the then insured dies of lung cancer due to smoking, but not if the insured later dies of AIDS.  Finally, in some cases, the insurance company cannot avoid liability even when the policy has been procured through outright fraud".

In addressing the Professional Planner forum, attorney George Berger of the New York law firm Phillips Nizer stated:

"All that the N.Y. Insurance Law requires is that there be a material misrepresentation in the application. Even an innocent misrepresentation will do and the common position taken by the insured that I told the broker or agent the truth but he failed to write it down will not excuse the misrepresentation.

The test for what is material is stated in section 3105 the N.Y. Insurance Law and it says:

"No misrepresentation shall be deemed material unless knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract."

More Comments
IF you are part of the majority that is truthful on your application you should be able to  "bank on your policy", even if the indeterminable loss occurs within the contestable period.

When you apply for life insurance, you should carefully review the application BEFORE you sign the application. The application becomes part of the contract and is usually attached thereto, at the back. When you receive your annuity contract from your agent or the company, you should look over the application AGAIN and make sure that your application (that is now part of the contract) is completely truthful and accurately recorded.

 

Just remember if you screw up on your life insurance application, you may never know the ramifications, but your family will!

 

There seems to be some confusion about l life insurance contestable periods over on The Settlement Channel, where a reader wrote:

 

"I have noticed lately that there are a lot of concerns about life insurance policies and the fact that you have to keep them for at least a year or whatever the term says before you can actually bank on the policy. So if you get a life insurance policy and you die in 2 weeks, then you do not get the life insurance payoff because you died too fast (no matter what the reason is). It is important to check out the life insurance company you are going to be dealing with on this aspect.

May 31, 2009 | life insurance girl" [The highlighted part above is not accurate]

What happens if death occurs while after a prepaid life insurance application is pending

A prepaid insurance application means that a deposit has been submitted with the application, in exchange for a conditional insurance receipt or temporary insurance agreement.If you die while a prepaid application is pending, the life insurer will continue underwriting the policy. Subject to the terms of the conditional insurance receipt or temporary insurance agreement, may very well pay the claim up to the amount stated in the conditional insurance receipt or temporary insurance agreement, if the applicant would have been insurable.  The amount may be limited to a maximum of $500,000or $2,000,000 depending on the company.

 

What happens if death occurs while after a life insurance application is issued and in force, but within the life insurance policy's contestability period?

A contestability review will be part of the claim review for any claims submitted in the contestability period. The contestability period is two years from policy issue in the majority of states and one year in others.  Again it begins as soon as a policy goes into effect. The life insurance company is within its rights to investigate the application and the information submitted for material misstatements. One big example could be if a life insurance applicant has lied about smoking status.  There is legal precedent for rescission of a life insurance contract over misstatement of smoking status after presentment of a life insurance claim. [ see Montgomery v Fidelity & Guaranty Life Ins Co , 269 Mich App 126 (2006), where the  insured  did  not  disclose  his  smoking  habit  on  life  insurance  policy application,  although  he  died  in  a  car accident. The court held that the material misrepresentation warranted rescission of the policy by the insurer

 

 There are separate contestability periods for suicide which may be 1 or 2 years.  An insurer does not want someone buying a policy in contemplation of causing their own death.