Once I started a family, one of the things that I started to really think about was getting life insurance. In the case of anything happening to me, I wanted to make sure that my family was cared for. But when looking for the right kind of life insurance, one must also be careful of the hidden traps of life insurance.
Many insurance companies such as Suncorp offer life insurance, but getting life insurance is a process. I had to look at the different kinds of life insurance available, and then once I picked the right policy, I had to jump through hoops such as reporting my medical condition as well as getting a medical examination to make sure I was in proper health. Yes, they want to make sure that you aren’t likely to die anytime soon before they give you good life insurance.
The closer your are to dying the less insurable you are…
Of course everything in the insurance industry comes with caveats. Remember that insurance companies are in the business of making money. So it’s becomes a game of cat and mouse to make sure that you’ve got the right policy that will take care of your family. You have to look at all the fine print to avoid any potential loopholes.
First off, keep in mind that most policies have what they call “The Contestable” period. Which basically means that they have an exclusion that allows them to cancel your policy within the first two years if they find that there was any kind of omission in your original application. This is pretty broad language, so be careful when filling out that application.
This includes leaving out things like being a smoker, which may fall into the category of being a material omission on your application. All of a sudden you may find that you end up cancelled an uninsured.
Then of course, there are a number of exclusions where the insurance company has written an exception to when they are not obligated to pay on your policy.
There are several common exclusions that typically come up:
- The suicide clause. This one does make sense in that the insurance company doesn’t want someone to take out a huge policy and then kill themselves to take advantage of the payment. Usually, this is an exclusion within the first couple of years of the policy.
- Alcohol and Drug exclusions-These can be tricky exclusion clauses that cover a broad range. It basically excludes payment in cases where the insured is under the influence of alcohol or drugs. Of course this can be interpreted loosely. Imagine cases, where the person is using legally prescribed medications. It can be a vague and tricky area.
- Illegal activities exceptions- Of course, policies exclude payments in cases where the death is caused by illegal activities. But be careful, such a clause could be triggered if you are doing something as simple as having a heart attack while trespassing on private property during a hiking excursion.
- Inherently dangerous activity- Different people have different definitions of dangerous activity. But the insurance company’s definition is all that matters when dealing with hidden pitfalls and loopholes. If you are into bungee jumping and sky-diving, you may have to expect paying a higher premium.
- Mistatement of Age- Whether is a mistake of a few days, months or years, it’s all treated the same. Don’t lie about your age in your insurance form. This can lead to a denial of your claim.
Loopholes, technicalities, hidden language, these things are the bane of the insured. Always study and read your policies carefully and make sure you fill out your application correctly. It’s a game of cat and mouse between you and your insurance company, so make sure that you avoid the hidden traps of life insurance.