Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability Insurance

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Home Page Finance Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability Insurance
Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability Insurance

Posted: Apr 24th, 2008 | Comments: 0 | Views: 23 |

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Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability InsuranceAuthor: Ryan Patterson

A recent survey by Harris Interactive for America’s Health Insurance Plans (AHIP) found that most Baby Boomers underestimate their risk of missing work for an extended period of time due to a disability. Yet they believe that they are more likely to suffer such a disability than to die prematurely. What’s wrong with this picture? Like most breadwinners, Boomers buy family health insurance and life insurance to protect their families while skimping on long-term disability insurance.

How far off are the disability risk guesstimates of most Americans? A study sponsored by the Life and Health Insurance Foundation for Education called “The Real Risk of Disability in the United States” found that a white-collar worker between 35 and 65 years of age has a 27 to 31 percent chance of becoming disabled for 90 days or longer. Unfortunately, the duration of disabilities has increased substantially in the past few decades. In the 1970s and 80s, a 35-year-old male with such a disability would have been out of work, on average, almost four years. Today it’s six, because better medical care means that people with terminal illnesses are living longer. It does not, however, mean they are able to pull in their pre-disability income while they’re ill.

Steven Crawford, a Maryland-based disability insurance specialist, believes that a well considered policy is the keystone to any sound financial plan. Unfortunately, he notes, most financial advisers, not to mention the media at large, rarely mention the subject, even though a person’s ability to generate income is by far their most valuable asset.

“Everybody should have the maximum [benefits] they can afford,” Crawford says. “Somebody 20 years old

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Home Page Finance Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability Insurance

Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability Insurance

Posted: Apr 24th, 2008 | Comments: 0 | Views: 23 |

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<br /> <h1>Protecting Your Family: Health Insurance, Life Insurance, And, Don’t Forget! – Disability Insurance</h1> <p><strong>Author: <a title="Ryan Patterson" href="http://www.articlesbase.com/authors/ryan-patterson/55586.htm" onclick="javascript:pageTracker._trackPageview('/outbound/article/http://www.articlesbase.com/authors/ryan-patterson/55586.htm');">Ryan Patterson</a></strong> <p>A recent survey by Harris Interactive for America’s Health Insurance Plans (AHIP) found that most Baby Boomers underestimate their risk of missing work for an extended period of time due to a disability. Yet they believe that they are more likely to suffer such a disability than to die prematurely. What’s wrong with this picture? Like most breadwinners, Boomers buy family health insurance and life insurance to protect their families while skimping on long-term disability insurance.</p> <p> </p> <p>How far off are the disability risk guesstimates of most Americans? A study sponsored by the Life and Health Insurance Foundation for Education called “The Real Risk of Disability in the United States” found that a white-collar worker between 35 and 65 years of age has a 27 to 31 percent chance of becoming disabled for 90 days or longer. Unfortunately, the duration of disabilities has increased substantially in the past few decades. In the 1970s and 80s, a 35-year-old male with such a disability would have been out of work, on average, almost four years. Today it’s six, because better medical care means that people with terminal illnesses are living longer. It does not, however, mean they are able to pull in their pre-disability income while they’re ill.</p> <p> </p> <p>Steven Crawford, a Maryland-based disability insurance specialist, believes that a well considered policy is the keystone to any sound financial plan. Unfortunately, he notes, most financial advisers, not to mention the media at large, rarely mention the subject, even though a person’s ability to generate income is by far their most valuable asset.</p> <p> </p> <p>“Everybody should have the maximum [benefits] they can afford,” Crawford says. “Somebody 20 years old</p> <p>

There are all kinds of clauses involved with life insurance policies. It’s a veritable attorney’s dream (or nightmare) reading through the typical life policy. One very important clause that bares further explanation is the contestability clause. Let’s go through this clause and understand its impact on you as the policy holder as it can be pretty significant. It’s also important to discuss ways to avoid triggering this clause all together during the underwriting and application process. Let’s look a little closer at contestability clauses found in life insurance.

First, a definition of the contestability clause in simple language. Essentially, if the applicant of a life insurance policy misleads, misrepresents, or withholds material information to the life insurance company during the application process, the life insurance company may not have to pay benefits in the event of the insured passing away.  The key word there is material. Material basically means that the information is important to the consideration of your application to the life insurance company. A hangnail probably doesn’t apply but elevated cholesterol does. Our recommendation is to list everything and answer each question thoroughly and honestly so you can avoid any issues involved with the contestability clause when applying for life insurance. Life insurance application tend to be less involved than average health insurance apps since both types of insurance plans differ in what they view as important. Life insurance is more concerned with issues that affect mortality while health insurance is more concerned with issues that affect morbidity.

There are two ways that the the contestability usually becomes an issue. The first is that the applicant simply forgets information. You want to make sure not to do this with larger issues. Even if you honestly forgot a more serious issue, it can still come back to bite you via the contestability clause. The life insurance application is a contract after all. Even if honestly forgotten, material information left off the application can jeopardize the validity of the contract and potentially void the contract (and your ability of your life beneficiaries to receive life benefits).

The other way is that a person is concerned about qualifying for life insurance and/or the rate and health class that will be offered based on pre-existing condition which leads them to conceal or misrepresent this information. Don’t do it. It doesn’t make sense to jeopardize your life insurance benefits by concealing information. It defeats the purpose of buying life insurance altogether by doing this. Life insurance is all or none…there’s no 50% payout. By jeopardizing your life insurance contract, your beneficiaries may end up with nothing.

There’s a timetable that constrains the life insurance contestability clause. The life insurance company has 2 years to use the contestability clause if evidence of misrepresentation, concealment, or material fraud occurs. After this period of time, the carrier is unable to use this particular clause in such situations. There are other options now if you have a health issue such as no medical life insurance. We can also try to re-apply in the future to replace life insurance which is issued on a higher tier. Some issues can be remedied with more time away from them such as driving record issues. If you are concerned about your chances of qualifying, please contact us with your situation so can we avoid any issues with the contestability clause.

Let’s be frank. The term life insurance application is not exactly a fun process. We rank it slightly worst than health insurance application but considerably better than mortgage application. Somewhere in the nasty middle. Let’s take a look at some pitfalls and problems to avoid on the dreaded term life application.

The biggest concern is to leave off medical information or history on the application. Some applicants will say “well that’s not very important” and they dismiss some issue and do not enter it on the application. Let the life insurance underwriter (person at insurance carrier that determines eligibility) make that determination. If you do not include information on the application, your insurance can be rescinded which is a technical term for cancelled after the fact. This is bad in that it usually comes up when there is a claim and the carrier finds that health history was not made apparent to them during the application process. It defeats the purpose of securing term life insurance protection if that protection is made void by missing information. This also goes for people who intentionally leave information off in order to secure coverage or get better rates. What’s the purpose of obtaining coverage that might not be valid when the need actually occurs to trigger benefits. It’s a losing game and after seeing the negative consequences in the past of missing information, we strongly recommend against it.

Another problem that occurs is entry of vague or incorrect information, especially in the life beneficiary section. We wrote an entire section just on beneficiaries to drive home the point that this is a crucial part of the application. A quick refresher… Be specific as to the person (don’t use words like “spouse); as to how the benefit will break down (use percentages instead of dollar amounts); as to secondary and other beneficiaries (in the event the primary beneficiary is unable to collect or as passed away). You want to avoid the benefit going through probate and the accompanying estate taxes/conflicts that can result.

If you have any questions as all on selecting the right plan options on the application, please consult with us as your licensed term life insurance agent. Once we go through the underwriting process and they come back with a decision, we may have to completely re-apply to change the plan choice. It’s best to avoid this and also make sure you select the coverage you think you are buying. The carriers have many options (not to mention that there are many carriers) so it’s best to be sure that you have selected the right option. This goes for life riders as well. We’re not sold that insurance riders are the best use of your premium dollars (as described in our term life insurance riders article) but if you do decide to go this way, make sure you have selected correctly…with our help of course.

It’s also very important to keep information up to date. Do not assume you can always change it later (which of course you can) as things may change or the benefits may be triggered. We have seen situations where people figure they will update the information next year and the unforeseen occurs which can throw all types off problems into the mix.

These are some common issues to avoid when completing your term life insurance application. We would be happy to help you with an questions you have during the process.

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