What Can Void a Life Insurance Policy?

A few situations can cause a life insurance policy to be voided or terminated. It is important that policyholders avoid having their life insurance policy voided because once it has been terminated, the death benefit will not be paid. Furthermore, in a situation where the policy has been terminated, the consumer will be required to re-apply for a different plan and will be subject to proving insurability again. As a result, it is imperative to be honest on the application and to make sure the premiums are kept current.

Misrepresentations

Life insurance policies can be voided because of a few things. One of the reasons that most policies are voided is because of misrepresentations or falsifications. It is imperative to be honest on an application for life insurance. If a policyholder is found to have provided false or fraudulent information on an application, the policy can be rescinded.  That means that the death benefit will not be paid. However, in the event that the policy is rescinded, premiums are returned in most states.

Contestability Period

The contestability period is the amount of time that the insurance company has to contest any answer on the application. In most states, the contestability period is approximately two years. During this two-year period, the insurance company can question and investigate any answer that was provided when the policyholder applied. If any of the information is found to be fraudulent, the policy can be terminated. Nevertheless, in most states, the premiums would be refunded even in this situation.

How Suicide Affects a Policy

Suicide is not a reason for termination in all situations because policies vary on this topic. However, suicide can cause a life insurance policy to be voided. Each state mandates their own requirements, so state guidelines on this subject can be a bit diverse. Some policies stipulate that suicide within a certain amount of time from the start of the policy will void the death benefit. Additionally, some policies will not pay a death benefit on suicide at all. Because each state and each insurance company varies on the topic of suicide, it is important to note what your policy states specifically.

Lapsing in Payment

Another way to void a policy is to lapse in payment when premiums are required. It does not take long for a policy to be voided when payments are missed. As with all insurance companies, every plan has a grace period of thirty days. The grace period is the amount of time that a policy owner has to make a payment after the due date but before the policy is terminated for nonpayment. However, if the payment is late after the grace period, the policy will lapse and be terminated for nonpayment. To reinstate the policy, the consumer must re-apply and qualify for the plan again.

Many factors can cause a life insurance policy to be voided. Applicants must remember to be completely honest when applying because any misrepresentations or falsifications can cause a policy to be voided and terminated. Additionally, the insurance company has up to two years to contest any information on the application for any reason. Suicide can void some policies, however, be sure to check your policy for the requirements. In addition, keep payments current and do not lapse on the account past the grace period, as that can void a policy as well.

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