Are you entitled to a refund if the premiums are paid in advance and you die
UPDATED: May 4, 2015
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Asked May 4, 2015
There are few insurance policies that will refund pre-paid premiums to your heirs upon your death under very specific circumstances. Life insurance is something that we purchase in advance as a way to provide for our family in case of early or unexpected death, or to assist with funeral costs and pay debts. There are many different types of life insurance, with whole life policies term life insurance being the most common.
It is important to keep together all active insurance policies in a place where they will be accessible to the executor of the will so the appropriate requests can be made in a timely fashion to close out any open insurance policies. Life insurance policies typically have a required notification date and it may take them some time to process the claim. Unfortunately, many family members are overwhelmed and don't know all of the insurance policies held by their loved one or how to go about closing them. They also don't know they may be entitled to refunds of premiums paid in advance on some types of insurance policies or which types of policies this applies to.
There are two types of life insurance policies for which one can pre-pay premiums. The first is Universal Life Insurance. With a Universal Life Insurance policy you make your initial premium payment and thereafter have a minimum payment due but can choose to make payments at any time and in any amount that meets the minimum requirement. This is one way to pay in advance for premiums, although there is also a limit to how much over you can pay. There is no refund for premiums paid beyond the date of death with this policy.
The other policy in which you pre-pay is called Single-Premium Life Insurance. This is life insurance for which you pay the entire premium up front at the time of purchase. This is an expensive investment to make at one time and is not common, but may be appropriate for some circumstances. This policy also does not provide refunds of premiums, because it is a lump sum payment. The policy does, like many other types of life insurance, provide accelerated death benefits. This means that if you have a terminal illness you are able to request the death benefit while still alive to cover medical and/or hospice costs.
The one circumstance in which a refund of premiums may be issued to the estate is in the case of suicide within two years of policy purchase. Typically, all premiums paid will then be refunded because the full death benefit will not be paid in the event of suicide. If the suicide occurs more than two years after the beginning of coverage, there is no refund of premiums nor payment of the death benefit.
Answered May 7, 2015 by Anonymous