How long before a person dies would some one benefit from buying a life insurance policy?
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Asked July 1, 2015
Contemplating the purchase of life insurance tends to raise a number of questions -- or should lead to certain questions being asked of a consumer. One issue that a person in the market for insurance must consider is the point in time the policy itself becomes effective. In other words, is there a period of time that exists after purchase of a policy in which benefits are not paid if the covered individual dies.
A consumer seeking life insurance coverage needs to understand that the terms and conditions of this type of insurance varies from one policy to another. This includes the length of any exclusionary period following the date of policy purchase in which premiums are not paid.
Insurance regulations in different states also impact any post-purchase exclusionary period. Regulations promulgated by the state set broad parameters regarding any permissible time period in which a policy is purchased and coverage upon death is payable.
One type of exclusionary period can be particularly long. A standard life insurance policy will preclude payment if the covered individual commits suicide during an established exclusionary period. This time frame can be as long as one to two years.
A consumer must also consider the type of life insurance being purchased: term or whole life, including variable whole life. With a term policy, the amount of the death benefit is established up front. In the case of a variable whole life policy, the amount of the death benefit increases over time. Thus, if the covered individual dies shortly after a policy is purchased, the death benefit will be less than would be the case if the insurance were in place for a longer period of time.
It is incumbent upon a consumer seeking insurance to be sure that any question regarding a post-purchase exclusionary period is fully answered and understood. Although the policy does contain this information, confirming any exclusionary period with an agent or broker is fundamental.
Impartial and consumer-friendly information on life insurance policies is available from the consumer assistance division of the insurance commissioner's office in each of the 50 states. Included is information and materials designed to make a consumer more savvy when it comes to the purchase of life insurance.
Answered July 11, 2015 by Anonymous