One of the largest concerns policyholders have about taking out a life insurance policy is the risk of it not paying out. Life insurance is designed to pay out a lump sum to your beneficiaries when you die, giving you peace of mind that they are protected. While clauses do exist that restrict payouts, it is very rare that life insurance does not payout. To help you understand why an insurance policy would not payout in the event of your death, read on.
Common Reasons a Life Insurance Policy Would Not Pay Out
We all might be guilty of telling a little white lie here and there, but lying on your life insurance application is a major no-no. In some cases, people knowingly lie on their life insurance application to avoid high fees and land themselves a lower premium. In other cases, they unknowingly tell a mistruth that then gets discovered when the insurance agency is handling the pay out.
If an insurer finds out that you have lied on your application, they may not pay out, leaving your family to fend for themselves. What’s more, most lies do get found out and always hurt the people you love at the worst possible time. Avoid non-disclosure – or good old-fashioned fraud – if you want to provide for your dependents when your number’s up in life.
Outlive the policy
This applies to term life insurance policies where you secure coverage for a set period of time, such as 10, 20, or 30 years. When this term policy expires and you have passed during the term length, you are going to have to secure a brand new policy under your new conditions.
If you outlive the policy, the insurance will not pay out and you will need to find new coverage. As you age, you may develop health conditions that are then more expensive to insure. You can choose not to renew, but you’d be throwing away the previous payments made towards the previous policy. For that reason, you should consider wisely the fixed term period before you sign.
Change in circumstances
You will need to keep your insurance provider up-to-date with any changes in your life such as getting married, having children, moving house, or changing jobs. If you move house and have a bigger mortgage or change jobs and receive a higher income, it’s likely that you’ll need to increase your level of cover or change it entirely. If you don’t update the terms of your policy when your lifestyle changes, your policy may not fit your needs anymore. If you don’t update the terms of your policy or switch to a new one, you may be underinsured and the insurer may not pay out when you pass. What’s more, if you’re diagnosed with a life-shortening illness but fail to let your insurer know, your claim could be refused.
When you’re ready to get started on your life insurance policy talk to the professionals at Premier Risk Insurance. We serve Long Island and surrounding cities in New York, and we look forward to hearing from you today.