Are You Reading Your Life Insurance Fine Print?

/ Life Insurance / Oct 5, 2020

When you are thinking of getting a life insurance policy, you must realize that it is a legal document which you should know very well before the purchase.

Take your time in reading the document and ask your financial advisor questions until you are satisfied with your plan. Here are the things you should look for.

Find out the things that are excluded in the fine print

Your insurance plan tells you clearly what is included and what is excluded. You should try to find out from the fine print what happens if:

  • you suddenly decide to cancel your coverage.
  • you miss out on your premium payment.
  • you are declared dead by intoxication or suicide.
  • you want a coverage extension (for e.g., term life insurance typically gives you the right to convert to permanent).

Beware of high-risk activities

If you engage in high-risk activities like skydiving or racing, you may face higher premiums or additional exclusions. The countries where you travel may also have a profound effect. Since most life insurance companies have varying requirements, it makes more sense to compare life insurance quotes with an experienced financial advisor to come to the best decision.

If you start on any bad habit that comes with serious health issues like smoking after opting for life insurance, you will be covered with low premium, but it may result in a void of contract if you go through the section written in fine print.

Know what can result in contract cancellation

The insurance company can challenge the validity of your policy at any time for fraud and during the contestability period (usually two years). A mistake, such as giving the wrong date of birth, can usually be corrected.

However, if you smoke but say no, you are committing a life insurance fraud. You may consider yourself a non-smoker because you occasionally smoke a cigar or use electronic cigarettes. However, it’s better to discuss these points with your advisor before coming to a decision.

For example, the advisor can suggest you to go for a no-medical life insurance plan instead of a costly smoker’s term life policy depending on your financial circumstances.

Check the requirements closely

Insurance companies review your claim through underwriting. Since the underwriting criteria differ on the basis of insurer and increase with the amount of coverage, ask to see the requirements before you apply. For example, some insurers may require a slow-to-obtain Attending Physician’s Statement, while others do not.

Understand the life insurance application process

Once you have decided on what you want to purchase, you will need to apply for coverage. The application form can be dozens of pages long, although some sections may not apply to you. Make sure you answer each question accurately.

You can request an application form for review in advance. This gives you time to gather information that you may not remember, such as when and why you last visited your doctor.

Read the fine print of the life insurance claim process

Before a claim is paid, you often need to meet conditions such as a proof of death. There may also be a deadline for submitting complaints. You can request and review a claim form before purchasing.

The insurance company examines the claim before paying the benefits. For example, if the death occurs in a different country, or soon after a new policy comes into effect, be prepared for close scrutiny. The better you understand the claims process, the easier it will be in terms of the settlement.

Changing one’s mind

Your insurance policy usually comes with a 10-day “free sample.” During this period, you have a right of withdrawal. This means that you can return the policy for a refund with no questions asked.

You can also surrender (or cancel) your coverage at any time thereafter. There can be taxes and penalties, which is another reason to explore the fine print of the life insurance policy before you buy.

Need professional help? Find a life insurance advisor in Mississauga, Toronto, Canada

Our expert life insurance advisors can help you determine the appropriate coverage amount, considering a number of factors like your income, debts, net worth, existing plans, current health conditions, etc.

We have more than 30 years of experience providing expert insurance and investment advice for both businesses and individuals. Get in touch with our expert financial advisors to know more about the best and affordable Life Insurance Plans in Toronto and Mississauga.