It’s the responsible thing to do – get life insurance. Yet many of us don’t do it.
Some claim it’s a financial issue although there are policies available for as little as $20 a month or three Starbucks coffees. Others think it’s for older people or only those who have children. Both of those are important reasons, but you can be young and single and still take out life insurance. Unfortunately, death can come at any time--it’s not reserved for the old. What you don’t want to do is leave your family or friends in debt paying for your funeral expenses. Life insurance can pay for that and any outstanding debts that you may have acquired during your lifetime. Now that you understand the importance of life insurance, it’s important to know what it does NOT cover. Here is a breakdown of the conditions in the fineprint that people rarely read that can impact your insurance policy.
It matters how you lose your life
Death can come in many different forms, but if you choose to take your own life, most policies will not pay out to your beneficiaries. However, depending on where you live, there may be a suicide clause in your policy. This means that if you commit suicide within a specific time frame, typically 2 years from when you signed, your beneficiary would get the premiums back, but not the death benefit.
Tell the whole truth about your wellbeing
It is imperative to be completely honest about your health when you are applying for life insurance, especially when it comes to smoking. If you don’t come clean about your past smoking habits or you don’t mention any conditions you have, such as high blood pressure, it’s grounds for cancellation during the incontestability period. This is typically one to two years after you signed the policy. Don’t think you can hide health conditions. If you’ve ever watched CSI, you know that medical science can trace back the origins of most diseases, and so can forensics.
It doesn’t pay to live life on the edge
If you’re a thrill seeker, it may be harder to get coverage. It’s about risk assessment and the increased likelihood of you meeting your untimely death. Even professional athletes have certain clauses in their contract that don’t allow them to take part in so-called dangerous activities. Obvious ones are skydiving or parachuting, but it also includes something pretty common – but still dangerous – riding a motorcycle. Life insurance companies don’t like to pay out, and if you’re taking part in a lifestyle that’s full of extreme activities, you may find it difficult to get any substantive coverage.
It’s best to stay on the right side of the law
Crime doesn’t pay and neither do insurance companies if you are killed when committing an illegal activity. It’s pretty simple and straightforward, and it also goes back to risk assessment. If you’re involved in illicit behaviours, like robbing, drug dealing, or car theft, and you die as a result of anything connected to it, your beneficiary won’t be paid.
Stay clear of war zones
There is an interesting clause that involves war. It’s not about soldiers or people on active duty. It’s geared toward civilians who are killed in wars or by acts of wars, such as journalists whose job takes them into a battle on a regular basis. It is also for people who travel to parts of the world where there is armed conflict. If it is a known warzone and you choose to go there, you will not be covered if you’re killed. This is often overlooked for people who come from countries where sporadic violence is the norm, and they don’t even consider it warzone. It’s important to check with your insurer before you travel.
As always, it’s best to talk over your life insurance needs with a financial advisor or broker before you sign on the dotted line. Just make sure you get some, so that you can give your family peace of mind if the need ever arises.
Ian Webster's nearly two decades of recognized experience at several well-known financial organizations has given him the inside track on the upsell of products such as mortgages and mutual funds and allowed him to help clients with everything from lowering their taxes to developing profitable investment portfolios.
His expertise has been featured in The Globe and Mail, Toronto Star, Toronto Sun, and Time. He has also been a featured financial speaker at many high-profile networking functions.
Find Ian online at www.financialfighter.com and on Twitter, Facebook, Linkedin, and Instagram.