California Life Insurance Litigation
Most people buy life insurance without having any understanding of the policy they are buying. Many financial advisors do not adequately understand the product they are selling, and fail to properly explain how it works. There are many areas of complexity in life insurance that can lead to mistakes, misunderstandings, or worse.
Contestability Period
In most states, there is a two year period of contestability after issuance of the policy. During that time, if the insured dies, there will be an investigation to determine whether there were inaccurate or incomplete statements made on the application. Insurance companies have a legal right to conduct an investigation, and the beneficiary must cooperate). However, insurance companies will sometimes deny a death claim for misstatements on the application that are not material because they are unrelated to the cause of death. In those cases, the claim must be paid.
Types of Life Insurance
There are two basic types of life insurance: term and permanent. Term insurance lasts only for a specified period of time, and is temporary by nature. The terms are usually for 10, 20, or 30 years. The premiums are low because the likelihood of death during the term is very low. However, most term policies can be converted into permanent life insurance without further underwriting. “Permanent” insurance is intended to last for the lifetime of the insured. The premiums are much higher than term insurance premiums, and the policy usually has cash value.
There are also “accidental death” policies that pay benefits only if the insured dies as a result of an accident. They have no cash value, and the premiums are usually quite low.
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