As part of its free education forum CONNECT, Colina Insurance Limited is helping consumers gain a comprehensive knowledge of how to manage their life insurance and related financial planning products. In its latest installment, CONNECT focused on the theme "Who's getting what you've got when you're gone?" aimed at providing important information on the life claims process, the legal considerations and the importance of choosing the right beneficiary.
Over the next four weeks, the key issues covered at that forum will be featured weekly in The Nassau Guardian. The following was taken from a presentation made by Millicent Wong, assistant manager, Life Claims Unit, Colina Insurance Limited.
The primary reason for having a life insurance policy is to provide financial security for a loved one or to secure a mortgage in the event of a death. It is unnerving to think about dying or the death of someone you love, but death is a certainty and you must be prepared.
That's why it's important to understand the death claims process and the contestable provisions of a life insurance contract in order to avoid having your claim denied, and some of the factors that contribute to the delay in claim processing time.
How to file a death claim
The process begins with notifying the insurance company about the death of the insured. Colina Insurance will accept the following forms of notification:
o Telephone call from a family member of the deceased/executor of the estate.
o Telephone call or email from agent of the insured/policy owner.
o Walk-ins by a family member of the deceased/beneficiary.
o Newspaper obituary/death announcement/notices.
Once Colina Insurance is notified, the person making the claim will be advised by the Life Claims & Disability Unit to collect a death claim package from one of the nine branches of Colina Insurance.
The package will contain the general guidelines for submitting a death claim, a proof of death form (claimants statement, including physician's certificate on the flip side of the form) and a sympathy card.
The general guidelines provide information regarding the basic requirements for submitting a death claim, information about the claims process, turnaround time and any additional requirements for claims subject to investigation. The claims process will not begin until all relevant requirements are submitted.
What can be contested
A life insurance policy is a legally binding contract between the policy owner and the insurer. It is imperative that a policy owner understands the terms and conditions of the policy contract.
A life insurance policy contains what are commonly referred to as contestable provisions that every policy owner should be familiar with. A contestable provision in this context means those provisions that allow the insurer to dispute or challenge a claim based on the facts or evidence obtained about the death of the insured and information contained in your application for insurance.
The best way to avoid your life insurance death benefit from being contested is to be truthful from the start of the application process. Your premiums might be higher but you will certainly sleep better knowing that your death benefit will not be denied.
Except for fraud and misstatement of age, an insurance company will not contest or dispute a claim on a policy after it has been in force for a period of two years since the effective date or latest reinstatement date of the policy.
Can a claim be denied after death?
Yes. Here are some of the reasons a claim may be denied:
o If premiums are not paid at the end of the contractual grace period and the policy lapses.
o If the applicant knowingly did not disclose material facts, such as a pre-existing medical condition, drug use or smoking habits.
o If the insured died due to suicide within the suicide exclusion period as stated in your policy contract.
When a claim is denied, the policy is rescinded or canceled and the beneficiary will only be entitled to a refund of all premiums paid.
What happens to my death benefits if my beneficiary is the estate?
This means that you should have a will to ensure your death proceeds go to whom intended, otherwise the law will determine how the assets that form part of your estate get distributed.
Death benefits will be paid to the executor of the estate named in the will once a probate has been filed and a certified copy is received along with the completed claim requirements. If a person dies without a will, a court appointed administrator can claim proceeds, once a certified copy of letters of administration along with claim requirements are met.
What happens if I die and my life insurance policy is assigned?
For assigned policies, these proceeds will be paid to the assignee based on the type of assignment.
A collateral assignment means that the assignee must make the claim and the proceeds equal to the outstanding loan balance will be paid to the financial institution to which the policy is assigned. The balance, if any, would be paid to the beneficiary.
An absolute assignment means that all proceeds from the policy will be paid to the financial institution to which the policy is assigned.
Who gets the death benefit when there are no surviving beneficiaries?
Unless otherwise specified by the policy owner, the insurance company will either pay the death benefit to any contingent beneficiary, the estate of the insured or the policy owner's estate.
Factors contributing to a delay in processing time for a death claim
There are a number of factors that may contribute to delays in the turnaround for processing a death claim, including outstanding requirements, claims requiring policy investigation within contestable period, for suspicion of fraud, actuarial review for misstatement of age, completion of probates and letters of administration and death claims where the cause of death is unknown or unclear.
How will my death benefit be calculated?
Death benefits are calculated according to the policy provisions within the policy contract, which can include any additions and/or less any indebtedness to the company.
The provisions include:
Assured amount - Amount of money that would be payable upon the death of the insured.
Dividends - A participating policy owner's share of the company's earnings. Some policies are participating and others non-participating.
Paid additions - Any additional insurance coverage purchased with a single premium.
Fund value - The cash value of an investment-linked policy.
Premiums in suspense - Premiums paid in advance of the premium due date.
Cash loan - Loan granted by the insurance company at the request of the policy owner, secured by the cash surrender value of the policy.
Automatic premium loan - Loan granted automatically by the insurance company, secured by the cash surrender value of the policy if a premium is unpaid at the end of the grace period.
Outstanding premium - Premium due but not yet collected by the insurance company.
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