What use is life insurance if your beneficiaries don’t get the death benefit? You could have paid premiums for years or decades, but now you’re gone and aren’t there to fight. Your family suffers extra stress at a difficult time. They, like you, feel as if they had a false sense of security.
Life insurance companies do pay legitimate claims. The Canadian Life and Health Insurance Association publishes highlights in their annual Canadian Life and Health Insurance Facts report. If many claims were not getting paid, you’d hear the stories amplified by social media. The few stories you see likely aren’t representative. Insurance companies can’t present their side publicly for privacy reasons. Fighting with clients isn’t a good strategy because the big company can look like a bully.
Some claims get denied, but it’s usually for a good reason. First, the conditions of the contract must be met. For example:
- Proof of death must be established, which is more difficult outside of Canada and the U.S.
- There must not have been any fraud. For instance, a smoker declaring themselves as a non-smoker at the time of purchase.
Improving the odds
You increase your likelihood of having a claim paid by:
- Honestly answering the questions on the application as asked.
- Buying insurance from a company with a solid reputation for paying claims. The lowest premium may be the most expensive choice. Maybe the savings arise because they’re tougher at claim time or have more loopholes.
Make sure your life insurance company can reach you. If you move, make sure they can reach you if your payment wasn’t received and your coverage is about to get cancelled.
Accidental death coverage looks inexpensive, but there are tradeoffs. The benefits tend to have more restrictions. There’s a connection between what you pay and what you get, so you may do better by getting more conventional insurance instead.
Claims are more difficult to adjudicate for living benefits. That means disability and critical illness insurance. The conditions aren’t yes/no or black/white — there’s judgment required. Price also matters: if you pay more, you generally get better definitions and more coverage. Life insurance is simpler because alive/dead is easier to ascertain.
There are also issues with mortgage life insurance from your lender because the real underwriting takes place at the worst time — when there’s a claim. With personal insurance, the underwriting is more rigorous and takes place when you buy.
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