What Are State-Regulated Life Insurance Policies?

Seniors must know that the term "state-regulated life insurance program" used by some insurance agencies to sell final expense life insurance policies is simply a marketing strategy. Controversial or cavalier, it's a strategy that gets people talking about getting life insurance. While all insurance companies must comply with state regulations to safeguard consumers from fraudulent practices and theft, it does not imply state endorsement or approval of their deals. Remember that distinct state protocols govern life insurance purchase, maintenance, and claims at the state level.

What Does The State Law Covers?

Life insurance companies are required by state laws to provide adequate protection for their policyholders. These regulations vary by state but commonly include essential provisions such as grace periods, free look periods, payment guarantees, contestability periods, and timely payment. A grace period is typically provided for a missed payment, allowing time to catch up before the policy lapses. In most states, the grace period is roughly one month to pay the premium.

What Is The Contestability Period?

The contestability period is a time frame during which your insurance company can dispute your claim. Once this period ends, your insurer can only challenge your claim if you've failed to pay your premium. This period typically lasts for two years in almost all life insurance policies.

Can Your Policy Be Contested After The Contestability Period?

The contestability period is a two-year period during which insurance companies have the right to investigate and deny death claims. This period lasts a maximum of two years from the date the policy becomes active and only applies to policyholders who intentionally provided false information on their life insurance application. Although insurers are more likely to investigate a death claim during the contestability period, they can investigate any claim at any time if there are indications of fraud.

After the contestability period ends, policies usually become incontestable, which means that regardless of the cause of death (including suicide), the insurance company usually do not investigate claims anymore - unless they strongly suspect that the insured has committed insurance fraud or deliberately provided false information.

Can A Policy Pay Before The Contestability Period Ends?

If a person with a life insurance policy dies, the insurer usually pays the policy beneficiaries after a claim. However, suppose the person dies within the first two years of having the life insurance policy (known as the contestability period). In that case, the company can investigate the claim and delay payment if there is evidence of misrepresentation. If no proof of deception is discovered during the investigation, the insurance beneficiaries are still eligible for compensation even before the contestability period concludes.

What Should A Beneficiary Do If A Life Insurance Company Denies A Claim?

If your life insurance claim was denied, there are still ways to receive your benefits. You can challenge the decision with the insurer, seek help from your state's insurance department or attorney general for free, or hire a lawyer to handle your appeal or lawsuit. The insurance provider will send you a written explanation of their decision if they reject your claim. If you believe your claim was unfairly denied, the first step is to contact the insurance company directly.