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Q. My husband took out a life insurance policy 18
months ago. When I filed the claim, the company denied it, because he stated on
the application that he was a non-smoker when, in fact, he did smoke. The
company is refunding all premiums paid. Can they do this?
A. Possibly. Companies may contest statements
made in the application up to two years from the effective date of the policy.
If there was an omission, inaccurate, or incomplete information on the
application that was material to underwriting the risk, the company may rescind
the contract, and refund the premiums. Generally, if a company offers and issues a
policy using the rates for a non-smoker, but the insured was a smoker, the death benefit
would be reduced by calculating the correct smoker rates for the length of the policy.
This difference could be deducted from the total death benefit to accurately reflect the
correct premium payments for the policy coverage provided, depending on the terms and
conditions of the specific policy.
Q. What is universal life insurance?
A. Universal life insurance is a flexible
adjustable life policy, which incorporates annually renewable term insurance
with an interest bearing side fund (cash value). The insured may vary the
amount and timing of the premium payments to adjust the cash value and/or the
death benefit of the policy.
Q. What happens if I get a loan from my life
insurance policy, and never pay back the interest?
A. Unpaid interest is added to the loan balance.
If the loan balance ever grows to exceed the amount of policy cash value, the
contract will terminate without value. Also, if you should die before paying
back any loans made against the cash value of your policy, the outstanding loan
balance will be subtracted from the death proceeds.
Q. Can anyone insure your life?
A. No. In order to purchase a life insurance
policy on anyone, there must be an insurable interest. A relative who might
suffer financial loss if you died, a debtor who may be at risk of repayment, a
business partner, a spouse, son, daughter, or parent are examples of those who
may have an insurable interest.
Q. How can I find out if a person who has
passed away had any life insurance?
A. This Department does not have that
information on file. There is not a state agency that maintains or
provides this information. The Life Policy Search may be used to search for
possible life insurance policies. This database is not maintained by the Alabama
Department of Insurance and the results of the search are not provided to this Department.
Personal information is required to use the search. Please read and follow all instructions carefully.