Life insurance provides individuals an important safety net for their loved ones once they’re gone. However, not all policies are created equally, and the legality of life insurance can be rather complicated. It’s essential you know your rights as a consumer when it comes to owning and using your life insurance policy so you can make the most of it.
At David Pope Insurance Services, LLC, we have more than two decades of experience helping Missourians navigate life insurance. We help you get peace of mind regarding your loved ones’ futures while keeping costs low. We go beyond providing life insurance — we offer flexible insurance for your home, business, automotive and recreational vehicles. Learn more about Missouri life insurance law with David Pope Insurance.
The most important part of filling out your life insurance application and policy is carefully considering who your beneficiaries should be. When you purchase a life insurance policy, you will have to name your intended beneficiaries alongside the portion of your wealth and any assets they may receive. There are two types of life insurance beneficiaries:
There are several considerations to make before choosing a beneficiary. Always make sure to provide as much information as possible on your beneficiaries and assign contingent beneficiaries in case of the death of your primary beneficiaries. You must submit a full legal name, relationship to you, date of birth, address and Social Security number to your insurance company for every beneficiary. It is also important to tell each of your beneficiaries about their designation, or else they may not be aware they are entitled to your benefits.
You can also name organizations, corporations, trusts, and estates as your beneficiaries. If your children are underage, you must set up a trust fund to manage their financial benefits until they turn 18. It is best to designate your beneficiaries by a percentage or fraction of your wealth rather than a number, as this makes sure there is enough money for all your beneficiaries in case you decide to use some of your policy before your death.
To be official, your life insurance policy must have an official form for Designation or Change of Beneficiaries. This form must be dated and signed before being turned in and must be turned in by the policyholder. It is also important to remember your beneficiaries can be changed as long as they are designated as revocable, which allows you to ask your insurer for a change.
Missouri state code states that your life insurance company should provide a free look period for your policy, but there is no official state mandate. A free look period refers to the time your life insurance company must give you to thoroughly review your policy and decide if it’s still the best choice for you. During the free look period, you can cancel your policy without penalty and receive a full refund for it.
You may find that a life insurance policy that initially seemed like a great choice does not give you the benefits you need. Maybe you’re not getting enough coverage for your estimated needs and want to find a policy that’s more comprehensive. Another reason to take advantage of the free look period may be to find a competitor who offers you either a better rate for the same coverage or more coverage for the same rate. Regardless of the reason you want to cancel your policy, your insurance company must refund your policy if they have a free look period clause.
Each policy and company has its own free look period rules, meaning the length of time is not uniform. Most companies give you between 10 and 30 days with your policy to cancel it penalty-free.
According to Missouri state law, an insurance provider cannot cancel a policy if you make a reasonably late payment within 30 days of the original due date. If the policyholder fails to make a payment within 30 days of the due date, their insurance provider can deny them coverage or cancel their policy altogether. As long as a policyholder submits a payment within the grace period, the insurance company must reinstate the policy in good standing. However, the grace period does not provide you coverage.
Since each company has a different grace period, it’s essential to know your grace period policy before you sign.
A death benefit refers to the payout a beneficiary receives when a policyholder dies. In Missouri, death benefits are not counted toward income tax, and beneficiaries typically receive a lump-sum payment — though they may be paid in a continuation of regular monthly or yearly payments. As a policyholder, you can designate your death benefits in any way you want and specify the exact percentage of payout you want for each beneficiary. When deciding which payout method to give your beneficiaries, you can choose the following:
There is no time limit on when a beneficiary can file a death benefits claim, meaning it’s never too late to claim what’s yours as a beneficiary. The money your beneficiaries receive can be used on anything they want — from living expenses and retirement savings to their education or recreational purposes.
There is no maximum death benefit for Missouri life insurance unless the company goes out of business while you are still a policyholder. In that event, you become covered by the Missouri Life and Health Insurance Guaranty Association (MLHIGA) and have a maximum death benefit of $300,000. MLHIGA cannot provide any additional coverage beyond the $300,000 maximum death benefit regardless of the original coverage policy.
Cash value life insurance refers to coverage that earns you interest on the principle premium of your life insurance. This interest grows completely tax-deferred. Your premium payments in a cash value policy can help you grow your policy’s cash value, keep you insured and pay down any potential policy fees.
There are three main types of cash value life insurance:
There is no maximum cash value of life insurance in Missouri unless the insurance company covering you goes out of business while you are a policyholder. In that event, MLHIGA will protect you and provide your payout for up to $100,000 dollars. MLHIGA cannot compensate cash value for your life insurance policy above $100,000.
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Most life insurance policies are designed to disincentivize policyholders from having a financial reason to take their own lives. The average suicide clause states that a policyholder will receive no death benefits if the policyholder commits suicide in the first two years after taking out a policy. This period of time is referred to as the exclusion period, after which beneficiaries will receive a death benefit regardless of how the policyholder dies. Whether a policy covers suicide may also be affected by the type of coverages:
It’s important to remember that making changes to a policy, such as converting a policy or adding new coverage, can reset the exclusion period.
Every insurance policy has a set of clauses built in to protect beneficiaries, policyholders or the life insurance company itself. These clauses are referred to as exclusions and most frequently apply to factors such as misrepresentation or incomplete information.
Most life insurance policies have a clause that gives the insurance company a window of time to dispute any statements from a policyholder’s application and terminate the policy. If the insurer finds that information submitted by an applicant is false, the insurer can choose to either adjust the policyholder’s premiums or terminate their policy.
To prevent the policyholder from having their coverage revoked, an incontestability clause can protect them. Incontestability clauses protect policyholders after a certain period of time so life insurance policies cannot dispute their application. However, incontestability clauses only protect policyholders against application mistakes and do not protect them from the consequences of intentional insurance fraud.
Aside from incontestability clauses, the best way to protect yourself from making mistakes on your applications and getting your claim rejected is to work directly with your insurance company when filling out your application. If more disputes arise, legal action may be necessary.
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In case the insurance company you have your policy through goes out of business, you’ll still be guaranteed your coverage and benefits through a guaranty association. Each life insurance company in the state of Missouri must belong to a guaranty association, which steps in to pay beneficiaries in the event that the policyholder’s life insurance company has gone out of business.
Through the Missouri Life and Health Insurance Guaranty Association, your policy will be compensated at up to $300,000 maximum for lost death benefits and $100,000 maximum for lost cash surrender. Unfortunately, all money beyond the $300,000 maximum capacity cannot be recovered.
If you require assistance due to an insurance company treating you unfairly, you can submit a complaint to the Missouri Department of Commerce and Insurance. The Department of Commerce and Insurance also keeps a consumer complaint index, where you can see whether your insurance company has more or fewer Missouri insurance complaints against them than their competitors.
While the Department of Commerce and Insurance can solve many disputes, other disputes are best suited for a court of law and should be brought to the Missouri Department of Insurance’s attention. Fill out a complaint form or call the Missouri Department of Commerce and Insurance if you cannot solve a dispute with your insurer.
David Pope Insurance is here to give you and your loved ones peace of mind when it comes to the future. We provide life insurance to those in Missouri and beyond and are proud to offer flexible life insurance policies no matter your budget. Find the right insurance policy for you and your family when you contact us online today.
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