Most life insurance policies for seniors are simply a contract between a life insurance company and the insured individual. The life insurance company is agreeing to pay a death benefit to the beneficiary named on the policy should something happen to the insured. The insured applicant is agreeing to pay the monthly premium of the policy according to the terms and conditions of the policy. In most circumstances, the insured individual has the right to cancel the policy at any time. Does that also mean that the insurance company can cancel the policy at any time? The answer is no, but let’s review a few of the instances that would allow the insurance company to cancel the policy.
The first instance that could cause an insurance company to cancel a policy is simply if the insured individual stops making the monthly premium. There is typically a 30- to a 60-day grace period on the monthly premium. However, if that grace period expires, the insurance company has the right to cancel the contract with no obligation to the insured. Like we’ve discussed in other question and answer sessions, we recommend that the senior’s insurance policy is placed on an automatic payment option out of a bank account to ensure payments are not missed. This is a very important financial product, not a cell phone bill.
The second reason an insurance company can cancel a policy is if the contract was written under false pretenses. Simply put, if the individual lied on the application about their situation, the insurance company can cancel the policy due to fraudulent information. This gives the insurance company a protection against the insured lying about health or risk assessment. This is why it’s always important to make sure you answer every question as accurately as possible, disclose any information that is relevant to the application, and do not hide or omit information willfully.
The third reason an insurance policy can cancel is a very rare situation. There are times insurance companies can cancel policy simply because they have gone bankrupt or closed their doors. Depending on how the court views their case, the insured may simply have their policy canceled because the company is financially insolvent. This is why it’s important to pay attention to the insurance company’s financial rating. This rating indicates the financial strength of the company and gives the insured a gauge on their ability to pay the death benefit should something happen. Financial strength is not a guarantee that a company will never have issues. However, it is a good indicator that you’re with a secure company.
Though there might be other reasons an insurance company can cancel a policy, these are the main reasons that people deal with. If you have specific questions pertaining to the policy that you currently have, it’s always recommended to call the customer service number on your policy, as they would be the best help in answering those questions.
If you’re looking to purchase a policy and want to ensure that you’re getting the best policy that is right for you. We are licensed in most states and would be glad to answer any questions or concerns that you may have.