life insurance

[lprook]

Is Financial information on a life insurance application contestable?

 

[Dandy Don]

Your question is very vague. Can you provide more details of your specific situation or exactly what it is you want to achieve?

 

[lprook]

The insured has a net worth of 300,000, with this net worth the insurance company will only issue 1.5 mill of coverage, so the insured writes in the application that she/he has a net worth of 5mill. so she could get more coverage.

 

[Dandy Don]

Contestable by whom? The insurance company? The insurance company is normally going to check the applicant's credit bureau record to try to verify the $5 million figure, so it is likely they are going to find out she is not worth that much. She will be lucky if they even give her a policy since they will probably deny if they have proof that her figure is incorrect.

It is better for someone to report this misstated figure now so she can get another policy issued for correct value at the same company or get another company rather than wait to die and then have her heirs denied a payout because she lied.

DANDY DON IN OKLAHOMA ([email protected])

 

[FirstChance]

as a general rule...

you never want to lie on an insurance application, because the issuing company will be varifying the facts submitted looking for fraud. and lieing to get more insurance is fraud. the government limits the amount of insurance any one person can buy to a "reasonable" amount, probably to limit making millionairs out of the benificiaries.

 

[anteater]

the government limits the amount of insurance any one person can buy to a "reasonable" amount, probably to limit making millionairs out of the benificiaries.

Where can I find information on those limits?

 

[FirstChance]

Sorry to say it again, but it depends

Where can I find information on those limits?

The amount of insurance you can buy depends on which company you are dealing with. The reason is some of the smaller companies will not want to put themselves on the line for larger amounts of insurance. If you are dealing with a larger company, say $50 Billion in assets or larger, then a good role of thumb is 15 to 20 times your annual income. This is known as the human life replacement value.

That being said, if you have a substatial reason for wanting more insurance, then you should be able to get as much as you want. A substantial reason could be owning a business or a large estate--coincidentially two of the factors used to detirmine you net worth.

the bottom line is if you work with a good company, have an agent that knows what they are doing, and you can justify the amount of insurance you want, you will be able to get it.

 

[anteater]

OK, I understand that.

But you had said that the "government limits the amount of insurance......"

 

[FirstChance]

sorry, i thought i was getting long winded. The government uses the human life replacement value, 15 to 20 times annual income.

how much insurance are you trying to get?

 

[anteater]

I wasn't looking to buy additional insurance.

Your mention of govenrment limits puzzled me. I assumed that you were referring to something in the IRS Code and I had never run across that.

 

[FirstChance]

I don't know what code it is exactly

but the general idea is that the IRS does not want a person worth $100,000, buying $10 Million in life insurance to raise the family economic position. The IRS gets real upset when you make too much money tax free, life insurance death benifits are income tax free. while we are on the subject the IRS severely limits the amount of money you can put into a cash value life insurance policy for the same reason. to many rich people back in the 80's using single premium whole life as a tax shelter.