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Collecting on a Life Insurance Policy

Aug 22, 2008
Is It Feasible To Collect On My Life Insurance Before I Die?

Some life insurance policies authorize you to "speed up" the death benefit. This stipulation makes it achievable to collect on your own life insurance previous to you dying. Some companies call this the "living benefit" condition.

This provision may be built into the policy or presented as a rider.

It is proposed to let you use death benefits to compensate hospital or medical bills associated with fatal illness.

Normally, it necessitates you having a terminal illness, backed by a doctor's forecast that you will die within a set interlude of time (the amount of time will be specifically stated in the policy).

The policy may bound the dollar amount you can withdraw.

Be cautious! If you speed up and use the death benefit, there will be a smaller amount left in the policy for your relatives or other beneficiaries when you die.

What Are Viatical Settlements?

A viatical settlement is an contract to sell the possession of your life insurance policy to a different, unrelated person, who becomes both the proprietor and beneficiary of the policy.

Keep in mind, it is against the law for an outsider to take out an insurance policy on your life. The stranger has no insurable concern and could have an detrimental need to see you die earlier than nature intends!

Nevertheless, a life insurance policy is just like anything else. If you possess it, you can sell it, even to a perfect stranger who has no plausible insurable interest. That individual becomes the policy proprietor and can then name themselves as the beneficiary.

What Are Viatical Buyers And Sellers?

Buying and selling life insurance policies is the area of expertise of businesses that identify themselves as viatical settlement firms. The viatical firm purchases insurance policies from people with incurable illnesses and sells them to financiers.

If I Do Not Sell My Policy, What Ensues After I Die?

When an insured individual dies, the beneficiary must file a claim to gather the death benefit. The company has sixty days to disburse the claim or inform the beneficiary of any setback with it.

The beneficiary should request a claim form from the life insurance agent or company. They will need:

- The name of the insured
- A policy number
- A certified copy of the death certificate.

Out of the ordinary circumstances may occur if the beneficiary is a minor.

How Will The Death Benefit Be Paid?

The beneficiary might have a selection of ways to obtain a death benefit. Settlement choices may comprise of the following:

- A lump sum imbursement (the company sends a check for the complete amount)
- An installment payment with interest
- A checking account (the company creates a money market checking account in the beneficiary's name; the beneficiary is given a check book and can remove funds when needed)
- The company could hold the benefit and reimburse interest

Will The Death Benefits Be Taxed?

You normally are not required to pay income tax on death benefits.

What Happens If There Is A Conflict Between Beneficiaries?

If there are contradictory claims (such as two people claiming to be the beneficiary) the company might turn the cash over to a court. The court will seize the money until it determines who the valid recipient is. This procedure is called an interpleader.

Can The Company Refuse To Pay On My Policy?

Life insurance companies can decline to pay death benefits, under definite restricted conditions, such as if you die within the initial two years of a policy. The company's basis could include the following:

- The insured (now dead) committed deception when applying for the policy
- The insured did not divulge a material fact on the application,
- The insured committed suicide.

Additionally, if a beneficiary deliberately killed the insured individual, the company can repudiate paying a death benefit regardless of how long the policy has been in effect. This is accurate even if a court has not convicted the beneficiary of the killing.
About the Author
Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in life insurance policies, companies, and advice, as well as finance and business. For a free term life insurance quote, please visit http://www.equote.com.
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