The risks of buying life insurance on the internet
There are several life insurance companies that are selling their coverage on-line. You can open a web page and apply directly with the insurer. To many there is the perception that they are saving money through this approach by cutting out the agent’s commission, but in reality it appears that rates of on-line insurance are very similar to rates of life insurance coverage sold by an agent.
The traditional method of selling life insurance has always been through an agent. This has it’s advantages. A good agent should be able to explain the features of a life insurance policy and show the costs of various companies that you would chose from. If you are simply buying term life insurance then you may not feel you need an agent to explain it to you. You simply pay the premium and you have coverage until it expires — or you do.
The risks with buying life insurance over the internet is that nothing is explained when you are completing the application. A good agent is invaluable during this part of the application process. Questions on on-line applications are vague. For example the question; are you a smoker? It may be in your mind that since you haven’t smoked in 10 years the answer should be no. When you die and the insurance company examines your medical history they may see that 10 years ago your doctor put in your medical chart that you were a smoker. They will deny a claim based on this one item. In the mind of the life insurance company you committed fraud when you answered no.
Medical questions are another great example of being vague but of utmost importance. Many applications ask if the applicant has ever been treated for, and then a long list of medical conditions. The problem is that you may have been treated for a medical condition that was grouped together with many other conditions and you didn’t even know it. When you die, and aren’t able to defend yourself, the insurer will deny the death claim stating you withheld material information about your health.
Surprisingly people often overstate their income thinking that as long as they can afford the coverage they can have the coverage. The fact is that the life insurance company will verify the deceased’s income and if it does not match what they put on the application they will deny any claim. How often have you heard someone say, “I make around fifty thousand a year”. That around is what causes a life insurance claim denial. You must be specific and accurate when you apply for life insurance on-line.
Everyone should be aware that life insurance claims get denied all the time. We deal with many of those that have been denied and often the reason for the denial is a misunderstanding of information given by the insured and received by the insurer. The life insurance company will put significant effort into denying a claim, but very little into issuing a policy. So beware of buying life insurance over the internet and always answer each question with as much detail as possible. In instances where you have the option to add more information to a particular question, do so. If you are unsure of how to answer a question, call the insurance company on their recorded line and get clarification. But my best advice is, use a good agent so when you die your family won’t have to fight for the money you want to leave them.
The Center for Life Insurance Disputes represents beneficiaries of life insurance claims. We’ve recovered over $60 million in claims for our clients.
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