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Life Insurance FAQs


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Q. My husband took out a life insurance policy 18 months ago. When I filed the claim, the company denied it, because he stated on the application that he was a non-smoker when, in fact, he did smoke. The company is refunding all premiums paid. Can they do this?

A. Possibly. Companies may contest statements made in the application up to two years from the effective date of the policy. If there was an omission, inaccurate, or incomplete information on the application that was material to underwriting the risk, the company may rescind the contract, and refund the premiums. Generally, if a company offers a smoker policy, then the death benefit should be adjusted to reflect the amount of insurance that the premium paid would have bought at the smoker rate.

Q. What is universal life insurance?

A. Universal life insurance is a flexible adjustable life policy, which incorporates annually renewable term insurance with an interest bearing side fund (cash value). The insured may vary the amount and timing of the premium payments to adjust the cash value and/or the death benefit of the policy.

Q. What happens if I get a loan from my life insurance policy, and never pay back the interest?

A. Unpaid interest is added to the loan balance. If the loan balance ever grows to exceed the amount of policy cash value, the contract will terminate without value. Also, if you should die before paying back any loans made against the cash value of your policy, the outstanding loan balance will be subtracted from the death proceeds.

Q. Can anyone insure your life?

A. No. In order to purchase a life insurance policy on anyone, there must be an insurable interest. A relative who might suffer financial loss if you died, a debtor who may be at risk of repayment, a business partner, a spouse, son, daughter, or parent are examples of those who may have an insurable interest.

Q. How can I find out if a person who has passed away had any life insurance?

A. This Department does not have that information on file. There is not a state agency that maintains or provides this information.