I am currently working with the CEO, President and Vice president of a company that has turned global in nature. They currently qualify for disability income insurance based on their past and planned business travel, but are concerned that the limitations set to qualify now will be surpassed as the company grows, and that may create a contestable issue. This is a question that comes up frequently. “I’ve always wanted to fly. What happens if I take up flying?” “I haven’t smoked for over a year and qualify for non smoker rates. What if I start smoking again after the policy is in force?”
Fair questions. The last thing anyone wants is for a policy to be voided when their family or business needs it. This can be a compounding tragedy as people, rightly so, may use their life insurance to free up assets for other uses. So if the assets are gone or tied up and the life insurance fails, well, disaster happens. So let’s lay out the truth on this subject and not only clear this up for owners of life insurance policies, but pull the rug out from under unscrupulous life insurance agents who play on this concern to create new unneeded sales. “Better not to take the chance. Let’s just write a new policy and make sure you’re covered.”
First, second and last,the most important thing is to tell the absolute truth on your life insurance or disability income application. It is impossible for a company to contest or dispute the truth. Let’s use my current clients as an example. The company we are working with said they would approve the policies as long as there aren’t plans to travel more than 2 months outside of the US on business in 2014. At this moment they can look at their calendars for the upcoming year and answer that question. Notice the company didn’t say that there can’t be more than two months. They asked if there were plans. And they know when they ask the question that plans can change.
At this point none of them have plans for foreign business travel of more than 2 months so they meet the company requirement to be approved without a travel exclusion. This is an engineering firm and they have projects in the middle east. Their duties when they travel don’t put them at any significant risk as they don’t go into dangerous areas and generally meet in very secure areas. So, what happens if 2014 turns out to be much busier than they anticipate right now? What if projects get off track and take more travel time to keep moving? What happens if they go over two months travel and something happens and they become disabled or are killed?
The obvious question for these clients is will the insurance company pay even though the travel for the year turned out to be more extensive than what was planned at the beginning of the year? You can bet the company will investigate before paying, but what is it they have to prove in order to successfully contest and not pay the insurance benefit? In a nutshell, and it is not more complicated than this, the insurance company has to prove that at the time the policy was taken out the insured knew they were going to travel more than two months in 2014. They can’t say that since the insured had seven weeks of planned travel he should have assumed more than two months. In business meetings get planned at the last minute and they also get cancelled. That seven weeks could end up being five of fifteen. but it doesn’t change what the answer was at the time the policy was taken out. The company will pay in full.
Bottom line. In life insurance and disability income insurance the companies don’t assume a static life. Non smokers will start smoking. Pilots who fly right side up will start occasionally flying upside down. People will decide to skydive for their 50th birthday. Companies are bound to the coverage they offered if at the time they made the offer the client answered the questions honestly. If you have any questions or an agent is trying to sell you a new policy “just to be sure”, call or email me directly. My name is Ed Hinerman. Let’s talk.