Can You Lose Your Death Benefit While Alive Once You Have Life Insurance Coverage?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding Death Benefits in Life Insurance

1. Non-Payment of Premiums

  • If you fail to pay your premiums, your policy may lapse, resulting in the loss of the death benefit.
  • Example: If you have a term life insurance policy and miss payments, the insurer may cancel your policy.

2. Term Expiration

3. Fraud or Misrepresentation

  • Insurance companies can deny death benefits if they find fraud or significant misrepresentation in your application.
  • Example: Providing false information about your health or habits could lead to a void policy.

4. Policy Exclusions

  • Certain causes of death may be excluded from coverage, like suicide within the first few policy years or deaths related to illegal activities.
  • Example: If the policy excludes deaths caused by risky activities and you die while engaging in one, the benefit might not be paid.

5. Loans Against Policy

  • For permanent life insurance policies, borrowing against the policy’s cash value and not repaying can reduce or eliminate the death benefit.
  • Example: If you take a loan from your whole life policy and don’t repay it, the unpaid amount will be deducted from the death benefit.

6. Policy Surrender

  • Surrendering a permanent life insurance policy for its cash value effectively cancels the death benefit.
  • Example: If you choose to surrender a whole life policy for its cash value, you will no longer have life insurance coverage.

Key Reasons for Losing Death Benefits

ReasonPolicy Type AffectedExample Situation
Non-Payment of PremiumsAllMissing payments leading to lapse
Term ExpirationTerm LifeOutliving a 20-year term
Fraud/MisrepresentationAllFalse health information
Policy ExclusionsAllDeath during an excluded activity
Loans Against PolicyPermanent LifeUnpaid loans reducing death benefit
Policy SurrenderPermanent LifeSurrendering policy for cash value

Conclusion

In summary, you can lose your death benefit while alive in certain situations like non-payment of premiums, policy expiration, fraud, policy exclusions, loans against the policy, and policy surrender. It’s essential to understand these aspects to maintain your coverage effectively.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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