- How come I can’t take out a life insurance policy on anyone I want, say, Keith Richards? Or Tony Hawk? Good question, actually. But to take out a life policy on someone, you must have an ‘insurable interest‘ in that party. This means that the person you are buying a policy for is a spouse, or child or other close relative that you know and rely on for some support, or someone whose death could cause personal or financial harm. You are assumed to have an insurable interest in your own life. As a rule, you are not to take out a life insurance policy on anyone, your husband, say, or business partner, without his or her knowledge.
- Can I have more than one life insurance policy? Yes, absolutely. You can have as many policies with as many different companies as you care to pay for. You can have group coverage, individual coverage, or both. You can have different policies with different beneficiaries. When you die, so long as all the premiums have been paid and the policies are in effect, all the death benefits will be paid out. No policy cancels or supersedes the others.
- Why do men pay more for life insurance? Ah, this one. No, it’s not discrimination. It’s a numbers thing. Life insurance rates are based on potential risk. Men as a statistical group are a greater risk to insure than women. Men die younger and, as a group, participate in higher risk activities. That’s it. Most of the time, then, a man will pay more for life insurance than a woman would.
- Can the carrier cancel a life insurance policy for health reasons? No. You cannot be dropped for a change in your health status – actually for any reason other than non-payment of the premium – unless you falsified or intentionally misled the company on your life insurance application. You as a policy holder, of course, are free to cancel the policy at any time.
- What if I lie about my medical history on the life insurance application? Seriously? What do you think will happen? This is a big-time bad idea. If you lie about drugs or medications, your smoking habits, your medical history or any other lifestyle issues, your claim can be denied. Your beneficiaries will likely be left nothing. Should the insurance company discover this while you are still alive, the policy may be cancelled or adjusted; in some states, you could face insurance fraud charges. So don’t go there!
- Do I always have to endure a physical exam to get life insurance? An exam may or may not be required. As a rule, the higher the death benefit, the more likely it is that the insurer will require a physical. Often, the paramedic will arrange to come to your home or office to perform this exam. You will be asked a series of medical questions, your weight and height will be measured, and blood and/or urine samples may be taken. Other tests are often performed; your medical records will be requested. And sometimes your driving record and credit status are looked at.
- So who regulates these life insurance companies, anyway? Insurance is a state-regulated industry. Life insurance companies are regulated and supervised by the states in which they are licensed or certified to sell insurance. The names of these agencies vary a bit from state to state, but most can be found under ‘department of insurance’. The ratings you often see, assessing financial strength or performance, are not state-based. These come from private firms specializing in the business and financial sectors – Moody’s, Standard & Poor’s. AM Best and so on.