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With the continuing global economic crisis, there has been a lot in the press recently concerning the importance of life insurance at such a time and whether it is even certain that we’ll receive our money when we are due it. This is particularly relevant in the UK at the moment with the Janice Wild Vs Windsor Life case, but the aim of this article is to highlight that this is an isolated incident and that we shouldn’t lose trust in the UK life insurance industry as a whole. Typically though, there are certain times when policies will not pay out and I shall describe some of them here:Death by Hazardous ActivityHazardous activities or extreme sports are often hard to define, but it is usual for insurance companies to stipulate that should a policyholder die during some kind of dangerous recreation or pastime they will not pay out. Consequently, it is important that if you are considering a life insurance policy and enjoy any sport that necessitates any degree of risk: such as skateboarding, rock climbing and sky-diving – then you should be completely honest with your insurance company and ascertain whether you need extra or specialist cover at the outset.Death by SuicideInsurance companies will often refuse to pay out when the policyholder has committed suicide. It is typical of each life insurance policy to include a suicide clause which nullifies the policy if suicide occurs, usually, within two years in the US – whilst some state-wide policies have statutory suicide clause covering 1 year. Additionally, certain policies may reserve the right to reject a claim should the holder commit suicide at any time.Death during WarIt is typical of insurance companies to not pay out should the policy holder die during an act of war. This is simply because an event that is as unpredictable and extraordinary as war is difficult to calculate in risk terms. Consequently, the definition of “war” amongst companies is usually quite broad and might vary between each, but will likely include: civil and international war, declared and undeclared war, and any conflict between military organizations. It must be acknowledged that acts of terror confuses matters further and are regarded as acts of war by some, but not others.Death in a Restricted CountryLife insurance companies may also refuse to pay out if the policyholder dies in what is considered a “Restricted Country”. These usually refer to places where disease or conflict leads to the deaths of many of the population. Similarly to death during war, it is too difficult for companies to judge the risk of an individual in such an unstable country. In circumstances where policyholders must travel to such destinations, a policy rider is usually purchased for the duration, and at an increased premium, in order to ensure the individual is covered.

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Thinking of cashing in your life insurance? Cashing a life insurance policy can be costly business! In recent years cashing a life insurance policy has become a very common practise. It used to be that most life insurance policies were left in force in order that the intended beneficiaries could receive the face value of the insurance policy upon the death of the insured.Ever since the inception of the aids virus, people with the disease have searched for ways to get their hands on cash to pay medical bills and in some cases just to live. Thus, if these people have life insurance policy with large cash values they end up cashing a life insurance policy or selling their life insurance policies.Even the people who are receiving structured settlements from life insurance or an annuity are cashing their settlements in return for an immediate lump sum. These companies that buy these settlements or policies are enjoying a real bonanza…but the person with the terminal illness and their families are really losing in the end.These investment companies buy life insurance policies from terminally ill people for a percentage of the face amount of the policy. The investment company pays all premiums for as long as the insured stays alive and collects the death benefit upon his or her death. The investment company is called a viatical company. Selling the policies can be referred to as “viatication”.In some situations people who are not terminally ill also sell their policies. In their situation their health has declined and they are in need of cash. These are referred to as life insurance settlements.Instead of cashing a life insurance policy or selling your life insurance policy it may be prudent to take a loan from your policy if the “loan value” is sufficient to meet your financial needs. Bear in mind that there may also be tax implications involved with cashing a life insurance policy or selling it.

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