Not every individual needs life insurance. Life insurance is primarily for individuals who want to care for family members or other loved ones financially after they pass away.

An individual’s need for life insurance will also depend upon their immediate financial situation. This is because individuals who have less income may have greater financial priorities than paying for a life insurance policy.

There are certain factors an individual should consider when determining whether or not they really need a life insurance policy, including:

  • The number of people who are dependent upon the individual financially. If there are a large number of individuals depending on the individual considering insurance financially, then they have a greater reason for obtaining a life insurance policy;
  • If an individual does have dependents, they should attempt to assess how much money they would need, and for how long, if the individual passed away right now;
    • If the individual’s savings would not be able to last their dependents until they could become financially independent, the individual may want to consider purchasing a life insurance policy;
  • Keep in mind that property may be in probate for months after an individual passes away and that life insurance proceeds are immediately available; and
  • If an individual does not have assets that will be readily available to pay for any debts or expenses when they die, a life insurance policy is a good option to provide liquid assets.

I Am Considering Purchasing a Life Insurance Policy. What Factors Will the Insurance Company Look at to Determine My Eligibility?

There are numerous potential factors that a life insurance company will consider in order to determine an individual’s eligibility for life insurance, including:

  • Age;
  • Sex, as some states have “unisex” rates;
  • Marital status;
  • Number of children;
  • Height and weight;
  • Purpose of the insurance;
  • Health history of the individual and their family;
  • Occupation and income;
  • Alcohol consumption, both past and present;
  • Smoking, both legal and illegal;
  • Hobbies;
  • Type and frequency of travel; and
  • The amount of the policy requested.

Can I Purchase a Life Insurance Policy on a Life Other than my Own?

In order for an individual to purchase a life insurance policy on a life other than their own, they must have an insurable interest in the life which is covered by the policy. In other words, the individual can only insure the life of an individual who they would want to see protected, for example:

  • A spouse;
  • Dependents; or
  • The individual themselves.

This is done to ensure that an individual does not insure the life of an individual they would murder in order to collect on the insurance policy.

I Run a Business with Other Partners. Can I Invest in a Life Insurance Policy on Anyone Involved in the Company?

A partner in a business is permitted to purchase a life insurance policy on another partner. In addition, the company can invest in life insurance for its important employees.

How Does Life Insurance Impact Estate Planning?

If an individual has a life insurance policy when they pass away, their beneficiaries will receive some benefits that can make the administration of their estate less costly and less of a burden on them, including:

  • As soon as the policy holder dies, the money from the policy is made immediately available to the beneficiary or beneficiaries. This means that if the beneficiary is the estate or close family, the money could be used to pay off the deceased’s debts and funeral expenses; and
  • If the estate is large enough to incur estate tax liability, life insurance proceeds will not contribute to the amount of the estate qualifying for an exemption.

What Should I Do if My Insurance Company Denies My Claim or Acts in Bad Faith?

There are several reasons insurance companies may deny claims, including, but not limited to:

  • Incorrect patient or claimant identification information;
  • Coverage is terminated;
  • Services are not covered;
  • Member failing to update insurance with other insurance information;
  • Timely filing/ statute of limitations;
  • Coverage/policy exclusions;
  • Pre-existing conditions; and
  • Fraud or misrepresentation.

An insurance company is required by law to deny or approve any claim in good faith. It is common, however, for insurance companies to deny claims in bad faith.

Bad faith is a legal concept which may result in a civil claim being filed against an insurance company. Insurance companies have been held liable for bad faith when they:

  • Delay in handling a claim;
  • Do not investigate the claim;
  • Refusal to defend a lawsuit;
  • Refuse to make a reasonable offer to settle a claim; and
  • Irrationally interpreting the insurance policy.

Can I Sue My Insurance Company?

Yes, there are numerous reasons why an individual may be required to sue their insurance company. In order to understand this issue, it may be helpful to have an understanding of the legal relationship which exists between an individual who purchases insurance, called the insured, and the insurance company, called the insurer.

Insurance is basically a contract, referred to as an insurance policy. In this contract, one party agrees to pay premiums in exchange for an insurer to provide coverage.

If a loss occurs that is due to an event or events which are covered by the insurance policy, the insurance company will be required to protect the insured from any:

  • Losses;
  • Damages; or
  • Liability.

A legal contractual relationship exists between the insured and the insurer, which may be a company or group which agrees to protect the insured if a covered event occurs. A lawsuit commonly arises when an insurance company does not indemnify, or protect, the insured individual or party from an act which is covered under the policy or when an insurance company does not otherwise uphold their end of the contract, for example, if they wrongfully deny the claim.

What Are Some Remedies Available in an Insurance Claim Lawsuit?

If an individual is required to file a civil lawsuit against their insurance company and they prevail, the court may award them damages. One of the most common legal theories upon which insurance companies are sued is a breach of contract.

If an individual prevails in a breach of contract claim, they will be entitled to actual damages, or the amount which they were supposed to receive under their insurance contract. In certain jurisdictions, a plaintiff may be able to recover for out of pocket expenses, which may include attorney’s fees.

In some cases where an insurance company acts in a particularly egregious manner, punitive damages may be awarded. For example, if the insurance company wrongfully denied a claim or delayed in rendering payment to the insured, they may be able to recover damages for:

  • The value of the property claim;
  • The attorney’s fees associated with pursuing the claim; and
  • Possible punitive damages.

Do I Need a Lawyer to Help Me with My Life Insurance Problem?

A life insurance policy is a contract which is often full of technicalities as well as rigid requirements. In addition, life insurance is regulated by state laws, so an individual may be required to review the laws in their state.

It may be helpful to consult with an insurance lawyer who can assist you with understanding your life insurance policy as well as advise you regarding how the laws in your state affect your policy. Your lawyer can also review a life insurance policy before you sign the contract.

If an issue arises and you are required to sue your life insurance provider, your attorney will be able to assist you through the process and represent you in court. In addition, your lawyer will be able to advise you how a life insurance policy may affect estate planning and provide assistance to your dependents once you have passed on.