In a recent FEGLI beneficiary dispute case, the United States District Court in New York reviewed issues of the FEGLI beneficiary designation form, a decedent’s intent in changing beneficiaries and state law claims seeking damages for unjust enrichment, conversion, misrepresentation and promissory estoppel.
In Smith v. Smith, the surviving spouse of a FEGLI insured decedent filed a claim for unjust enrichment, conversion, misrepresentation and promissory estoppel against the decedent’s mother after the insurance company paid the mother the FEGLI benefits under the decedent’s FEGLI policy. The decedent was a federal employee and was provided with a FEGLI policy.
Prior to meeting his spouse, he designated his parents as beneficiaries on his FEGLI policy. His father predeceased him leaving his mother as the sole beneficiary of the FEGLI policy pursuant to the Designation of Beneficiary form signed by the insured in 1992.
The question of whether a divorce decree can be considered in an SGLI beneficiary dispute is quite common.
When people get divorced, their life insurance policy is usually incorporated into their divorce decree obligating one or both spouses to maintain their life insurance policy for the benefit of the other spouse and children.
In many cases, a divorce decree obligating a divorcing individual to carry a life insurance policy for the benefit of the former spouse and children will have an effect on how proceeds from a life insurance policy are distributed after an insured’s death. Thus is not the case, however, with SGLI policies.
With life insurance companies making obtaining life insurance policies easier, more and more consumers get coverage. There are several things policyowners and beneficiaries need to know when buying life insurance.
1. No Medical Exam Does Not Guarantee Automatic Payout in the Event of Death
Today many insurers offer policies for lower benefit amounts (usually less that $400,000) without a medical exam.
What consumers need to know is that no requirement for a medical exam does not mean that benefits will automatically be payable in the event of death.
Many companies request pharmacy records and check all medications prescribed to an insured. In addition, questions on an application for life insurance ask about an applicant’s medical history and background.
Life insurance policies have a provision that states that if an insured dies within the first two years of the policy effective date, the insurance company has the right to contest the policy – check the insured’s medical history and background to ensure that all questions on the life insurance application were answered correctly.
If the insurer finds that there was a misrepresentation on the application, life insurance benefits will be denied.
Life insurance has become one of the most popular long-term financial planning tools. To use it effectively, you need to understand how and when life insurance payouts are made to beneficiaries and how quickly benefits will be paid.
When Payouts Are Made
Usually life insurance benefits are paid after the insured’s death, and after the beneficiary filed a claim with the insurer and submitted a copy of the death certificate and all other necessary documents.
In the majority of cases, insurers must pay claims within 30 to 60 days after they receive all the necessary documents. When a claim is delayed, the insurance company will pay a high interest on the claim amount.
This prompts most insurers to pay the claim on time, however, many claims are still unfairly delayed.
An accidental death benefit is a benefit that is paid by a life insurance company in the event of an insured’s accidental death. Accidental death policies usually outline which deaths are considered accidental.
For example, death in a car accident or drowning is considered an accident. However, an accidental death is not the only requirement that needs to be satisfied in order for an AD&D claim to be paid. An AD&D claim will be paid if an insured dies in an accident and none of the exclusions in the policy apply.
Exclusions are special provisions in insurance contracts that describe situations when a claim will not be paid.
Some of the most popular exclusions are exclusions for suicide, self-inflicted injuries, intoxication, using prescription medications without a valid prescription, using prescription medications not according to a doctor’s advice, taking illicit drugs and participating in a felony or an illegal activity.
Many life insurance policies offer special benefits, such as seat belt benefits, anti-inflation benefits, accidental death benefits and accelerated death benefits.
Accelerated death benefits differ from the rest of life insurance benefits in that they are offered to insureds during their lifetime. Accelerated death benefits are generally available to an insured who is terminally ill and has a life expectancy of two years or less (depending on the contract).
Unlike life insurance benefits that are paid to beneficiaries after an insured’s death, accelerated death benefits are payable directly to an insured and constitute an amount that is 20%-50% less than life insurance benefits.
In order to receive an accelerated death benefit, an insured must comply with certain requirements outlined in the life insurance contract. In the majority of cases, the insurance company will want a statement from the insured’s doctor which supports a finding of a terminal illness and determines what an insured’s life expectancy is.