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It's
the worst news to get as life insurance
policy owner/beneficiary or term life
insurance agent. Rescission.
We need to find out what exactly does it
mean in the world of life insurance and
more importantly, how to avoid ever
hearing it.
First, we'll start with the formal
dictionary definition according to
Merriam-Webster
for rescinding:
1 : to
take away : remove
2 a :
take back, cancel
<refused to rescind the order>
b : to
abrogate (a contract) and restore the
parties to the positions they would have
occupied had there been no contract
3 : to
make void (as an act) by action of the
enacting authority or a superior
authority : repeal
Definition #2 and 3 are most appropriate
for our usage. Sometimes, people
forget that the
term life
insurance application is a
contract between the applicant and the
insurance carrier. The "offer" is
made by the applicant in the form of the
application. The carrier than
makes it's decision on whether to accept
this offer based on the information in
the application and as a result of the
paramedical exam/interview. Where
rescission comes into play is if there
was material information not included in
the application. Material
essentially means that information would
have affected the carrier's decision had
they know about it. For example, a
cold from 2 years ago probably isn't an
issue. Elevate cholesterol or
heart palpitations would be since they
have a direct bearing on mortality and
actuarial probabilities. To
be safe...be thorough.
Most
term life insurance policies have a two
year window to rescind a policy if they
discover information was misrepresented
during the
life underwriting
process. This two year
window usually starts from the effective
date of the policy. After this two
year window, the carrier is typically
without recourse to rescind the policy
or not pay the benefit according to the
terms of the coverage.
As
licensed life
insurance agents, we strongly
recommend that you must provide all your
information honestly and thoroughly
during the life underwriting process.
From our experience, the carriers have
ways to find that information was
misrepresented on the application.
Let's take an example.
John
Doe decides to conceal his long, prior
history of drug use. He
avoids use prior to the paramedical so
that it does not show. One year
later, cocaine use causes a heart
attack. The carrier may then
investigate prior claims history.
They find a panic attack ER visit years
before and doctor notes reflecting drug
use. This person is in serious
jeopardy of not having benefits paid out
to his beneficiaries. After
the loss of a loved one, it's insult to
injury to find out that the
life insurance
policy has been rescinded.
The carriers also have access to the MIB
(Medical Information Board) which is a
collection of data reflecting at a
minimum, instances of fraud of
misrepresentation among the carriers
that participate (Medical and Life).
If
you're worried about your ability to
qualify based on health history/status,
contact us so we can evaluate your
situation and match up the right
options. There can be
High Risk
insurance plans we can
investigate. Certain carrier may
also be more lenient for a given issue.
That's where our experience as life
insurance agents really come in handy.
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