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UK Life Insurance FAQ

Can I change the beneficiaries in my life insurance policy? How?

You can simply request your Insurance Company to make the change by filling up an endorsement form for that purpose. This has to be in writing and should be reflected in the policy. However, if the beneficiary is listed as irrevocable, you cannot remove him from the list, change the percentages (share) of the beneficiaries or make any changes to the policy's beneficiaries and some terms unless the irrevocable beneficiaries give their consent in writing.

Please note that the insurance company will honor the changes made through them and not via a will. If you name a different beneficiary in a will, what is listed in the policy will take precedence.

There are also additional considerations when you are in a community property state. You cannot also name other beneficiaries unless your spouse provides his or her consent. The same goes for changes due to a divorce. You cannot choose to name any other beneficiary if the insurance policy is part of your divorce settlement with your spouse.

Are there any tax benefits with life insurance?

If you name your beneficiaries as irrevocable beneficiaries or write the policy in trust, the life insurance proceeds will be spared of taxes usually levied on inheritance or on the estate. Please check what tax laws apply specifically in your state.

How do I know the amount of coverage I need?

Please note that you are primarily aiming to replace your lost income in the event of your demise. Thus, you need to calculate your total income (or the amount you contribute to annual household income) and multiply this by the number of years you think your family will need that income. Some suggest multiplying your annual income by 10 to 12.

You also need to add in the amount of debt you have, as you would want your family to be able to pay these debts.

There are actually various methods by which you can calculate the amount of coverage you need. What is shown above is just one of these methods. You can also ask the help of a reputable agent to help you come up with the suitable coverage amount you need.

Can I take out a loan on my life insurance policy? If so, how?

If your policy is the type that accumulates cash value, you can take out a loan on your policy. Your loan will be based on the current cash value of the policy. This provides you with cash you need while still enjoying life insurance coverage.

To make a loan, you just need to contact the customer service department of your Insurance Company and ask for a loan form. After signing the loan form, the insurance company will process your request and cut you a check for the amount of the loan. Loans against the policy are charged with interest. If the loan remains outstanding at the time of your death, your beneficiaries will receive the death benefit minus the amount of the loan and its interest.

How will my beneficiaries make a claim?

Upon the Insured's death, it is important that the beneficiaries inform the Insurance Company so that they can get the ball rolling with regards to the claim. The beneficiaries will be required to submit documents, such as the Death Certificate.

What is a contingent beneficiary and should I name one?

If you named only the primary beneficiaries and these beneficiaries did not survive prior to the claim, the proceeds of the life insurance may revert to your estate. To prevent this, you should name a contingent beneficiary, who will be second in line to receive the proceeds of the insurance should all the primary beneficiaries die before the Insured.

How do I make changes on my policy?

Updates may involve a change in address or civil status (i.e. from single to married), a change in the payment mode or any other changes with regards to your policy. You simply have to call the Customer Service department of your Insurance Company to ask that these changes be made. You may need to sign a form.

Can I withdraw funds from my policy?

If your policy has cash value and if you are the policy owner, you are allowed to withdraw the current cash value you have. The Insurance Company may charge related fees. It is advisable to as much as possible refrain from making any withdrawals so that your cash value can grow over time. This will provide additional funds on top of the death benefit or this is the amount you will receive when the policy expires (also on top of any endowments due at the end of the policy).

My policy has lapsed. Can I get it to be effective again?

This is called reinstatement. Insurance Companies have different policies and procedures regarding reinstatement. Generally, though, you are allowed to revive or reinstate your lapsed policy within a given period, as long as you pay all the outstanding premiums, as well as premiums due during the period and any fees involved. The insurance company may also require you to submit proof of insurability (i.e. require you to undergo a medical exam). If there are any changes in your health, occupation, etc., this may mean a change in your premium ratings.

Can the insurance company cancel my policy?

There is what is called the contestable period (usually two years). During this period, an Insurance Company can cancel the policy if there are misrepresentations made during the application. After the contestable period has passed, the Insurance Company will be deemed as committing to the policy and it cannot cancel the contract anymore. However, if you have a Term Life Insurance and your policy comes up for renewal, the Insurance Company may deny you your application for renewal if your policy does not have a Guaranteed Renewability clause.

I used my life insurance policy as collateral to a loan? How do I assign my policy?

You can change the beneficiary in your policy and name the bank (or lending company) as your beneficiary. You just need to make this change request to your Insurance Company. However, you will need to get the written consent of any irrevocable beneficiaries, if you have any.

A loved one died without leaving any information regarding his policies, although I know that he has life insurance coverage. How do I find out about any policies?

Since there is no central listing that provides information on all the insurance policies of a certain person, you will have to find out through other means. You can:

  • Review the Insured's checkbook to see if there are payments towards a life insurance company.
  • Ask his employer about any coverage, since most employers provide life insurance coverage to their employees. You can also ask the same from civic organizations such as the Rotary or Lion's Club where your relative is a member. There are also organizations that provide life insurance coverage to such groups.
  • Take a look at your loved one's papers.
  • Call or write to insurance company where it is likely that your loved one will get a policy. Be sure to provide details such as your loved one's name, date of birth, address, etc.

Can I buy life insurance for a loved one?

Yes, as long as you can prove that there is an insurance interest between you and that loved one. Meaning, you must have an interest in wanting that person to stay alive or suffer financial or emotional loss upon this person's death and that the loss is sufficient enough for you to need compensation. This prevents just about any one from getting life insurance coverage to someone they're not even related to in the hopes of receiving the life insurance proceeds.

However, you will need the consent of the person you want to buy insurance for. Without his or her consent (shown by a signature in the policy application), the Insurance Company cannot issue the policy.

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