What is High Risk Life Insurance?
Life insurance is something everyone should purchase. A typical life insurance policy comes in two forms, whole and term. Whole life insurance is a type of coverage that pays the beneficiary in the event of the death of the insured. This coverage lasts the insured entire life and does not need to be renewed. Term life insurance pays out benefits to the insured’s beneficiaries in the event of the insured’s death as well; however, this type of policy must be renewed at the end of a specific period, or term. The term policy is the most popular, since they generally offer the lowest premiums and highest payouts.
Unfortunately, many people do not qualify for these most common types of insurance policies because they have a preexisting condition such as cancer, HIV or AIDS or other terminal and/or serious illness or if the prospective client does not pass the health questionnaire. Additionally, those who insist on participating in high risk activities such as rock climbing, skydiving, scuba diving and others have a difficult time finding companies to insure them because the risk of the insured passing away and the company being forced to pay out is greater than those who do not participate in high risk activities. This is where high risk life insurance cones into play.
A high risk life insurance policy will allow the typical “uninsurable” person to purchase life insurance. The companies offering this type of insurance policy specialize in insuring people who cannot find insurance elsewhere. The downfall to these “life insurance for high risk individuals” policies is that they cost much more than a regular policy; however this cost is made up with the prospect of the insured having the coverage needed to support the family in their time of need should the insured pass away.
The major deterrent to high-risk policies is the way these policies pay benefits. If an insured with a high-risk policy dies during the stated term of the policy, the insurance company may not pay out the entire death benefit to the beneficiary. If the insured passed away as a direct result of being engaged in the high-risk activity, then the company must only pay as much as was paid by the insured’s monthly premiums. For example, if the insured paid $5.000 worth of premiums and the face value of the policy is $20,000, the company will only pay the $5,000 for the death benefit if the autopsy or other proof shows the person died because of the high-risk activity. However, if it is proven that the insured died of reasons other than those that wee the high-risk activity, the company may pay the entire face value. This is why it is necessary to find a company or agent specializing in high risk life insurance.
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