Everywhere on the web you can find much about different types of life insurance.

Clauses and terms with life insurance

Life insurance is insurance like any other – and is sometimes subject to fraud. Although in the case of life insurance, the methods of fraud are invariably grim, they can occasionally happen. As a result, there are a number of clauses often written into contracts to protect these companies from fraud that you should be aware of.

Firstly, many insure companies write a period of contestability into their contracts. This means that, if you make a claim within a certain time period, the company will have a legal right to contest the claim. This time period is usually two years.

Your dependents may also not get their claim if you commit suicide. Although this is often written into the contract, many US states offer a statutory one year period for any life insurer not to need to pay out if the policy holder commits suicide within a year of taking the contract.

You should also check to see when your policy matures: it varies depending on the contract, and can be anywhere from age 65 (typical retirement age) to age 100 (after which insurance will be difficult to attain).

Criticisms of life insurance

Although life insurance has many positive aspects, there are some who criticise it, mostly from an aspect of the nature that life insurance fraud would take.

Because life insurance policies usually only pay off after death, some argue that there is an incentive to the beneficiary of the policy to murder the policy holder. Although there is a logic to this, and it has happened in the past, the risk to reward ratio of such an action is extremely low, as the more money is paid out, the more likely insurance agents – those who investigate insurance fraud – and police are to investigate the claim of foul play. In 2006, two women were arrested and indicted for this very act.

Many people have also criticised the corporate “dead peasants tax” actions, wherein a company buys a life insurance policy on its employee, and names itself as the beneficiary, meaning that the employee’s death contributes to company profits. This has been illegalised in most places. However, in the US, with the Citizens United case declaring corporations to be legal persons, it is difficult to say if this will remain the case.