Is it really as simple as paying premiums? It is when an insurance company has grounds to believe a life insurance policy should be cancelled and continues to collect premiums. Consider this common real life scenario. Several months after issuance of a life insurance policy, the issuing company sends a letter to the insured advising him that it has grounds to believe that the insured provided false or misleading information in the underwriting process, and the company informs the insured it has a right to cancel his policy. The investigator asks for additional detailed information concerning the insured’s medical or financial history. The collection and review of the additional information take several months. In an optimum setting for the insured, he continues to make monthly premium payments, and the life insurer continues to negotiate the insured’s checks.
On the other hand, insureds feeling bullied by the insurer’s harsh words, and motivated by the futility of the situation, stop making premium payments. That act by the insured results in a win for the insurer that was trying to unglue itself from the policy’s risk. Insureds facing rescission should continue to pay their premiums.
How It Works
