LIFE INSURANCE

[ExGingi]

there wasn't any fraud but the they needed to jump through hoops to get there.
Like I said similar to the garbage the govt pulled with PUA "overpayment"

From what I've seen, in NY a death claim form only requires basic identifying information and a death certificate if the policy has been in force for 2 years. If it was in force less than two years there's additional information required (such as cause of death, and some basic medical information). After a form is submitted, in cases where death occurred within two years of a policy being in force, the company may pull medical records and ask additional questions, depending on the circumstances.

I am actually aware of someone who had a term policy for many years, his policy lapsed for non-payment, he sent in a reinstatement application (I don't know how truthful it might have been) and on the day the company approved the reinstatement he died. The company might have been within its rights to deny the claim, but AFAIK it was paid. Now this claim was for less than 500k IINM. I am not sure whether the company would do the same if it were a 10MM claim.

[yos9694]

From what I've seen, in NY a death claim form only requires basic identifying information and a death certificate if the policy has been in force for 2 years. If it was in force less than two years there's additional information required (such as cause of death, and some basic medical information). After a form is submitted, in cases where death occurred within two years of a policy being in force, the company may pull medical records and ask additional questions, depending on the circumstances.

I am actually aware of someone who had a term policy for many years, his policy lapsed for non-payment, he sent in a reinstatement application (I don't know how truthful it might have been) and on the day the company approved the reinstatement he died. The company might have been within its rights to deny the claim, but AFAIK it was paid. Now this claim was for less than 500k IINM. I am not sure whether the company would do the same if it were a 10MM claim.

Reinstatement resets the contestible period when evidence of insurability is required, which is not always. It could be in that case it wasn't reset, or someone had rachmanus, or simply that the company was too busy with bigger problems

[ExGingi]

Reinstatement resets the contestible period when evidence of insurability is required, which is not always. It could be in that case it wasn't reset, or someone had rachmanus, or simply that the company was too busy with bigger problems

After the grace period is over, from what I've seen there will always be some questions that need to be answered. Some companies have a "short form reinstatement" for an initial period after lapse, while others might ask more questions. In said case I believe a non-medical questionnaire was required (and I would guess that it wasn't necessarily truthfully answered). But after a policy has been in force for a couple of decades, and for a policy of less than 500k it might have been a wise business decision to approve.

I contrast that with an experience I have been involved with in EY (the incontestibilty period there is 3 years), where the company initially (illegally IMHO) denied the claim, but as soon as they sensed that the beneficiary is questioning their denial, they paid the claim. I actually just received a letter from them last week sort of admitting this. I am wondering if a class action lawsuit is in place to stop them from their illegal practices.

[ExGingi]

I didn't type all that due to being on my phone rather than a proper keyboard.

I recall a Florida case where the insurance company tried denying a claim saying that an impostor took the medical exam, and the judge denied their motion saying that there is no "impostor exclusion" to the 2 year incontestibilty rule.

https://www.floridabar.org/the-florida-bar-journal/imposter-fraud-and-incontestability-clauses-in-life-insurance-policies/

[Pad18]

is there a rule of dumb regarding how to calculate the amount and what plan to take?

[ExGingi]

is there a rule of dumb regarding how to calculate the amount and what plan to take?

For amount of insurance, here is an example from one company. Most companies are similar with slight differences either in age brackets or multiples.

[Euclid]

For amount of insurance

Wow are these numbers accurate? That means someone relatively young who's making $100k needs to take out $3.5/4 million? That doesn't track with what most people do...

[ExGingi]

Wow are these numbers accurate? That means someone relatively young who's making $100k needs to take out $3.5/4 million? That doesn't track with what most people do...

How do you know what most people do? What amount are you assuming that said "most people" insure themselves for?

Think about it, it's income replacement. If an amount of capital is to be used to replace the loss of income (with increases), how much would that income be over the person's lifetime? What amount would be needed to generate that income without taking unnecessary risks?

[dm123]

is there a rule of dumb regarding how to calculate the amount and what plan to take?

Some people do 25x income so they can pull 4% annually income from the principal. (or adjust for what you would consider safe withdrawal rate)

You can check out these pages for some other ideas.
https://www.investopedia.com/articles/pf/06/insureneeds.asp
https://www.forbes.com/advisor/life-insurance/how-much-life-insurance-do-you-really-need/

[yesitsme]

אינטערוויו: "יַסֹּר יִסְּרַנִּי קהּ וְלַמָּוֶת לֹא נְתָנָנִי", ר' שמואל יוטקאוויטש, א חרדישער פילאט פון בארא פארק, איז געווען אין זיין פליגער בשעת ווען עס איז פלוצלינג ארויף אין פלאמען, "איך האב באקומען ערשט און צווייטע גראד בראנד וואונדן אויף די הענט און פיס, איך בין שוין ב"ה באפרייט פון שפיטאל" https://www.yiddish24.com/interviews/12/65472

[ExGingi]

Some people do 25x income so they can pull 4% annually income from the principal. (or adjust for what you would consider safe withdrawal rate)

One can ignore age at one own's peril.

[ExGingi]

https://lifehappens.org/human-life-value-calculator/

[dm123]

One can ignore age at one own's peril.

One's age or one's future earning potential?

Also, do insurance companies cap coverage to a certain X income?

[ExGingi]

One's age or one's future earning potential?

Also, do insurance companies cap coverage to a certain X income?

One's age is highly correlated to one's future earnings potential.

Insurance companies do financial underwriting. The information I posted above is out of one company's manual (just whatever came up in a Google search). If one wants to buy amounts above what the regular multiple is, an explanation needs to go along with it.

[Euclid]

How do you know what most people do? What amount are you assuming that said "most people" insure themselves for?

Think about it, it's income replacement. If an amount of capital is to be used to replace the loss of income (with increases), how much would that income be over the person's lifetime? What amount would be needed to generate that income without taking unnecessary risks?

Granted it's anecdotal, but most people I know (ages 25-40) have between $1-2 million. 

[Alexsei]

Granted it's anecdotal, but most people I know (ages 25-40) have between $1-2 million.

You have a great circle, most people I know don't have LI

[yelped]

Granted it's anecdotal, but most people I know (ages 25-40) have between $1-2 million.

It's hard for people with a frum lifestyle to cover more.

[ckmk47]

You're trying to replace his income.
$2 million earning 4% gives an income of $80,000.


If she's young with a small family, she may be able to return to the workforce in a few  years perhaps getting training or college first.
If she's in her 40's with a houseful of kids, that's not a realistic expectation for a while. In the meantime there's tuition, camp, weddings, etc.


(That's where the 'askanim' come in and tie up the LI in annuities for the weddings and go public with tzedoko campaigns.
The couple should know how  much he's insured for and how that money will be used to care for the family.  Or at minimum, which financially savvy friend or relative they can rely on for advice.)

[ExGingi]

You're trying to replace his income.
$2 million earning 4% gives an income of $80,000.


If she's young with a small family, she may be able to return to the workforce in a few  years perhaps getting training or college first.
If she's in her 40's with a houseful of kids, that's not a realistic expectation for a while. In the meantime there's tuition, camp, weddings, etc.


(That's where the 'askanim' come in and tie up the LI in annuities for the weddings and go public with tzedoko campaigns.
The couple should know how  much he's insured for and how that money will be used to care for the family.  Or at minimum, which financially savvy friend or relative they can rely on for advice.)

So many unknowns (and the need to possibly rely on askanim or "savvy friend or relative") with so many breakpoints that could fail. Which is why the most logical approach is to go with the Human Life Value approach which seeks to provide the closest estimation of the capital required in order to replace the lost income without needing to take any unnecessary risk with that capital.

[aygart]

So many unknowns (and the need to possibly rely on askanim or "savvy friend or relative") with so many breakpoints that could fail. Which is why the most logical approach is to go with the Human Life Value approach which seeks to provide the closest estimation of the capital required in order to replace the lost income without needing to take any unnecessary risk with that capital.

I would add to this an amount to be able to pay people to do items he or she typically does. It may not be practical to rely on a husband with a full time job that may require overtime to be able to take care of children all afternoon.