Articles Tagged with waiver of premium

As you probably know, insurance companies are masters of fine print. You may think you have coverage for a condition or injury under your insurance, but when the worst happens, you may find out that you weren’t actually covered after all. Or, you may be covered, but you didn’t have as much coverage as you thought you did.

You can’t always protect yourselves from these gotchas. Many of us have insurance through our employers, and we don’t have power to negotiate the terms of those policies.

However, you can still avoid nasty surprises by reading the fine print in advance. Medical insurance is the type of insurance most people are familiar with, and while you don’t need to know your entire insurance policy by heart, you should know the basics of calculating your benefits – i.e., what your deductible, coinsurance, copay, and out-of-pocket maximums are.

Maybe you’ve heard (or experienced) the tragic story of someone becoming ill, forgetting or being unable to pay their life insurance premium, only to see the policy lapse at the time it is needed most. It’s more common than you may realize, and at our law firm we see it quite often. It is terribly unfortunate.

What most people don’t realize, however, is that there is law in California that may come to the rescue. That law is known as the “notice prejudice” rule. The rule emanates from a judicially created doctrine dating back to at least 1963, when the California Supreme Court decided Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 305. The rule is simple: it prohibits insurers from denying insurance benefits on the ground that the insured presented an untimely claim, unless the insurer can show it was prejudiced by the delay. It is expressly designed to prohibit insurance companies from disclaiming liability based on a “technical escape hatch,” and to protect insureds from the unfair forfeiture of their benefits on procedural grounds. (The rule is also widespread; the majority of states impose a similar requirement on insurers.)

So, how does the rule apply to lapsed life insurance? Well, it is important to state at the outset that it only applies in certain circumstances. One of the most common examples is when the life insurance policy also includes a provision that premium payments will be excused or “waived” in the event the insured becomes disabled. This is usually referred to as a “life waiver of premium provision” (LWOP) or something similar. Many policies have such provisions but policyholders just aren’t aware of the benefit.

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