by : Christian Rios

Acquiring life insurance can be a complicated issue. Thereare many factors involved when purchasing insurance that the policyholder mayor may not be aware of. Let's take a look at a few of the factors thatdetermine whether or not a life insurance policy can be acquired.

Life Insurance Application - Everything begins here. Anapplicant must fill out a form and provide accurate, complete information tothe insurer. Also, information regarding other existing life insurance policiesmust be disclosed on the application.

Insurable Interest - This is required by law and without ita policy is unenforceable. But what exactly is Insurable Interest? It can be infound in many forms but we'll try to summarize with a single sentence: AnInsurable Interest can be found when financial gains and/or financial loss canbe expected from the proposed insured's death. This could mean loss of incomeor even existing financial debt. It's important to note that the amount insuredshould relate closely to the Insurable Interest - a person can't simplypurchase an overly high life insurance policy without having a relatively equalInsurable Interest. Generally speaking, the Insurable Interest only needs toexist when the policy is issued and not at the time a death benefit is issued.However, some states vary. Check with your insurance professional to determineyour particular state's requirements.

Incontestable Clause - The insurer can void a contract ongrounds of concealment, misrepresentation, and or fraud within a period of twoyears from issuance. After two years, the policyholder is protected from theinsurer voiding or otherwise refusing to payout a policy based on such ascenario.

Suicide Clause - If the insured commits suicide within aspecified time period from policy issuance, the insurer may cancel the policyand return the premiums. This is typically in the hands of the insurer todetermine.

Jurisdiction - The state or local government that is mostclosely related to the insured individual typically has jurisdiction over lifeinsurance policies. "Closely related" can be interpreted as"where does the person reside the majority of the time?" If a particularstate has favorable life insurance laws, it would not be of benefit to anindividual to cross the border merely for the sole purpose of purchasing it ifthat same individual did not reside in the same state.

Date of issuance - Acquiring a receipt or an actually copyof the policy is required before a life insurance policy is considered"officially" issued. Payment should always be accompanied by a lifeinsurance application submittal.

Reinstatement Clause - Should a policyholder fail to pay aninsurance premium, they are given a grace period to reinstate the lifeinsurance policy. In most cases, the policyholder simply has to pay overduepremiums to reinstate the policy. Sometimes the policyholder may have toprovide evidence of insurability before reinstatement can occur.

Grace Period - This protects the insured in case of a missedpayment. The insurer is required to accept premiums for a certain period afterthey are considered late without requiring the insured to provide proof ofinsurability again. This grace period is typically 30 to 60 days. During thattime, the life insurance policy is considered active. If a policyholder were todie during the grace period, the insurer is allowed to deduct the overduepremiums plus interest from any premium proceeds past due.