Need it? Forget it.
Reversing a final judgment for widow Varsha Grogan and rendering judgment against her on a $1,000,000 life insurance claim, the Fifth Circuit held today that her husband’s policy required his "good health" before it took effect. The policy provided that it "shall not take effect unless" payment of the first premium occurs "during the Insured’s lifetime and continued good health". The court construed the language as establishing good health as a condition precedent to the effectiveness of the coverage. The court also held that Mr. Grogan’s cancer antedated payment of the first premium. Assurity Life Ins. Co. v. Grogan, No. 05-51609 (5th Cir. Mar. 2, 2007) (applying Texas law).
One may well ask why a healthy person needs life insurance. Answer: they generally don’t. That explains why carriers earn profits on premiums. The risk of death to a hale and hearty individual usually arises from the possibility of a tragic accident, an event that happens to few. But a man who already has cancer — even if he doesn’t know about it — poses a far higher risk. Insurers, um, prefer not to take them on as customers.
So what do these outfits insure? Blawgletter infers that they cover, first, fatal accidents and, second, ailments that commence after the policy takes effect. You can get insurance only if you probably don’t need it. Alrighty then.