Can They Really Do That In Life Insurance?

I have been known to be something of a zealot when it comes to my opinions on life insurance companies that treat their loyal customers poorly, but I am also a zealot when it comes to great BBQ. I think it gives me credibility that I’m not grumpy about everything. The truth is that things done right deserve a shout out just like those things that couldn’t be handled any worse.

There has been no lack of unsubtle commentary coming from this forum on the industry changes in term conversion options over the last 6 years. It has been pretty non stop calling out one company after another when they sack the old “conversion to a permanent product” to “conversion to a product that suits the company best no matter how horribly it serves to client” approach to customer service. It’s a bit like Don Quixote and his wind mill jousting. Of all the companies I have taken on I’ve only really had one victory. Unfortunately the victory only benefited other agent’s clients because at the same time they adjusted their conversion option they fired me for being such a butt about the whole thing.

I’ve done my best to impress upon my clients the importance of a good conversion option and have been able to get a large number of clients to actually change life insurance companies from the one that fired me to companies with better customer service track records. But, for health reasons I still have a substantial client base that couldn’t make that change. One in particular, a 58 year old guy, took out a 10 year term 9 years ago. I showed him longer terms but it truly was a matter of budget. The expense of he and his wife raising a special needs child dictated what was left for other items.

At the time they took these 10 year term policies out the company in question had, hands down, the best priced no lapse guarantee universal life, guaranteed to age 121, as their conversion option. Three years later they changed the conversion option. Now it was only guaranteed for 10 years and at a higher price than their great GUL life insurance product. The other thing that happened during that three years is that my client’s health went south and he became not insurable. So now we are in year nine and his health is such that it is doubtful he will pass away in the next year so I looked at the conversion option since it also looks highly unlikely he will live another 10 years. He is no longer able to work so their income has dropped and while his life insurance is currently about $30 a month, their first offer for a conversion will be $150 per month but I was shocked when I ran the illustration to find out that the converted policy would only last two years. There is no other way to describe it than an insulting conversion option.

What company would have enough gall to offer a conversion option that only lasts two years? It is less expensive for them to just pay the increasing premiums after the 10 year guarantee so why insult them by offering them a way to pay more for the same thing? The company also offers a whole life option that lasts to age 100, but the price on that is $350 a month, completely out of their budget range.

Bottom line. Life insurance companies seem to be held blameless for these kind of actions by the National Association of Insurance Commissioners, the legal and ethical body through whom all product changes have to be presented and approved. Can they really do these things to their long term customers? Apparently they can. If you have questions or are concerned about the conversion language in your life insurance, call or email me directly. My name is Ed Hinerman. Let’s talk.