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Every profession has it’s share of dirt balls that will make a buck no matter who it hurts. The truth is that most of the unscrupulous types don’t last in the life insurance business, and leave damaged customers behind trying to make sense of what happened.

A rather fresh example of this is a friend who came to me recently. She and her husband live in Hawaii now,  are in their 70’s and both are in pretty poor health. They just got a notice from their life insurance company that their policy had lapsed after 55 years of paying premiums. When they took out a whole life policy 55 years ago, it was for $10,000 of insurance on him and she was a rider on the policy for $7500. This policy, really nothing more than a final expense life insurance policy, at least had a guaranteed level premium and death benefit to age 100.
In 1988 Mr Unscrupulous Agent, representing Great West Life Assurance, called them and said he could increase their coverage, and their payments would be even lower.  He got them to use the $5000 cash value from their policy to fund the new policy. The new policy had an $18,000 death benefit for him and $10,000 for her. The agent assured them that the policy would last forever because of the dividends or interest that would be credited to the policy.

Well, Mr Unscrupulous was a nice enough guy, and they believed him, so they bought the new policy. Because of the large cash input up front, the policy held out very well as interest rates dropped and dropped and dropped. This year though, they got a notice saying their $150 a year premium was going to be $425.87. This was more than my friends can afford so they asked me to try to mediate a solution.

Great West Life Assurance, sadly a product of my own home state, Colorado, said that was the way it was. Tough luck for my friends. They went on to say that since the policy was now out of cash, next year’s premium would be about $1800 just to keep up with mortality costs. Mortality cost increases with age, so it would be higher each successive year.

It is the contention of Great West that my elderly friends should have been able to tell there was a problem based on their annual statements. They should have seen that it was running out of cash. Even though the agent is long since gone, they should have been able to understand the intricacies of a universal life policy and have recognized that there was a problem and they should have known to call the home office before it ever reached this point. It was their own fault, and no, there was really nothing they could do about it. The Colorado Insurance Division is now reviewing the information.

55 years of faithfully paying premiums to a company and the company isn’t willing to clean up the mess that this agent made. If the agent had been client oriented and not commission driven, he could have told them to invest that $5000 and even at a modest return, by next year they would have had almost enough cash to replace what they used to have in insurance. Or better yet, he should have just left them alone. They had life insurance that was guaranteed and he ruined it. Great West allowed him to ruin it.

Because of health reasons, my friends are uninsurable now.  They paid for 55 years and now their family will have to take care of final expenses.

Bottom line. Don’t take your own universal life policies for granted and if your parents have life insurance policies, dig them out and review them. Find out what is guaranteed and what isn’t.

This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.