My Life Insurance Policy was Canceled
Our client told us, “I’ve been making my payments for years and then all of a sudden my Life Insurance Premiums Increased Beyond Anything I Could Afford. They told me I had 60 days to pay huge premiums or my policy would lapse. How can they do this?”
We get these same calls all too often, and we have been for years. So, after significant investigations what we’ve uncovered may change the billing practices of the entire industry. Lawyers from around the US are asking us to refer clients to them because we’ve proven that so many of these insurers have been over-charging their life insurance policyholders for years.
Nearly every policy we’ve investigated follows the same pattern:
- The charges start off relatively low for several years,
- The policy appears to have a strong cash value, then
- The charges start to increase in double-digits year after year quickly using the cash value of the policy to pay for the charges, and
- The policy lapses before ever paying the death benefit.
Once the life insurance policy cash value is depleted the client has to pay 3 to 5 or sometimes 10 times as much premium just to keep the policy alive for a short time. Many people write to the insurer complaining, but the insurers dismiss their complaints.
Universal, Indexed and Variable life insurance are the main type(s) of policy that gets cancelled in this way. Each of these types of policies are known as “flexible premium” policies. This means that the owner can pay varying amounts of premium each year and, in some cases, not pay any premium at all. But that’s also the reason why so many people are caught off guard by their policy lapsing.
No other type of insurance product uses a flexible premium approach. Not auto, homeowners, medical, boat,…. All other types of insurance have a set premium. You pay that premium and you are guaranteed your coverage for the period of time you’ve paid.
Nearly every major life insurer in the US issues flexible premium life insurance policies. Prudential, Met Life, Voya, American General, Lincoln… on and on.
The life insurance industry uses a different approach. They use flexible premiums. How people get burned by this is that they never adjust their premiums to the changes in the policy fees. With these life insurance policies, if you don’t pay enough premium to cover the fees, the insurer goes into your cash value and deducts the difference. They don’t tell you they’ve done it, they just do it. Most people would expect to get a notice telling them they need to pay more premium. Again, if it was health insurance it would be required by law. But not with life insurance. The policy fees go up but the insurer doesn’t have to give special notice.
Once the fees exceed the premiums the insurer starts drawing from the cash value. Once the cash value is depleted the owner gets a notice that they have 60 days to pay the “new premium” or the policy lapses. The current law says an insurer only has to notify the policyholder of a potential lapse 60 days before the policy lapses.
We’ve gathered and reviewed policy fee history from all of the large insurers. We’ve done hours and hours of research for each offering. And what we now know is that an insurer cannot randomly raise rates, there are stop-gaps in most policies that dictate fee increases, and that most insurers are ignoring these limitations.
We’ve shown that the violations occurred and we’re showing more and more every week. (Google search: Palumbo Trust v Nationwide Life). We’re actively pursuing death benefits from these policies when the insured dies after the policy has lapsed. We’re pursuing refunds of excess charges and reinstatement of policies that were unfairly lapsed.
If any of these situations describes you or a policy you’re the beneficiary of, contact us now. You may be entitled to payment of death benefits or refunds of premiums.
1-888-428-4868
Connecticut Law Tribune article: Judge OKs Fraud Against Nationwide
Also Read: How to Save a Dying Life Insurance Policy
$850,000 Paid from a Lapsed Life Insurance Policy