Under a new Florida law life insurance companies must check death benefit records retroactive to January 1, 1992 to help identify deceased policy owners and initiate paying claims according to the Orlando Sentinel.
Start at Florida’s Unclaimed Property Search to see if you are a life insurance policy beneficiary.
How does a life insurance company know that the policy holder has died? Traditionally it has been the beneficiary’s obligation to notify the carrier and file a claim. Carriers require a death claim form and a copy of the death certificate be submitted. But what if the beneficiaries are unaware of the policy? Unfortunately that has been a real problem. Thousands of life insurance policy holders did not have adequate estate planning. Their beneficiaries did not know the policy existed or were no longer alive. Millions of dollars of life insurance benefits have never been paid.
Life insurance carriers have not been proactive making good on life policies when not notified of a claim. They have had no economic incentive to pay those claims. However the states where the policy owner resided have an incentive to take over the unclaimed money after a period of time to allow the death benefit to earn interest for them. Multiple states life Florida and California have reached settlements with the companies. It was obvious many insurance companies had set a double standard. Since it was in their economic interest to stop paying checks for annuity policy holders, they set up a system cross referred the social security death master file, but never bothered to set up the same system for their life policies holders.
These settlements of state lawsuits has helped reform the system immensely, but a rear guard has done their best to challenge reform and do as little as legally required.
Consumer protection may depend on what state you live in. Legislation has been passed or proposed in states that is more conducive to life insurance carriers’ interest. Note how this shielding process is now being proposed in North Carolina.
In recent years, roughly 20 life insurance companies, in national agreements with states, have promised to identify dead policyholders and pay out their policies or turn the money over to the states as unclaimed property. But other companies are petitioning state lawmakers across the country to pass a law that would shield them from having to do the same thing.
North Carolina state Treasurer Janet Cowell leads a fight to protect beneficiaries. Quote via NC Policy Watch article.
SB 665 is an attempt by one insurance company, to greatly limit the Department’s ability to audit by excluding whole categories of policies from the audit requirement. Specifically the legislation would exclude policies called “industrial life policies” which comprise the great majority of benefits that have gone unpaid by these companies. This exclusion will result in tens of thousands of loved ones never receiving the death benefits their parent, grandparent, or spouse has already paid for.
This legislation is little more than a money grab. Other companies in the industry have had no problem complying with statutory audit requirements.
Kemper Corp. has lead an effort to block or restrict reform.
If you’re wondering if you are a beneficiary to a life policy, there are some basic steps to take for free and others for more extensive follow through. MIB is a good source for this.
Notes: May 2015
Retroactive Statutes:
Iowa, Idaho, Maryland, Nevade, New York, North Dakota, Rhode Island and Vermont.
Prospective statues or interpreted to be prospective only:
Alabama, Arkansas, Georgia, Indiana Kentucky, Mississippi, Montana, New Mexico, Tennessee and Utah,
Transamerica withdrew their TransACE life insurance products on February 4th citing a difficult interest rate environment. Carriers at times discontinue or change products, but Transamerica’s decision was unusual in that they stopped processing current applications. Usually carriers give prior notice and accept applications up to the cut off date and give a processing deadline for submitted applications, but here Transamerica even pulled the plug on current applications except where the 1035 cash exchanges had already been sent to the existing carrier, or those out for delivery.
The low interest rate environment is an ongoing concern for life insurance carrier. Here’s an overview from the NAIC, National Association of Insurance Carriers on its impact.
How to know this was coming? Transamerica has strong independent financial ratings. They have a 92 Comdex ranking which is a composite percentile rank of all carriers. However, Fitch had given Transamerica a negative outlook in February, 2014, but revised it to stable in October.
Take Away
Transamerica’s abrupt decision to withdraw TransACE probably did applicants a favor, given the encountered difficulties. Applicants can simply apply somewhere else using the same paramed results and medical records. Current TransACE policy holders may wish to reevaluate. One may surmise the plan’s projections were not favorable. Considering replacement calls for careful review; the burden of proof for replacing should be fairly high. Requesting an inforce illustration from the carrier is the first step.
Choosing a carrier is a key component in selecting a permanent life insurance policy. I favor mutual life companies or those privately held over publicly traded stock companies. Stock companies have to subject the pressures of shareholders; publicly held or mutual companies do not.
The product affects the importance of carrier choice. Whole life is the traditional province of mutual companies. With guaranteed Universal Life (GUL), the lowest premium with a lifetime no lapse guarantee is the key driver. The company offering a Guaranteed UL are on the hook for the guarantee. How the carrier performs over the time is not of strict importance, assuming the historical resiliency of the life carriers. With a current assumption UL or an Indexed Universal Life (IUL) consumers are advised to closely review the relative merits of the carrier’s financial strength, since the policy’s performance will depend on interest crediting and cost of insurance charges. Carrier ratings matter but also trends indicating stability and financial strength. Veteran life insurance agents since the Great Recession of 2008 have witnessed many.
Being 58 years old, nearly 59, it’s compelling to flip the hour glass and reflect on those whose lives spanned 58 years and no more.
Continue reading “Died at 58 years old: comparatively too soon”
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American General Life Insurance Company has introduced “Secure Survivor GUL”. Survivorship Insurance, also called Second-To-Die Insurance, is designed for couples for estate planning purposes. It is less expenses than individual coverage.
Key Features:
Guaranteed Universal Lifurvivor GUL”e (GUL) guaranteed not to lapse, no lapse, with timely premium payments; guaranteed death benefit and premiums.
Guaranteed cash value accumulation
Ability to reduce the death benefit and premiums in future years. Pro-rata partial withdrawals of cash value permitted while maintaining the age 121 lifetime guarantee.
Return of premium feature: one-time option at end of policy year 15 for return of up to a maximum of 100% of premiums paid, a no cost rider
Comments: American General’s product has what they call optionality. The choice to reduce the death benefit, premiums and accessing the guaranteed cash value while maintaining the lifetime guarantee, as well as the option to return premiums in year 15 are very valuable and flexible options. The guaranteed cash value accumulation is another useful plus to this product, unlike most Guaranteed ULs which build little or no cash value making premium payments and lapse protection much less flexible over the course of the policy.
Your first choice for life insurance should be a product that requires a paramedical exam. Coverage is much less expensive. Why AARP and other marketing to seniors doesn’t advise this is a sad state of affairs. A paramed is part of fully underwritten life insurance where an underwriter reviews your blood test results and often your medical records. Think of it as a free health evaluation. This is extremely valuable, if one hasn’t had a recent blood test to tip you off to any spikes outside the normal range. Even if you regularly go for an annual physical, the feedback is different with a life application because the rate classification given to you: preferred, standard, or whatever grades the results. Feedback in your medical records is valuable too. A good number of people don’t know or fully understand what’s in their medical records. Doctors may soft peddle their evaluation. Often crucial facts or advice from a doctor’s is not fully understood or remembered. Applicants get a more realistic appraisal of their records when health information contained in it affects their rate classification and premium. “What do you mean I’m not a preferred plus?” Understanding why is a reality check.
Tips for Best Results
I advise my clients to fast at least 12 hours to get their purest cholesterol results. This means most paramed exams should take place in the morning. Fasting includes beverages like juice and coffee. Some examiners say black sugarless coffee is okay, but I advise to skip it. Just drink water. You’re going for your best results, after all. Also avoid sludgy high cholesterol foods several days before the exam. If you’re not feeling well before the exam, or not able to give your best results, cancel and reschedule. Here are some other tips.
Images: Wikimedia Commons
Let’s say you go to an website for term life insurance quotes, plug in you information an you get a list of premiums and carriers. Are those the lowest priced carriers? Probably not. The website will only show you carriers the brokerage are able to represent or are willing to represent, not all the carriers out there. Certain carriers are closed or heavily restricted to independent brokers, like Northwestern Mutual and Cincinnati Life. Knowing this is especially important to tobacco users for certain age and amounts, because there are wide variations in tobacco rates and you’re not likely to see anywhere near the best rates in online term comparison quotes. Online quote system gives the illusion that your seeing the lowest rates. But that is really only an illusion. They only show you their carriers. It may be a long list, but not a comprehensive list.
My rule of thumb is that Genworth is by far the best term carrier because they have very competitive premiums and a superior conversion option that outdistances the competition hands down. Conversion is a key element. However, if another carrier has a far better price for whatever reason, saving my client money for decades is a more important consideration than conversion, so I recommend that carrier. Most of the time I can recommend a carrier I represent, but if I’m aware of a lower premium option for a carrier I can’t represent, I’m willing to make that recommendation and walk away. It’s the same ethic that is in place when recommending whether to replace a policy. A good life agent is always willing to serve in the client’s best interest, even if it means walking away.
West Coast Life now offers a permanent life insurance product called “ModLife UL”. It’s a lifetime guaranteed universal life, guaranteed coverage to age 121 at fixed rates. That’s plural: rates. Instead of the typical one fixed rate in all coverage years, ModLife UL is about half price of other carriers years 1 to 5, then premiums increase in years 6 to 10, and then levels out in year 11 and thereafter. The catch is that those 11 and thereafter premiums will be quite a bit higher than the level-from-day-one guaranteed UL.
Pros: Good in situations where money is now tight, but will free up because you’ve paid off the mortgage or some other obligation, or expect increasing income.
Cons: Higher premiums after the initial years, and potentially higher overall costs, called cumulative premium outlay, the longer you live, after a certain break even point.
I ran a cost analysis for someone age 60 for $100,000 coverage. The merits of a low premiums now, higher premiums later approach will depend on an individual’s situation: income, age, health and lifespan projections. It’s not for everyone but certainly innovative. And ModLife UL does offer lifetime protection like other guaranteed no lapse ULs: pay your premiums on time and coverage is guaranteed for life.
I Google searched Divorce and Life Insurance on Google to see what was written. Third from the top was an article written in 2005 on the American Bar Association webset reviewing the legal ramifications and giving an overview of the types of life insurance. The authors gave a good name to plain old Universal Life, calling it Conventional Universal Life, as a separate category to either Guaranteed Premium Universal life or Variable Universal Life. The life insurance agent’s role isn’t discussed that much.
Here are some thoughts, short of a more formal analytical article, on life insurance going through the gauntlet of divorce from a life insurance agent’s perspective. The “Who’s on first?” question revolves around ownership of the policy. Everyone involved must understand that the owner can change the beneficiaries of the policy at any time. To avoid the wayward husband changing the beneficiary to his new fiancée, the ex-wife should be the owner or better yet devise a spell-it-all-out life insurance trust.
What type of new policy to set up will depend on the situation. Let’s say the father has two children ages 7 and 9. A 15 year term protects the youngest, one hopes, to college graduation day. It’s best to put in some padding for a 5 year+ college plan, so a 20 year term in this example would be more appropriate. But would the father’s financial obligations end in all contingencies? What if a child is subsequently disables by a health condition or accident? A guaranteed UL, fixed rate for life, would be the answer, though the husband probably will balk at the greater expense. Well, remember term life insurance has a conversion to permanent option, which offers a plan B, but for most companies the price and options are determined at the time of conversion, and a few carriers have taken a cold hard look at their conversion options and cut them back during this recession. So conventional term conversion leaves too much open to the realm of contingency. Who knows what’s going to happen in the next 15 to 20 years. 2010 brings an answer! Genworth and West Coast Life have come out with Term UL products that set a fixed price for UL coverage at the end of the term. A known quantity lends itself better to this situation, and eliminates at least one mystery in a future, divorced from the past, that is full of divergent mysteries.
One reason to get a rock solid, there when you need him, agent like myself, involved in a cooking up a divorce style policy, is that a good servicing agent will stay involved in making sure the policy is paid. Payment by the insured, who’s off in a new direction, for the owner, the ex, may require a bit of bridge tending. The owner should get a 30 day grace period notice, but also the agent and brokerage will be notified. A good servicing agent will act as the policy’s guardian angel.
A Guaranteed UL’s (G-UL) with lapse protection is probably the best product for those more affluent divorce cases, a conventional UL or VUL could go careening off, and a G-UL has a fixed premium, which lends itself more to a two party agreement. It may not be best in all situations because other UL options, the younger you are, may be better. Setting G-UL coverage to an age past what anyone can expect to live, say age 121, is advisable. Setting the coverage period to end at age 90,95 or 100, does not shut the door to a centenarian opening.