12 April 2012 0 Comments

What To Do When The Premium You Were Quoted Doesn’t Come Through

I just covered how to get the best term premiums, but what happens when the agent quotes one premium and the policy is issued with a higher premium…or you are declined a policy at any premium?

This can happen, even when the agent has been thorough in asking all the right questions before quoting a premium.  I once quoted a very close personal friend a Preferred premium even though it appeared that he could qualify in a Preferred Best premium class.  I’d rather quote the slightly higher premium and surprise the applicant with a policy issued with a lower premium.  Well, we were both surprised because he was issued a policy with a higher premium, rated up with a Table 2 extra premium because he had Hepatitis C.  He wasn’t aware he had Hep C; it was detected on the blood test completed for the insurance company as part of the underwriting process.

So, what do you do when this happens?  My advice here is not unique to Term insurance.  It applies to an application for any type of life insurance.  First, bind the insurance company who has made an offer at any premium level.  Once you have completed all the issue requirements, including payment of the premium, you can decide if you really want to keep the policy, but the insurance company can’t decide that they don’t want to keep you.  They are bound, and barring misrepresentation on the application or your failure to pay future premiums, they cannot get out of the contract. Your agent should have been working with the company to improve their offer and may emphatically state that no better offer is available due to his/her experience with other applicants with similar insurability histories.  If you have faith in your agent, go with it.  If the agent can’t make that statement to your satisfaction, the race is on.

At his point your agent must go into hyper- speed to see if the issued policy is really the best available.  You normally have at least 10 days during a free look period during which time you can return the policy and get a full refund of the premium you have paid.  This free look period may be longer in some states and for advanced age applicants. The free look period starts from the day you have accepted delivery of the actual policy, so put your agent off on delivering the policy and if it comes to you in the mail do not sign the delivery receipt until absolutely necessary, or when you have determined that you will keep the policy that has been issued. If you had been planning to pay a premium less frequently than monthly, you may want to temporarily change to a monthly mode until you have concluded your search for a better deal.

Your agent should have been trying to improve the offer with this company, so by the time the policy is ready for issue, the search for a better premium will be with another company.  The agent will discuss the case with other companies and submit a new application if a better offer is possible. The medical exam you had for the original company should suffice for the new company.  If a better premium is available, you’ll stop paying the higher premium, accept the policy from the new company and possibly get a refund under the free look provision or, if not, you will only have paid for a month or two for the assurance of not letting a policy go that may be the best offer you receive.

If you don’t bind the original company, they can pull their offer, especially if new adverse information surfaces during underwriting for the new company.  Or, worse, you could die with no insurance in force.  Oh yes, I have seen it happen.  An attorney was issued a policy as a standard risk instead of preferred and told my broker he would think it over. It was Friday; he suffered a heart attack and was dead by Monday morning.  He had not paid the premium—no insurance was in force!

If all else fails…if you can’t obtain life insurance at any price, or at lease at a price you can afford, purchase an accidental death policy.  It only pays a benefit if your death is the result of an accident, but it’s better than nothing.

One last idea on how to keep premiums low is back-date to save age.  Most state insurance laws will allow you to back-date a policy up to six months in order to pay the lower premium for the younger age.  If you’re within six months of the date your insurance company uses to determine premium (last or nearest age, depending on the company) you may want to consider back-dating.  You’ll be paying for insurance for some months that you were not covered, but over the long haul it can produce meaningful savings.

Next, I’ll be leaving the subject of Term Insurance to start a discussion of Permanent Insurance…types of policies and when they should be used.  

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