12 March 2014 0 Comments

Your Policy is Issued with a Premium You Weren’t Expecting

shutterstock_107647085We just discussed what to do if your application for life insurance is declined.  But, what do you do when the policy is issued at a higher premium than you were quoted due to medical findings in the underwriting process?  Here are two real cases where the applicant made the wrong decision:

  • An attorney in his 40’s applied for a policy and it was issued with an extra premium due to a heart history.  He knew about the problem, but thought the extra charge was too high. He refused to pay the premium and asked the agent to leave the policy with him over the weekend, so he could look it over and make his decision.  He tossed the policy into the back seat of his car…it was still there on Monday when he was found along the roadside, dead from a heart attack…no insurance in force.
  • A business owner applied for a term policy to fund a buy and sell agreement.  The policy was issued with a Table 2 rating due to some liver irregularities found in his blood work done with the insurance exam.  He was unaware of any problem and insisted that the lab work must have gotten mixed up with someone else’s.  To prove his point he went to his own doctor who confirmed that he did, in fact, have a problem.  At this point the insurance company withdrew their offer—declining coverage at any premium.  He died of cancer within a year without insurance.

Either of these applicants could have placed their insurance in force simply by paying the premium.  They refused to do this because they thought they could get a better deal.  The insurance companies involved would have been on the hook had they simply paid one modal premium.  Then they could have done their research to see who was right.  This might even have been accomplished within the policies’ free look period, so if they did come up with something better it would have cost them nothing.  The lesson:  don’t offer to take any further tests or provide any additional information when you have an issued policy in your hands.  Accept the policy, binding the insurance company to the contract, and then continue your shopping.

P.S.  There’s another lesson to be learned from the case of the business man’s buy and sell policy.  He actually had another term policy in force issued years earlier that he was replacing because of increasing premiums.  He stopped paying premiums on that policy and it was out of the grace period before the new policy was issued because he was so sure he would qualify for the new policy.  Lesson two:  when replacing one policy with another, do not drop the existing policy until the new policy has been underwritten, paid for and all delivery requirements have been accepted by the new company.

Next I’ll discuss what legal recourse, if any, the above two applicants may have had.

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