Life Insurance Dirty Tricks

Would you believe that insurance companies withheld $1 billion in death benefits from beneficiaries of life insurance policies? If your answer is “No”, think again, according to an advanced story in TODAY about a Consumer Reports article to be published this month.

This finding of insurance company cheating doesn’t surprise us, but the amount is staggering.

Life insurance companies had their own version of “Don’t Ask, Don’t Tell” when it came to informing beneficiaries of policy benefits when an insured died. If a beneficiary didn’t know about the policy or about the insured’s death, the insurance company wouldn’t tell.

More than that, some companies, even knowing that their insured had died, not only didn’t inform the policy beneficiaries, they continued to charge the policy with premiums they knew couldn’t be paid until the policy ‘s cash reserves were drawn down before canceling the policy.

Now that practice has stopped in those states that called the insurance companies on it. Not only did the companies have to pay a fine, they also had to install systems which would be likely to see to it that beneficiaries were informed and paid when an insured died.

It’s not that insurance companies did not have a resource for learning when a policyholder died. The Master Death List of the Social Security Administration is open to them and they used it willingly to locate annuitants that had died so that they coukld stop paying annuities. But, they didn’t use the same information to notify beneficiaries of policyholder’s death. SHAME ON THEM!

To avoid any of these insurance industry shenanigans, everyone who takes out a life insurance policy should let the beneficiaries know about it. It is not necessary to know the amount, but beneficiaries should know there is a policy, the name of the insurance company and how to reach the company in the event of death.

If you can do it tactfully enough, you might want to mention this life insurance dirty trick to an older friend or relative who might have a policy. This will suggest that they give the necessary policy information to their beneficiaries if they haven’t already done so.

Insurance companies fight tooth and nail to keep from paying benefits.

Let’s not make it easier for them.
 

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