As millions of people are screaming “What is happening with my insurance policy!” insurers and the Federal Reserve Bank are both pointing fingers at each other while short-changing policyholders. In response, millions of Americans are pushing back by selling their policy.
The Cost Of Life Insurance Is Getting Unaffordable For Many Americans
Over the past year, several major insurers have notified hundreds of thousands of people that the monthly life insurance premium they pay on their policies will increase yet again. A report by the Wall Street Journal found that half a dozen lawsuits have been filed against major life insurers including Aegon NV’s Transamerica unit and Legal & General Group PLC’s Banner Life.
The reason? Policyholders have been forced to pay out-of-pocket on a life insurance premium that was not supposed to be raised. In defense, the insurance companies shifted blame to the Federal Reserve’s continued decision to keep interest rates historically low.
The issue is clearly summarized in the following case example of Raymond Foos an 87-year-old retired executive who purchased an $11 million policy in 2003 from Transamerica. This year, Transamerica informed him of an increase of the life insurance premium that will cost him $300,000 a year. This cost will be added to the $2.25 million he paid as a lump sum to buy the policy which he thought would cover him and his wife’s death.
Perhaps Foos should have read the fine print. Alternatively, perhaps the company shouldn’t have claimed over and over that his premiums could never be raised. Foos had this to say in response to the increase in his insurance premium:
Transamerica should “bite the bullet.” Drawing from his years of running a business, he said, “when you have a sale that you lose money on, you don’t go to the customer and say, ‘Give me some more money.’ You generally figure out how to live with your problem and go on…. You tighten your belt.” – (Source)
Is the Fed to blame?
Insurers say yes. Policyholders like Raymond Foos may not like it, but this is the reality of low-interest rates: someone needs to pay. Life insurers have an obligation to generate profit. When insurers are undercut by the FED’s historically low (and long-lasting) interest rates, they must generate that profit a different way – by skimming it off the top of the premiums of policyholders.
Don’t like it? You can complain, but the only way to fight back is to not buy insurance.
Spin-offs of companies to new holding companies have not helped the problem. Insurance beneficiaries are often left clueless. Unable to cash in on the policy, they are put on hold, constantly transferred from one department to another, chasing a trail of money that seems to evaporate overnight. The money is rightfully theirs, but the buying and selling of policies in bulk by insurance companies and other hedge funds make it near impossible to track down.
However, don’t call the insurance companies greedy just yet.
Life Insurance Industry Under Investigation for Not Paying Beneficiaries
This controversy comes on top of an already growing scandal where insurance companies have not stepped forward to pay the death benefits to beneficiaries. “Audits of the nation’s leading insurance companies have uncovered a systematic, industry-wide practice of not paying beneficiaries,” says CBS News correspondent Lesley Stahl.
The problem is that policyholders who take out a life insurance policy die without their beneficiaries knowing that they are entitled to the money. In Florida, for example, a state with a large population of Baby Boomers is home to hundreds of thousands of policies that are not being given to beneficiaries. “The companies know,” says Kevin McCarty, the insurance commissioner of Florida, who leads the charge on the national task force investigating the industry. “The beneficiary never comes forward because he or she doesn’t know the policy exists.”
It is the insurance company’s responsibility to come forward and pay the estate benefits to beneficiaries. However, some reports estimate that more than $50 billion worth of life insurance policies is unclaimed, largely due to the insurance companies’ ill will.
Where is the Consumer Finance Protection Agency when you need it?
Although we hear stories of policies numbering in the millions of dollars, the reality is that most policies are around $10,000 or less. However, all these policies lumped together, over millions of individuals that have not been adequately paid (many of them since the 1960s) create a large sum of money. “These are billions of dollars that now stay in the investment accounts of these insurance companies rather than return money to those families,” says Jeff Atwater of CBS.
In order to file a claim, one has to know that a policyholder put your name on their life insurance policy. Oftentimes this information simply “goes missing.”
The Fed’s policy of keeping interest rates low is indeed hurting the profits of the insurance industry. The problem with the excess greed in the insurance sector cannot be likened solely to the Federal Reserve Bank. Greed goes much deeper.
The problem lies in the lying and misrepresentation of facts. It lies in withholding money from policyholders that have paid the premiums asked of them month after month. It is the raising of premiums simply due to the fact that the companies are so big and the individual is so small.
I’m a policyholder, what do I do?
One option that policyholders around the nation have is to sell their life insurance policy. Selling your life insurance policy for cash breaks the cycle of abuse. You are no longer tethered to the whims and caprices of a villainous insurance company. You are no longer at the mercy of random premium hikes.
To find out more call Life Insurance Settlements Inc. at 1-866-326-5433. You will receive a cash settlement significantly more than what your insurance company will pay. You will then be free from the obligation and financial burden of paying future premium payments.