For most employees, the answer to that question would be no. Under Louisiana law, any person or organization applying for an insurance policy on your life is required to be able to show an insurable interest in you. Generally, an insurable interest would apply only in close family relationships and very specific business relationships.
We usually think of insurable interest in terms of the insured’s family members needing to cover such things as funeral costs and loss of income when that person dies. A business associate’s insurable interest is somewhat more difficult to understand.
A common need for life insurance in the business world often occurs when two people go into business together. They have put their money together and pledged their time and talents to make the business a success. Even if the partnership is going well, losing one of them in death can strike a devastating blow to the resources of the business. For one thing, it could mean the remaining partner would be forced to sell the business if he or she did not have the financial resources to buy out the deceased partner’s family’s interest in the business.
Another common form of business insurance, used especially in large corporations, is often referred to as key person insurance. An example of a key person would be the director of the creative team who must constantly come up with new ideas to keep the corporation profitable. A corporation can legally purchase a key person policy on one of its Louisiana employees only if the corporation can show that losing that person would have a significant impact on the company’s bottom line. It is also important to note that this law applies to Louisiana employees even if the employer is headquartered out of state.
In your case, if you are a valuable employee, but one who can be replaced by someone who can do essentially the same work you do, your employer probably does not have an insurable interest that would justify taking out an insurance policy on your life.
If you have further questions about insurable interests, call our toll-free number and asked to speak to a member of our Life and Annuities staff.
Why don’t people change their beneficiaries when they
need to? I’m always hearing some horror story about the wrong person collecting
on life insurance policies.
The relationships in our lives are constantly changing. Birth, death, marriage,
divorce, and children reaching adulthood are some of the events in our lives that
can call for a change in beneficiaries. Not surprisingly, we neglect such bothersome
details when we are dealing with periods of change.
Another common problem is that people may not be able to get in touch with their life insurance company when they need to. This is most likely to occur if the insured is no longer making payments on the policy; that is, if the policy is paid up. Over time, an insurance company may change its name or sell a book of business to another company located in an entirely different part of the country. As a result, both the company and the policy may seem to disappear without a trace.
Anyone who is having trouble locating a life insurance company can call us here at the Department of Insurance for information. We maintain records of life insurance companies throughout the country. In fact, our best personal insurance against a horror story regarding our personal life insurance policies is to contact all our life insurance carriers every three of four years for a status report on each policy, including a confirmation of listed beneficiaries.
I don’t have any family to leave my life insurance policy to. Do I have to be sick to collect on the policy while I’m still alive?
It is possible that you can collect on your life insurance policy in your lifetime, although you will receive only a portion of its full value.
If you are the owner and the named insured person on your policy, you may want to look into viatical and life settlements. Viatical settlements are generally available only to persons who, because of illness, have a life expectancy of no more than two years or so. Policies involved in viatical settlements often have a face amount of less than $100,000. The face amount is the amount of money to be paid to the beneficiary when the insured person dies. Life settlements often involve much larger sums of money and are considered by some to be a good financial planning tool. A relatively healthy, affluent person 65 or older with a large life insurance policy might consider a life settlement.
Basically, here’s how a viatical or life settlement works. An individual or group, called the settlement provider, buys the life insurance policy. Let’s say, for example, that the face amount of the policy that is to be paid at the insured’s death is $100,000. The provider may pay $60,000 for the policy, and the insured gets the $60,000 right away. In turn the provider makes whatever payments are necessary to keep the policy current until the insured’s death, and collects the full $100,000 at that time.
Before entering into a life insurance settlement transaction, discuss the matter with trusted friends and financial advisors. Don’t sell your life insurance policy if there is any possibility that you may regret it later. In addition, you’ll want to be aware of associated costs, such as payment of taxes on the money you receive. Also, before making a final decision, consider calling us here at the Department of Insurance to learn whether any life settlement or viatical settlement provider you are thinking of using is reputable and is licensed to do business in this state.
You are to be commended for looking into this matter now, rather than leaving it for your family to figure out on their own during one of the most stressful times in their lives.
Collecting on a life insurance policy is usually relatively simple as long as you do a little advance planning. The most important thing you can do now is make sure that the beneficiary information on your life insurance is current. Keep your insurance policy and other valuable papers in an accessible place where a family member or other designated person can get to them easily. And, on a related matter, you may also want to make that person aware of any special wishes you have regarding funeral arrangements
When the time comes to collect on the life insurance policy, the three documents that are needed are: the insurance policy, a claim form from the insurance company and a death certificate. Anyone can complete the claim form, but it must be signed by the beneficiary and returned to the insurance company, along with the death certificate and the insurance policy. If the insurance policy cannot be found, a lost policy certificate can be completed and submitted in its place. Impress upon the person that you designate that it is very important to keep a copy of the entire packet that goes to the insurance company, particularly since the original insurance policy is involved.
Once the insurance company acknowledges receipt of the completed claim form and accompanying documents, it is obligated by Louisiana law to pay the claim within sixty days. The law states that failure to pay the claim promptly without just cause will mean the insurance company must pay interest on the money, at the rate of 8% per annum, from the time they receive proof of death to the time the payment is made.
If you have questions the Life & Annuity Division here at the Department of Insurance may be able to answer, give us a call, statewide, 1-800-259-5300.
Fortunately, you have a great number of choices in life insurance available to you. Before you buy, it is important to understand which will be best for you, now and in the future.
There are two basic types of life insurance, although there are a lot of complex variations. Term life insurance generally has low premiums for the first few years. However, the premiums can go up when the specified term expires, and the policy doesn’t build up any cash value. That is, your family will get payment of the face value of the policy if you die, but term life wouldn’t provide any financial reserves to help with emergency financial needs that can develop as your family, and financial responsibility, grows.
On the other hand, Whole Life Insurance covers you and other named members of your family for as long as you keep the premiums paid. Even though the premiums may seem high at first, they shouldn’t go up later, and the policy builds up cash value you can borrow against if you need to. Even if you cancel the whole life policy later, you could still get some residual value or extended coverage benefits from it.
As a young family man, you may want to look at a combination of these two basic types of life insurance protection. A whole life policy would give you life insurance benefits for a lifetime with rates that, generally speaking, won’t change unless you choose to change the policy. Adding a term life policy would give you added life insurance protection you may want at this time in your life. Later, when you have fewer financial obligations, you can let the term policy expire.
Talk to a life insurance agent you trust about developing the life insurance plan that is right for you. You should be able to come up with a combination of coverage that is flexible enough to give you the protection you need at 30, at 70, and at every age in between.
Is it true that I can make a guaranteed return of 30% on a viatical or life settlement investment? I’m 70 years old and interested in good short-term investment opportunities.
Beware of anyone who talks about guarantees of a high rate of return on any kind of investment, and that includes viatical investments. At first glance, a viatical, or life settlement may sound like a sure thing. A basic viatical settlement would involve the owner of an insurance policy selling a life insurance policy to get a percentage of the life insurance money now. When the insured person dies, the buyer gets the full worth of the policy.
Let's say, for example, the terminally ill person’s $100,000 life insurance policy is sold to an investment company. The owner of the policy gets $50,000 up front, and the investors will get the full $100,000 when the insured dies. If you are one of the investors, your money helps to pay the $50,000. In addition, you and the other investors will pay the premiums on the life insurance policy until the death of the insured. If that death occurs within a short period of time, you could get a rather high rate of return on your money, but this kind of investment is fraught with risk.
For starters, there is the risk that the insured person may live longer than expected. As long as that person lives, you and other people involved in the investment must continue to pay the premiums on the life insurance policy and will receive no return on that investment. Another risk factor is the life insurance company. If it should go bankrupt, you could be left with nothing.
In addition to these built-in risks, the gravest danger in such an investment is fraud. Although there are some legitimate viatical investment companies, scam artists are ripping off innocent victims all across the country with bogus viatical settlement schemes. Such thieves make a great sales pitch, especially to senior citizens, take all the money they can get and disappear.
Viatical or life settlements are regulated by the Louisiana Department of Insurance, and persons offering these types of investments are required to be licensed by the Department before doing business in Louisiana. If you decide to put any money in such an investment, consider getting proposals from two or three viatical investment companies. Contact us to learn if the companies you are considering are properly licensed in the state and have a good service record.
I've heard that I can sell my life insurance policy. I could use the extra money, and I got a good offer through a viatical broker who called after my recent surgery. What would you advise me to do?
Selling your life insurance policy involves a written agreement between the owner of the life insurance policy and a company called a viatical settlement provider, which buys the policy for a percentage of its face value. If, for example, you have a life insurance policy that will pay your beneficiary $100,000 when you die, the company may buy the policy from you for 50% of that, which would give you $50,000. The company would then pay premiums due on the policy from now until your death. In Louisiana, if the insured person is terminally ill, there are strict guidelines about the percentage of the value of the policy the person must be paid.
There are several reasons why you need to be careful about selling your life insurance:
Ask yourself why you bought the policy. Is the beneficiary still alive, and if so will that person have less income when you are gone? Will he or she be responsible for your funeral expenses or other bills associated with your death?
Don't assume you get all that money free and clear to spend as extra cash. For starters, if you have not been diagnosed as terminally ill, you will have to pay capital gains tax on the money. Also, if you have outstanding debts, you'll be fair game for your creditors.
Consider whether you will lose benefits from Medicaid or other public assistance programs if you receive a large sum of money. The cash windfall could make you ineligible for future payments.
Before deciding to sell your life insurance, gets bids from at least three different viatical or "life settlement" providers. Call our toll-free number to learn whether these companies are licensed in Louisiana, and talk to your tax adviser about how this move will affect your overall financial picture.
Finally, ask your life insurance company about alternative ways of getting some cash from your policy without having to sell it. It may have built up cash value you can draw upon now or it may contain an accelerated death benefit clause that allows you to collect some of the proceeds during your lifetime.
I have carried a burial policy for several years. Should I check on what it covers?
Yes, it would be a good idea to review your burial, or funeral, policy now. Read it over carefully and be sure you understand exactly what goods and services it covers.
If there is anything that needs to be added or updated to provide the funeral you expect, you'll be doing your family a great service if you take care of that now, rather than leave it for them to worry about at the time of your death.
One problem families often run into with policies that were bought several years ago is that the goods provided in the funeral policy, such as the casket, may not be of the quality they thought they would be.
The fact is that some burial or funeral policies may not allow you to add to or upgrade what is specifically spelled out in the policy. As a result, if at the time of your death your family tries to make changes in what funeral/burial goods and services are stipulated in the policy contract, that contract may become null and void. That means that if they insist on upgrading the casket, the insurance company may refuse to pay anything other than the amount of money listed as the face amount of the policy.
Even if you read over your funeral policy and decide everything looks fine, it would be a good idea to go see the official designated funeral director named in the policy. Ask that person any questions you may have about the services offered, and ask to see the type of casket the policy covers.
If you are not satisfied with what you find, consider arranging for the casket and service you want while you're there. Just be aware you may have to pay the difference between the total amount owed and the face value of the policy. That is, if you decide on a funeral that costs $3,500 and the face amount of the policy is $2,500, you may have to pay the difference of $1,000.
Even though you may be out some extra money now if you make changes in your burial policy and related arrangements, you will have the consolation of knowing you did not leave this unpleasant task for your family to deal with after you are gone.
My husband and I have just bought our first home. I know he needs life insurance. Do I?
If you work outside the home and your salary helps pay the mortgage, you probably need life insurance, too.
Even if you expect to stay home and care for the children, your untimely death would involve burial expenses, and other costs, ranging from childcare to housekeeping services.
Both you and your spouse should periodically evaluate your life insurance needs and make adjustments as necessary. Whatever your circumstances, the chances are you will always be choosing some variation of three basic types of life insurance: term, whole life and endowment.
Term life insurance is popular with homebuyers, parents of young children and others who need large amounts of coverage for a specified period of time, such as 20 years, or to age 65. It pays a benefit only if the insured person dies during the term covered by the policy. Some term insurance can be converted; that is, you can renew it for another term without a medical exam if you choose a renewable policy.
Every family should consider having whole life, or straight life, insurance which can be kept throughout the lifetime of the insured person. An attractive feature of whole life is that it builds up cash value that the insured can borrow against or collect on by surrendering or giving up the policy.
You will also want to be aware of endowment plans. After a certain number of years, or when the named insured reaches a certain age, the endowment amount that has accumulated in the plan is paid in full to the designated recipient. Endowment policies is sometimes used as a means of setting aside a sum of money for a child. They are often set up to mature, or be cashed in, when the child reaches a certain age, such as 18 or 21. Endowment premiums are often higher than the premiums of other plans as the focus is on the accumulation of money.
Enjoy your new home, and call us here at the Department of Insurance with can help with other insurance questions.
I enjoy high-risk sports, especially mountain climbing and scuba
diving. Now that I am married, do I need special insurance coverage because of my
risk exposure?
Any time you make a change in lifestyle, such as getting married, it is a good
idea to inventory all your insurance policies. In regard to your participation in
high-risk sports, your greatest concerns probably involve health, life and disability
insurance.
When you participate in high-risk activities, such as mountain climbing or scuba
diving, your health insurance will probably cover you up to the normal limits of
the policy if you are a part of a group plan. Employee-sponsored medical plans are
prohibited by federal law from discriminating against plan members by excluding
injuries from high-risk activities.
If you have an individual health care plan, you may need to take some kind of action.
Check with your health plan representative for details. On the one hand, you may
be able to cover the risk by increasing your premium for the period of time involved
in the high-risk activity. At the other extreme, you might get an exclusion on your
individual policy that would allow you to be covered as usual except for the time
you are actually engaged in the high-risk activity.
Two types of insurance that may be of greater concern to you as a person with family
responsibilities are disability and life insurance. Begin by talking to a local
insurance agent you trust about the coverage you need. Even when local agents cannot
write such policies themselves, they are often able to recommend someone who can.
If not, you will need to explore your options on your own.
The fact of the matter is that there is insurance coverage available somewhere to
cover almost any kind of high-risk activity you can name. Some of it, however, may
be cost prohibitive, so you will want to explore all your options.
We cannot recommend a specific insurance carrier, but when you have chosen one or
two that you think may be able to write the coverage you need, give us a call. When
you call, the questions you need to ask are whether a company is authorized to do
business in Louisiana, is financially sound and has a good claims payment record.
If I become seriously ill, can I use cash from my life insurance policy to pay my medical bills?
Most people buy life insurance to provide money for others after they die. Recently, however, more people are turning to their life insurance policies for cash during their lifetime.
Accelerated life benefits, policy loans and viatical settlements allow you to draw cash from your life insurance policy before your death.
An accelerated life insurance benefit spells out the fact that a certain amount of the death benefit (generally 25 percent) can be paid to the insured person if he/she has been diagnosed with a terminal illness. One purpose of the accelerated death benefit is to provide cash to pay for medical bills that will help to extend the life of the insured.
With a policy loan, a policyholder can borrow all or part of the cash value of the insurance policy at a specified interest rate, and the cash value of the policy will be used as collateral. In the event of the policyholder’s death, the insurance company deducts the amount borrowed, plus any accumulated interest, from the amount payable.
The viatical settlement has become popular in the last few years. It involves a business transaction between a viatical company and an individual who has one of several kinds of life insurance policies.
The viatical company buys the rights of ownership of a life insurance policy for a percentage of the face amount of the policy. The company then makes the payments on the policy until the insured dies and collects the full benefit.
For example, if the value of the policy is $10,000, the company might buy the policy for 80% of its value. The insured would get $8,000 right away, and the company would get the full $10,000 benefit when the person died.
Collecting life insurance payments before you die is a serious decision. It could take money away from the people or institutions who would have been your beneficiaries. I would advise you to discuss the matter with family members and close advisors before making a final decision.
Is it safe to buy insurance over the Internet?
The Internet is a great way to find information on just about any subject, including insurance. One of the most fascinating aspects of the Internet is that it is always open for business. You can use it 24 hours a day to find an insurance agent or company in your area, evaluate your insurance needs, compare insurance rates and even apply for insurance.
When using the Internet to shop for insurance, you should follow the same steps you take when shopping for insurance the traditional way. Take time to evaluate your needs, gather several quotes and buy only the coverage you need, based on your research. There are, however, some specific things to consider when looking for insurance online.
Since virtually anyone can put information on the Internet, it is crucial that you know who you are dealing with when transacting business online. In one case, a dishonest person set up a phony web site by using an official insurance company logo. A consumer, thinking he was dealing with a legitimate agent, filled out the online application, and included his credit card number. He later learned that the insurance company never received his application or his payment.
You should also be careful in giving out personal information over the Internet. Look for the company’s online privacy policy on its web site. If a policy is not posted, contact the company directly, and ask about it. If the company does not have a policy or its representative is reluctant to talk with you about it, think twice before doing business with that company.
While the Internet provides access to information, products and services you need, it may also allow a company to collect personal information about you. Oftentimes the information collected by one company is shared with other companies without your knowledge. If you are concerned about privacy, let the company know you do not want your personal information disclosed.
Before you buy insurance on the Internet, give us a call. We can let you know if the agent or company you are about to do business with is licensed to sell insurance in Louisiana. We can also let you know if any complaints have been filed against an agent or a company.
A friend of mine told me his life insurance premium went down. Is that possible?
Your friend’s situation might be similar to another case I heard about recently. A 35-year-old woman had bought a life insurance policy a few years back. At the time she was 50 pounds overweight, had high blood pressure, and was trying to quit smoking. Two years later, she had lost 50 pounds, her blood pressure was normal, and she had quit smoking.
In this case, because certain health factors had improved, she was able to obtain a lower premium rate even though she was two years older than when she first bought her life insurance policy.
Insurance companies now know that such as things as height, weight and nicotine use greatly influence the length of time we can be expected to live. These factors, known as "underwriting standards," are used to evaluate you as an insurance risk and to calculate the proper premium.
Most people fall into the preferred or standard risks category (average risk of death); a small minority will be "uninsurable" (probability of early death) and the remainder will be "substandard" (insurable, but with an above average risk of death). The best rates go to those who are least likely to die early, the "preferred risks."
People who are not considered to be in the best of health can still get life insurance, it will just cost them more. When shopping for insurance, ask what the company’s preferred rates are and if there are steps you can take, such as living a healthier lifestyle, to help you qualify for lower rates.
Shop around because many insurance companies have different rate structures. You may qualify for a lower premium with one company and not another.
Remember, with life insurance, as with any other kind of insurance, it is important to look for not only affordable premiums but also for a company with a good record of service and financial strength. We can provide you with an insurance company’s complaint history as well as its rating, which will indicate the financial stability of the insurance company.
Could somebody take a life insurance policy out on me and have me killed to collect the money?
There are safeguards to protect you from the person who might consider purchasing an insurance policy on you in order to kill you for the money. First of all, the applicant must be able to show an insurable interest, such as being a close family member or a business partner. More importantly, you, as the insured person, would have to sign the application and give permission for medical information about you to be released to the company.
As with any other kind of insurance application, the company underwrites, or investigates, the individual situation before binding coverage on a life insurance policy. In the traditional scenario, the person buying the life insurance is the primary wage earner in the family who is concerned about the rest of the family being provided for if that wage earner drops out of the picture.
In that case, there is no need for extensive underwriting if, for example, the applicant is a young person with a family who is applying for a reasonable amount of life insurance. A simple medical checkup will provide information on the applicant’s health, and the reason for the policy will be borne out by the fact that close family members are named as beneficiaries.
When partners in a business venture purchase life insurance policies on each other, the health of the insured and the insurable interest are once again easy to establish. But there is one important difference. The person whose life is being insured is not the person taking out the policy. In that case, each of the partners will be required to sign the application stating that he or she is aware that this policy is being bought. Again, the insured’s permission will be needed before the insurance company can obtain the necessary medical records to determine the health of the insured.
If a family member or other interested party wants to buy an insurance policy for a minor, a parent or legal guardian must sign the application and authorize the release of medical records on behalf of the child.
Because of the built-in safeguards described here, you should not have to worry about your life being insured without your knowing about it.
My mother is getting on in years and has begun asking me to help her with some of her finances. Can you suggest ways I can help her with insurance matters?
It is good that your mother has asked you to help her with these important issues. The planning you and she do now can bring peace of mind to you and other members of your family later on. While you are working with her, you may pick up some good tips about how to do some advance planning of your own as well.
Depending on how much your mother is ready to share at this time, here are several things you can do to help make sure that important information is correct and easy to access by you or someone else designated by your mother.
One of the first things you and your mother can do is sit down together and make a list of the locations of all important papers, such as life insurance, car insurance, and any homeowners or renters insurance policies. Also, contact her local agent or insurance company, and ask for a status report on each policy. Ask specifically for the name of current beneficiaries as they appear in the life insurance company records. Have your mother go over these records, and help her make any needed changes.
Your mother may be surprised to find some insurance-related records are not as current as she thought they were. One memorable situation occurred with a man who had remarried after his first wife died. Unfortunately, he forgot to remove the name of his first wife as beneficiary on his life insurance policy. The oversight wasn't found until after his death. Updating beneficiaries on life insurance policies and health insurance plans are just some of the important matters we all need to take care of when we make major life changes.
Another thing you and your mother can do is make a complete, and current, record of her financial accounts and safety deposit boxes and a list of the people who have access to them. It is also a good idea to put together a list of names and addresses of any lawyers, accountants, insurance agents or financial advisers who have handled business matters for her over the years. If a question comes up later, these professionals may have the information you need.
I am over 65 and just bought an annuity. Do you think I made a mistake?
Buying an annuity is not necessarily a mistake. However, if you have strong doubts, you can get your money back for up to 10 days after you receive the contract.
Let’s take a closer look at annuities. Annuities are insurance products similar to life insurance. Generally speaking, you usually pay a lump sum of money when you buy the annuity; although, some annuities do allow regular payments on a periodic basis.
When the annuity matures, the "annuitant," that is, the person who is to receive the payment, starts getting regular payments. That person will also get the benefit of interest that has accumulated on the money and possibly some tax breaks. The downside is that withdrawing the money within the first seven to 10 years after the annuity is purchased can mean a stiff penalty, up to 12 percent. However, most annuities do allow annual withdrawals of up to 10 percent without penalty.
A major problem with a person over 65 buying an annuity is the time frame. An 85-year-old probably wouldn’t be wise to buy an annuity that matures in 12 years when that person is 97. On the other hand, a 65-year-old in good health might decide to buy a 10-year annuity with money that won’t be needed for living expenses in the meantime.
When considering an annuity, be cautious about allowing yourself to be talked into cashing in other investments, such as certificates of deposit (CDs) or mutual funds, in order to buy the annuity. Take a close look at what the change in investment may cost you, such as a high penalty for early withdrawal of a CD.
Also, beware of the promise of an interest rate on an annuity that is just too good to be true. That high interest rate may only be paid the first year you have the annuity. Ask to see the rate structure that tells exactly what interest you will accumulate on your annuity each year, not just the first year you have it. Also make sure the contract specifies what penalty you will have to pay if you must draw the money out for an emergency.
I know of a young man who died of what was ruled a self-inflicted
gunshot wound. He had taken out a life insurance policy about a year before, and
the company wouldn’t pay his wife anything because he took his own life. Why
is that? Will insurance pay if the death is ruled an assisted suicide?
In the case of the young man you mention, the policy probably did not pay because
he died soon after he bought the policy. Louisiana law states that a life insurance
policy may restrict coverage if the person named on the policy dies as a result
of “self-destruction . . . within two years from the date of issue of the policy.”
Most life insurance policies written in the United States will include similar language.
The reasoning behind this provision is clear. It removes the temptation for people
to buy insurance and then kill themselves to solve immediate financial problems.
In most cases, the two years should serve as a sufficient buffer to keep that from
happening.
Because the exclusion for suicide is tied to how long the policy has been in effect,
the issue should rarely come up in the case of assisted suicide. We usually think
of assisted suicide as something that may be seen as an alternative to a person
who has suffered over a long period of time because of a debilitating illness or
injury. The majority of people in that situation would not be well enough to buy
life insurance less than two years before they considered asking someone to help
them die.
On a related matter, if a person attempts suicide, medical bills for the self-inflicted
injuries will probably not be covered by that person's health insurance. Most health
insurance plans contain a standard exclusion for self-inflicted injuries.
I know suicide is an uncomfortable subject for most people. However, if you or someone
you know is considering suicide, get help for that person. Many health care plans
cover suicide-related counseling, and most communities have a free, crisis intervention
telephone number you can call 24 hours a day, seven days a week.
I just discovered a paid up life insurance policy a distant
relative bought in the forties. To my surprise, I found I was named as the sole
beneficiary on the policy. How do I find out whether I have money coming from this
insurance company? If I do, would I need to report it as a part of the deceased
person’s estate?
To answer your second question first, money you receive as the beneficiary of a
life insurance policy does not have to be reported as a part of the deceased person’s
estate. There is a possibility, of course, that you will find the beneficiary was
changed at a later date. In that case, the last named beneficiary or that beneficiary’s
estate would be the sole recipient of the proceeds of the policy.
Because the policy was purchased in the forties, making contact with the company
could be a problem. Begin by calling or writing the company, using the latest telephone
number and address listed on materials that you have.
Before you make the contact, be sure you have all available information in hand.
The policy number, date of issue, name of insured, name of beneficiary and any correspondence
from the insurance company will be of help. If you receive no response, try to contact
the headquarters of the company as listed on the policy or the insurance department
in that state. Throughout the process, be sure to keep the originals of the policy
and supporting paperwork.
Even if you find a company has gone into liquidation, don’t despair. There
may still be money available, either through a state guaranty association or other
company or companies that bought the business. If that is the case, it will also
be helpful if you know what state or states both you and the insured have lived
in over the years.
If you have problems finding the company, give us a call. We may have historical
information on the companies involved or at least be able to suggest other steps
you may take.
Does the Department of Insurance regulate viatical companies
that buy life insurance policies from the terminally ill?
Louisiana was one of the first states to enact legislation to regulate viaticals.
Such laws were needed because companies dealing in viaticals do not come under insurance
company regulations, even though life insurance is vital to the success of their
business.
A viatical settlement involves a written agreement between a person who is covered
by a life insurance policy and a company, called a “viatical provider,”
that buys the policy for a percentage of its face value.
People who are terminally or chronically ill sometimes sell their life insurance
policies because they need the cash while they are still alive. If, for example,
a life insurance policy is to pay $100,000 at the insured’s death, the viatical
provider may buy the policy for 80% of that, or $80,000. The provider also starts
paying the premiums on the policy. When the insured dies, the company collects the
$100,000. The company’s gross profit is $30,000 less than the amount paid out
in premiums.
When viaticals started springing up across the country, it became clear that they
should be required to follow strict standards of practice. That’s why I strongly
supported passage of the 1996 Louisiana viatical law which established regulation
of companies buying life insurance policies from Louisiana residents.
As the viatical industry grew, a further problem developed. Unlicensed viatical
solicitors were marketing get-rich-quick investment schemes to Louisiana citizens.
They promised a huge return to people who invested in a viatical investment company.
These companies did not come under our viatical providers law because they were
not buying life insurance policies in this state.
We went back to the Legislature in 1997 in strong support of legislation to regulate
these investment activities. The resulting law requires viatical solicitors to have
a license before they raise money in Louisiana to buy life insurance policies. This
allows us to take action against, even shut down, unscrupulous con artists who promise
huge profits but leave the individual investor with nothing.
We will continue to monitor the viatical industry, but for now I am pleased with
the regulatory oversight we have under present law.
Because viaticals are a new concept to many, I would advise anyone who is thinking
of selling a life insurance policy to talk with family members before signing the
settlement agreement.
For a list of licensed viatical providers, contact us here at the Department of
Insurance.
Do you have a publication that could help me decide what kind of life insurance to buy?
The "Life Insurance Buyer's Guide" is a 12-page guide to buying life insurance. Details on how you can get your free copy are given at the end of this column.
A key feature of the "Guide" is a list of the seven most important things to consider when buying life insurance. A thumbnail sketch of those seven factors is given below. For details, you will need to read the "Guide."
1) Review your insurance needs and circumstances. Choose the kind of policy whose benefits fit your needs, and ask an agent or other life insurance company representative to help you make that choice.
2) Be sure you can make the premium payments. Can you afford the amount of money you have to pay up front? What if the premium goes up later? Will you still be able to afford the policy?
3) Don't sign an insurance application until you have read it carefully. Be sure your answers to all the questions on the form are accurate and complete.
4) Don't buy life insurance unless you intend to keep it. It can be very expensive to drop a policy.
5) Don't drop one policy in order to buy another one until you study both of them carefully. Replacing a life insurance policy can by very costly.
6) Read your policy closely as soon as you get it. Ask your life insurance representative about anything that is not clear to you.
7) Review all of your life insurance policies with your agent every few years. Your income and your need for life insurance will often change over time.
The "Guide" also contains helpful suggestions on how to decide how much life insurance you need, and it explains, in simple language, the basic types of life policies.
You will find suggested questions you should ask, such as whether premiums or benefits vary from year to year, how much the benefits build up in the policy, and what parts of the premiums or benefits are not guaranteed.
For anyone who is thinking of buying life insurance, this booklet is a must. When you call or write to request your free copy, ask for the "Life Insurance Buyer's Guide."
What can I do to make sure the right people benefit from my life insurance policies?
There are some typical kinds of problems involving beneficiaries that we can avoid by continuing to update life insurance policy information, even though we may no longer be making payments on them.
The best place to start is by being as specific as possible when naming beneficiaries. Then, when there is a major change in your life, designate other beneficiaries as needed in your new circumstances.
Something as simple as not being specific when naming a beneficiary can cause problems. For example, John Doe may name "my spouse" or "Mrs. John Doe" as his beneficiary. If he remarries, as a result of death or divorce, these terms apply to a different person. This could be a problem if, for example, the first wife was to remain the beneficiary of a life insurance policy after a divorce. Mr. Doe may not think to change the name on the policy, as he intends for the same person to continue to be the beneficiary. But the fact is, the beneficiary will now be the second wife because the insured was not specific in originally naming the beneficiary.
Problems also may occur when the named beneficiary dies before the insured does. Often a policy calls for a second beneficiary, primarily to provide a beneficiary if both the insured and the primary beneficiary die at or near the same time. However, if no second beneficiary is named and the insured dies without a living beneficiary, the proceeds from the policy will go into the insured’s estate.
To ensure that your life insurance matters are properly handled after your death, keep an attorney or other trusted individual informed on where all life policies and related updates are stored, including the names of beneficiaries.
In addition, contact your local agent or the insurance company periodically for a status report on each of your life insurance policies. Ask specifically for the name of current beneficiaries as they appear in insurance company records.