Mr. Jones had paid 5 large annual premiums, but he had also borrowed money from the policy during those 5 years. When he bought the policy his agent told him he could pay money in and borrow money out. “It’s like paying yourself,” he was told. After making several hundred thousand dollars of premium payments, Mr. Jones was shocked when he received a pre-lapse notice from the insurer that demanded several hundred thousand dollars to keep the policy from lapsing.
While it was true Mr. Jones had borrowed a lot of money from his policy it was also true that neither the agent nor the insurer properly disclosed how the loans worked and how they affected the benefits of the policy. For example, Mr. Jones was not told:
1. If a policy is in the surrender-charge period (usually 10 years), the policy can have cash value but still lapse.
2. You don’t need to take loans unless the cash value is greater than all premiums paid.
3. Loan repayments must be designated as such; otherwise they will be premium payments.
4. There is a balance between how much can be borrowed from a policy without triggering a lapse.
5. Life insurance policies do not act like bank accounts.
6. Loans affect the cash value and death benefit.
It is easy to get into in a misleading situation with an insurance policy. Insurance language can be challenging even for experienced professionals to accurately interpret and articulate. Insurance experts are available to make the language more clear and to help preserve your consumer rights.
If you have a dispute over your life insurance policy, contact The Center for Life Insurance Disputes to discuss your options at (888) 428-4868 or www.cflid.com. With over 20 years of focused experience in dealing with life insurance complaints—and a proven track record of recovering money for clients, they can help those who have suffered damages due to life insurance fraud, scams, denial of death benefits, or other types of bad faith practices. The Center for Life Insurance Disputes protects the best interests of the client—never those of the insurance company. Consultations are free.