by InsInvestigator » Mon Aug 08, 2011 05:22 am
I picked up a potential case last week from a policyholder in south-central Florida. It involves a major insurance company and a Conference-level producer. After I finished interviewing the policy holder, I couldn’t believe the details of the case and thought, I must be missing something – this is so wrong, it’s unbelievable. Please take a look at this and let me know what I missed.
In the year 2000, 34-year-old well-to-do building contractor received a phone call from a local insurance agent. Claiming to have gotten his name as a referral, the agent said he specialized in estate planning and life insurance plans for the owners and employees of large businesses. The contractor, whom I’ll refer to as Ted, only had a small life insurance policy at the time and knew he needed more.
A week later, Ted told me the agent came to his office where he completed some sort of questionnaire. On this document, Ted disclosed that he was a body-builder, had taken steroids many years before, and smokes cigarettes. No significant health history was noted – no surgeries or complications of any type. During this meeting, the agent briefly outlined the features and advantages and benefits of a sound life insurance policy with a major insurer.
A few days later, the agent called Ted and told him he had completed some sort of evaluation (what I think was a type of Financial Needs Analysis) and needed to meet. The agent said he had great news for him. Almost two weeks passed before their meeting and during that time, the agent telephoned Ted almost every day. When they finally met, the agent showed Ted some charts and graphs on his computer and told him that, based on his analysis, he needed $1.5 million worth of permanent life insurance coverage. The agent told him the premium would be slightly higher because he was a smoker and to count on paying around $17,000 per year. At the time, Ted could easily afford that and agreed to move forward with the agent’s recommendation.
Over the course of the following month, Ted told me he completed a bunch of tests (which I know must have been a blood/spec and paramed) doctor’s exam, answered financial questions about his business and accounts related thereto, questions about his wife, children, time on his boat “the whole 9 yards.” A little more than three weeks later, the agent called, claimed to have great news and needed to meet with him and his wife as soon as possible.
The agent came to Ted’s house with another man, whom the agent claimed was his supervisor. Both men were nicely dressed and drove up an expensive Mercedes. During the meeting, the agent congratulated Ted on taking such good care of his health (in spite of being a smoker, I guess) and said the company had given him a “special type” of Preferred rating. “The best thing about this type of rating” the agent claimed “is the company doubles your death benefit for just a little bit more money.” What a Deal!
So, just like that, Ted got a $3 million Multi-Funded Universal Life insurance policy for slightly less than $20,000 per year. Ted was exuberant, and very proud of his perfect health. He wasted no time in signing a few more documents and cutting the agent a check for a little more than $19,000. “This amount needs to be paid every year on the policy's anniversary” the agent claimed. “With this type of plan, a monthly deduction from your checking account is not an option.”
In 2005, Ted received a phone call from the agent, who claimed he had something he needed to go over with him. In a meeting held a few days later, the agent said he had “an even better plan” that would provide a much better return on Ted’s money. The death benefit would not change, nor would the premium and “a great thing about this policy” he stated, was that premium payments could be made every month, instead of annually. Believing him, Ted completed a stack of forms and went back to work.
In 2009, hard times fell upon the building industry in Florida and, in order to make ends meet, Ted needed to borrow some money from his policy. When he telephoned the company, he was told his policy had lapsed in 2008 due to insufficient premiums. Ted does not recall ever receiving notice from the insurance company that his policy was in trouble. Although he had stopped making premium payments in mid-2008 (oddly about the time his premiums stopped his policy lapsed) he was told his policy would remain in effect for quite some time and he could make up the premium shortage later on.
In the year that followed, Ted wrote numerous letters to the insurance company with no luck. He could not get a hold of the agent and was extremely frustrated. A business associate of his suggested he write to the Florida State Department of Insurance – which he did. After receiving and returning some correspondence and a questionnaire from the DOI, the agency scheduled Ted’s deposition. For nearly 3 hours, they asked questions about the company, policy, agent, representations, everything related to the sale of that policy. When they were done, Ted asked what they were going to do about his policy. “We can’t do anything about that, we just wanted to know about the agent,” they stated “you might want to call an attorney about the policy.”
And that’s where I came into the picture.
Okay, please help me. What have I missed here? Are there actually companies who’ll automatically double a policy's face value for a preferred rating? Do some companies automatically provide free insurance for body-building smokers? I would hate to take this case and be embarrassed by something I should have obviously known.
Thanks,
Mark
In the year 2000, 34-year-old well-to-do building contractor received a phone call from a local insurance agent. Claiming to have gotten his name as a referral, the agent said he specialized in estate planning and life insurance plans for the owners and employees of large businesses. The contractor, whom I’ll refer to as Ted, only had a small life insurance policy at the time and knew he needed more.
A week later, Ted told me the agent came to his office where he completed some sort of questionnaire. On this document, Ted disclosed that he was a body-builder, had taken steroids many years before, and smokes cigarettes. No significant health history was noted – no surgeries or complications of any type. During this meeting, the agent briefly outlined the features and advantages and benefits of a sound life insurance policy with a major insurer.
A few days later, the agent called Ted and told him he had completed some sort of evaluation (what I think was a type of Financial Needs Analysis) and needed to meet. The agent said he had great news for him. Almost two weeks passed before their meeting and during that time, the agent telephoned Ted almost every day. When they finally met, the agent showed Ted some charts and graphs on his computer and told him that, based on his analysis, he needed $1.5 million worth of permanent life insurance coverage. The agent told him the premium would be slightly higher because he was a smoker and to count on paying around $17,000 per year. At the time, Ted could easily afford that and agreed to move forward with the agent’s recommendation.
Over the course of the following month, Ted told me he completed a bunch of tests (which I know must have been a blood/spec and paramed) doctor’s exam, answered financial questions about his business and accounts related thereto, questions about his wife, children, time on his boat “the whole 9 yards.” A little more than three weeks later, the agent called, claimed to have great news and needed to meet with him and his wife as soon as possible.
The agent came to Ted’s house with another man, whom the agent claimed was his supervisor. Both men were nicely dressed and drove up an expensive Mercedes. During the meeting, the agent congratulated Ted on taking such good care of his health (in spite of being a smoker, I guess) and said the company had given him a “special type” of Preferred rating. “The best thing about this type of rating” the agent claimed “is the company doubles your death benefit for just a little bit more money.” What a Deal!
So, just like that, Ted got a $3 million Multi-Funded Universal Life insurance policy for slightly less than $20,000 per year. Ted was exuberant, and very proud of his perfect health. He wasted no time in signing a few more documents and cutting the agent a check for a little more than $19,000. “This amount needs to be paid every year on the policy's anniversary” the agent claimed. “With this type of plan, a monthly deduction from your checking account is not an option.”
In 2005, Ted received a phone call from the agent, who claimed he had something he needed to go over with him. In a meeting held a few days later, the agent said he had “an even better plan” that would provide a much better return on Ted’s money. The death benefit would not change, nor would the premium and “a great thing about this policy” he stated, was that premium payments could be made every month, instead of annually. Believing him, Ted completed a stack of forms and went back to work.
In 2009, hard times fell upon the building industry in Florida and, in order to make ends meet, Ted needed to borrow some money from his policy. When he telephoned the company, he was told his policy had lapsed in 2008 due to insufficient premiums. Ted does not recall ever receiving notice from the insurance company that his policy was in trouble. Although he had stopped making premium payments in mid-2008 (oddly about the time his premiums stopped his policy lapsed) he was told his policy would remain in effect for quite some time and he could make up the premium shortage later on.
In the year that followed, Ted wrote numerous letters to the insurance company with no luck. He could not get a hold of the agent and was extremely frustrated. A business associate of his suggested he write to the Florida State Department of Insurance – which he did. After receiving and returning some correspondence and a questionnaire from the DOI, the agency scheduled Ted’s deposition. For nearly 3 hours, they asked questions about the company, policy, agent, representations, everything related to the sale of that policy. When they were done, Ted asked what they were going to do about his policy. “We can’t do anything about that, we just wanted to know about the agent,” they stated “you might want to call an attorney about the policy.”
And that’s where I came into the picture.
Okay, please help me. What have I missed here? Are there actually companies who’ll automatically double a policy's face value for a preferred rating? Do some companies automatically provide free insurance for body-building smokers? I would hate to take this case and be embarrassed by something I should have obviously known.
Thanks,
Mark
Posted: Wed Aug 10, 2011 10:19 am Post Subject:
Ask about the details of the case presented to you and follow-up with more questions you should ask even more questions until you are either satisfied with the details of the case or until the person hangs up on you.
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Fire Insurance Claim Tips
Posted: Fri Aug 12, 2011 12:50 pm Post Subject:
Mark . . .
Have you even seen the contracts or annual statements? That's where I would start.
We all know of incidents where a person was told by the agent, "Gosh, Mr. & Mrs. Jones, I'm very sorry, but I was using the wrong rate table and miscalculated the cost of your insurance. Instead of $100 per month, the actual cost is going to be $150." The problem wasn't a wrong rate table, but a failure to disclose a substandard rating.
A preferred rating that doubles the face amount? Come on. For a smoker, on its face, that's unrealistic. Smoker rates tend to be 40%-100% higher than non-tobacco. There are the few companies that have "preferred tobacco" rates (which I've never really understood), but I can't see that doubling the face amount.
Without seeing the contracts, I suspect the premiums were written as the absolute minimums on the high face amounts with the so-called "secondary/no lapse guarantees" that I'm well-known here for bashing. You and I know that once you miss a premium payment, the guarantee goes away. You indicated that in 2008, the insured stopped paying premiums. So, too, I imagine, did the guarantee.
With a minimum premium, there's going to be little cash accumulation (the reliance on unending premiums being the basis for the death benefit guarantee in the absence of cash accumulation), and with no premium payments whatever cash value there is will be quickly eroded by COI on a high face amount.
Did the insured ever get an annual statement? Or did someone file a change of address so he wouldn't see what was happening? On what basis did he think he had any cash accumulation available to borrow?
It's always possible that the potential client is withholding some information that would be detrimental to his position. As "Jenkins" said above, there may be some hard questions remaining to be asked. But I definitely think there was something nefarious going on on the part of the agent (less likely on the part of the insurance company, perhaps).
Posted: Sun Aug 21, 2011 01:52 am Post Subject:
All right first, absolutely you should get as much original paperwork as possible. You have the company names, why not contact them and ask about these products?
As far as double the death benefit for getting preferred...I seriously doubt it, I know of nothing that makes that offer. Here's where it gets interesting. I just checked GUL rates for 3 mill, only one is under 20k for a 34 year old preferred smoker, and that's with products that are based on the 2001 CSO. It is possible this product in question was blended with term (this is available from some insurance companies on UL; I've never heard of it on a GUL).
Was the new policy in 2005 with the same company or a new one?
Is the agent in question still in business? Does the client still have the paperwork for the policy issued in 2005?
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