by Guest » Wed Sep 19, 2007 04:03 pm
Lincoln Benefit Life
2940 South 84th Street
Lincoln, Nebraska 68501-0469
I signed up for a term life policy 4 years ago that was supposed to be switched to a "whole life" policy after the first year. The way it was explained to me (because I didn't even want to sign up for the term because it was too expensive - $1200) was that after the first year I could switch to the whole life policy which cost $5000 and get a credit for the $1200 for the first year which is what I did. The insurance broker faxed me over the pages on a rush basis after the first year to switch the policy and I faxed them back to her the same day. What I believe was the terms and conditions page had been recopied so many times that you can't even read it. A few weeks later the policy book was delivered to me by the agent. The way she had described the policy was that my money would only grow so according to what she told me I should have $15000 plus interest. What I have now is nothing. I in theory have $12000 because they deduct "costs" and "expenses" - none of which she told me when she was selling me the policy. She told me the reason is because when she was explaining the policy to me her laptop computer wouldn't allow her to show me the costs and expenses. Another feature she failed to tell me about is that I have to be in the policy for 20 years! If I pull out in advance I forfeit $14300. When I received my last statement I didn't understand the costs and expenses and called up Lincoln Benefit to find out what was going on and I found out then for the first time that Lincoln Benefit (my insurance company) no longer sells whole life policies and I had been signed up for an "adjustable flexible" policy. I explained that I had never even heard my insurance broker utter those words and that she had only referred to the policy as a whole life policy. My agent had never told me about costs and expenses and never explained the $14300 default fee if I pulled out before 20 years. She did a bait and switch on me. Lincon's complaint department did an investigation and have said everything is on the up and up and I have no recourse. I was totally lied to and relied on everything she told me about this policy. I was never informed AT ALL about the $14,300 default fee or about the costs and expenses - she simply described my money growing each and every year so by now I would have the $150000 I've put in plus around 5% interest. Lincoln agreed to give me back $5000 if I terminated my policy. However, they kept my remaining $10,000. DON'T DO BUSINESS WITH THIS COMPANY IF YOU WISH TO KEEP YOUR MONEY - THEY ARE THIEVES AND LIARS. I've tried everything I can do to get my money back but it appears I would have to sue them and I just don't know what my chances would be. I work with a law firm and even the lawyers here told me they're unable to understand my policy in full. I depended on Lincoln to explain to me what I was buying and by leaving out vital details I was in fact lied to. A partner at my firm (a very intelligent attorney) told me that even he had been the victim of a similar policy so it can't be just me. I honestly don't know how they can get away with this but it appears they can. I work 13 hours a day as a secretary to support my family and the $10,000 they ended up keeping was two years of my bonuses. This was money I thought I could use in the event of an emergency and now it is all gone.
2940 South 84th Street
Lincoln, Nebraska 68501-0469
I signed up for a term life policy 4 years ago that was supposed to be switched to a "whole life" policy after the first year. The way it was explained to me (because I didn't even want to sign up for the term because it was too expensive - $1200) was that after the first year I could switch to the whole life policy which cost $5000 and get a credit for the $1200 for the first year which is what I did. The insurance broker faxed me over the pages on a rush basis after the first year to switch the policy and I faxed them back to her the same day. What I believe was the terms and conditions page had been recopied so many times that you can't even read it. A few weeks later the policy book was delivered to me by the agent. The way she had described the policy was that my money would only grow so according to what she told me I should have $15000 plus interest. What I have now is nothing. I in theory have $12000 because they deduct "costs" and "expenses" - none of which she told me when she was selling me the policy. She told me the reason is because when she was explaining the policy to me her laptop computer wouldn't allow her to show me the costs and expenses. Another feature she failed to tell me about is that I have to be in the policy for 20 years! If I pull out in advance I forfeit $14300. When I received my last statement I didn't understand the costs and expenses and called up Lincoln Benefit to find out what was going on and I found out then for the first time that Lincoln Benefit (my insurance company) no longer sells whole life policies and I had been signed up for an "adjustable flexible" policy. I explained that I had never even heard my insurance broker utter those words and that she had only referred to the policy as a whole life policy. My agent had never told me about costs and expenses and never explained the $14300 default fee if I pulled out before 20 years. She did a bait and switch on me. Lincon's complaint department did an investigation and have said everything is on the up and up and I have no recourse. I was totally lied to and relied on everything she told me about this policy. I was never informed AT ALL about the $14,300 default fee or about the costs and expenses - she simply described my money growing each and every year so by now I would have the $150000 I've put in plus around 5% interest. Lincoln agreed to give me back $5000 if I terminated my policy. However, they kept my remaining $10,000. DON'T DO BUSINESS WITH THIS COMPANY IF YOU WISH TO KEEP YOUR MONEY - THEY ARE THIEVES AND LIARS. I've tried everything I can do to get my money back but it appears I would have to sue them and I just don't know what my chances would be. I work with a law firm and even the lawyers here told me they're unable to understand my policy in full. I depended on Lincoln to explain to me what I was buying and by leaving out vital details I was in fact lied to. A partner at my firm (a very intelligent attorney) told me that even he had been the victim of a similar policy so it can't be just me. I honestly don't know how they can get away with this but it appears they can. I work 13 hours a day as a secretary to support my family and the $10,000 they ended up keeping was two years of my bonuses. This was money I thought I could use in the event of an emergency and now it is all gone.
Posted: Sun Nov 27, 2011 06:11 am Post Subject:
gbarney04, I am sincerely sorry that you feel that you were lied to. It is very unethical for an agent to mislead their clients. With that said, have you ever heard the story about people sitting around the table and tell a story from one person to another and by the time the story gets back to the original story teller, it is completely changed? You may feel that you were lied to and you may very well have been lied to, but take into consideration that maybe you just misunderstood.
Posted: Sun Nov 27, 2011 08:52 am Post Subject:
Dear TaxFreeIncome . . .
You have replied to a post that is about 4 years old. Not that it's a problem, but it is simply untimely.
As for your "pass it on" example, that certainly can be true, but in my experience, which dates back to 1980, people who know little about life insurance tend to repeat fairly well what they've heard. No one I know of -- except an agent -- could make up anything as crazy as what the OP wrote in Sept 2007:
The way it was explained to me (because I didn't even want to sign up for the term because it was too expensive - $1200) was that after the first year I could switch to the whole life policy which cost $5000 and get a credit for the $1200 for the first year which is what I did
But while we're on the subject of things agents say, I assume that your moniker has something to do with the way you promote life insurance products. Very risky proposition if you ask me . . . telling folks that life insurance is designed to provide tax-free income, because it's not.
Posted: Sun Nov 27, 2011 08:51 pm Post Subject:
I never said anything about life insurance being designed to provide a tax-free income. A tax free income is a benefit of life insurance. Not all life insurance policies are designed to provide a tax free income. I sell appropriate policies to my clients. I like the way you put words in my mouth.
As far as the poster goes (4 years ago or not), I don't believe that the poster did understand what they agent was selling them. I do not believe the agent misrepresented anything. I think there are too many variables that were not listed in the post. I think we heard only her side of the story and if the agent were to post his/her side of the story, you would not have posted what you did.
Now, before you start making accusations about me and what I sell, maybe you want to reexamine what you sell before you start throwing stones. I have never had a client lose one penny invested with me, YOU CAN'T SAY THAT!
Posted: Sun Nov 27, 2011 09:50 pm Post Subject:
I don't believe that the poster did understand what they agent was selling them. I do not believe the agent misrepresented anything.
And cops never lie in court either, do they?
A tax free income is a benefit of life insurance.
Don't bet on that for one minute.
I have never had a client lose one penny invested with me,
If the only thing they "invested" in was a life insurance policy, they lost everything.
Posted: Sun Nov 27, 2011 10:45 pm Post Subject:
Accusations! You don't know if cops lie in court! Have you ever witnessed that? NO!
You say you are an educator of Insurance? Tax Free income is a benefit of life insurance policies. It is called a tax free loan! There are other variables of this to make sure the policy is properly funded but we are not discussing that.
Once again you ASSUME! Who ever said anything about the only thing they invested in was a life insurance policy?
You are a very dangerous salesperson if you make accusations and assumptions like this with your customers. You know I agree with a few of the other members in here that you can not admit when you are wrong! Just admit it that you are making accusations and assumptions to try to prove you are right!
Posted: Mon Nov 28, 2011 09:05 am Post Subject:
Accusations! You don't know if cops lie in court! Have you ever witnessed that?
Gee! I really touched a nerve here. Of course SOME cops lie in court . . . how short your memory must be. One of the detectives in the OJ Simpson murder trial testified about evidence he collected at the scene, only to later admit that he planted the evidence. If that's not a lie, I guess I misunderstand what a lie is.
Tax Free income is a benefit of life insurance policies. It is called a tax free loan!
FINALLY! We arrive at the heart of the matter. You are on the witness stand, and have made a conflicting statement . . . Well, which is it . . . INCOME or a LOAN?
You see, you have fallen victim to the hype of your sales trainer, the insurance company, or your own misunderstanding of life insurance. Here's what you need to understand. I'm not blaming you for the misunderstanding, but you have to come to the realization that every time you talk to someone about TAX-FREE this or that coming from a life insurance policy, you are misrepresenting the reality of the situation. There is not a single life insurance policy in force today, or that was in force in the past that ever said, IN WRITING, "This policy will provide you with tax-free income in the future." Show me one that does, and I'll make a video of me eating the thing and post it on YouTube. But insurance company marketing materials do state that you can use the cash value "to supplement other sources of income" in your retirement years. However, even those same marketing materials don't describe the policy as providing INCOME, because they cannot.
You have to admit that all of this "income" from the policy robs the beneficiary of some or most of the death benefit, just like taking money from my savings account or investment accounts robs my heirs of that money, too. The cash value is not INTENDED to be used by the policyowner, it is intended to make up a portion of the death benefit proceeds.
If you or I BORROW money from the bank, it may be in our pockets, and we may freely use that money in any way we choose, but, in the final analysis, it's not our money. However, in your mind it's "tax-free" money.
But I don't consider it to be tax-free because I understand that I don't pay taxes on borrowed money, I only pay tax on earned income (and other "gains" or dividends I receive from my invested money -- which is considered unearned income, and is fully taxable).
I also realize that I don't need to "borrow" my own saved money -- I simply take it and use it as I please, because I already paid tax on that money before I put it into savings. Now, I also realize that some of my savings were set aside BEFORE any income tax was collected on that money. And I cannot touch any of that QUALIFIED money (principal or gains) until I turn age 59-1/2 without a 10% penalty tax and income tax (with only some limited exceptions that avoid the penalties, but not the income tax).
If I have that money in a 401(k) or 403(b) account, the Internal Revenue Code permits me the unique privilege of "borrowing" the money without a penalty or income tax today, as long as I have a plan in writing to repay the money and actually do so. But I could wind up in big tax trouble if I quit my employment (or get laid off or fired) with any of the "loan" outstanding. If I cannot replace the unpaid loan principal within 60 days, the outstanding balance and interest due is treated as a taxable distribution in that tax year. And if I'm under age 59-1/2, I'm going to be hit with that additional 10% penalty tax,
Now, let's get back to the heart of the matter. Life insurance cash value. If it was our money, there would be no "fee" to touch it. But it's not our money -- it is the property of the life insurance company, and they DEMAND that we pay interest on that BORROWED money. Don't believe that? You just have to read and understand the contract to see it (it's actually easiest to see in a variable contract, when it talks about the separate account and the fact that "we" (the insurance company) own the separate account), Please tell the court, where the interest payments go? (They go directly to the insurance company's bottom line, not to the policy's cash value, and to the insurance company it creates a tax liability. And you can thank the life insurance industry for the loss of deductibility of life insurance policy loan interest -- Congress did away with that when they saw the "TAX-FREE INCOME" business in UL policies in the early 1980s and enacted TAMRA and the Modified Endowment Contract provisions in the IRC.)
The insurance company would not be inclined to let us borrow any money from them under normal circumstances, because they are not a bank, and lending is contrary to the operation of an insurance company (they exist mostly to see the money flow in, not out, which is a good thing, because we want and need our insurance company to be profitable). But state insurance laws demand that cash value policies (and ROP term policies, too) have a "NONFORFEITURE" value -- that is, they cannot simply take our money and keep it hidden from us. We can surrender the policy and receive our cash value, or we can convert our cash value to a new EXTENDED TERM or REDUCED PAID UP policy.
If we surrender the policy, we have no insurance, and the insurance company is off the hook, so they really don't mind if we do that at all -- in fact, their actuaries know with reasonable certainty that some percentage of all policies will be surrendered or lapsed and they will keep the money invested in their reserves for years to come.
If we convert to extended term or reduced paid up, the insurance company is fine with that. They have our money, we have something of value in exchange, and we either die and our beneficiary receives a check, or we don't, and one contract ends while the other one matures years later, and the insurance company sends the owner a check.
Still following along? I'm trying to educate you here.
However, the insurance company would prefer that you not surrender the policy just to get the cash value. So they add something to the contract not required by law -- a LOAN PROVISION. Most policies actually have two: an AUTOMATIC LOAN PROVISION that allows them to borrow some of the cash value from the policy to pay the premium if you forget to do that, and a basic loan provision that says you may borrow the amount "we permit" -- which will never be 100% of the value (that loan provision also says, "We have the right to defer making a loan for up to six months from the date of your request".
That automatic premium loan provision is valuable because it keeps your policy in force for a while. But to the insurance company, it's just moving the money from the right pocket to the left. No money has left the company. If you fail to pay premiums long enough, they will have moved all the money from the right pocket to the left and you end up with no insurance. Too bad you forgot to die a day or two sooner, they would have paid a death claim (minus all the "borrowed" money and unpaid interest).
Why do they put something in the contract that isn't required by law? Go back to the fundamental operation of the insurance company -- they need the money flowing in, not out. If you BORROW their money, you will, in most cases, continue to pay premiums (money IN), and you might even repay the loan and loan interest (more money IN). But, they can't force you to pay any of those three things.
Except that if you borrow too much money, and fail to repay the interest, even if you are still making premium payments, your policy could LAPSE WITHOUT VALUE. No money, no insurance.
Now here's why you'd better learn to stop using the TAX-FREE terminology. If you're doing this from any variation of UNIVERSAL LIFE INSURANCE (ordinary, equity-indexed, or variable), there is the potential to have BORROWED more than your COST BASIS -- the amount of money you paid in over all those years. If you allow your policy to lapse, some of that "tax-free" money will become a taxable event -- the amount exceeding the cost basis -- in the year of lapse (as opposed to the year(s) in which it was first (or subsequently) borrowed. This includes all those dollars taken in the form of automatic premium loans -- money you never saw after you paid it the first time to the insurance company.
In the early-1980s, there were folks whose policies earned current interest at rates of 10%-12%-16% or more, and they stopped paying premiums because their agents TOLD THEM (aka: "lied") that the policy would "pay for itself" after some number of years (seven was the most common number recited). And many of those folks were also told by their agents, "You can have the income TAX-FREE, and never have to repay it."
Well, when those folks got their lapse notices in the early-1990s, many of them also got TAX BILLS on "phantom income" of $50,000 - $70,000 - $100,000 or more. Money they had "received" the benefit of even though it might never have actually passed through their fingers.
That would piss you off if it happened to you, wouldn't it?
It also cost the life insurance companies that marketed those first generation UL policies in excess of $2 BILLION in regulatory fines, civil judgments, and policyholder restitution from the late 1980s to as recently as 2001. And it can still happen to today's UL policies, because the core of the product design is still Annual Renewable Term insurance with a cash accumulation account. That part has not changed.
Whole life is less susceptible to this because few policies ever develop a cash value in excess of their cost basis. Only the excess unpaid loan interest would be likely to end up a taxable event in a worst case scenario.
BUT THE FACT REMAINS -- neither you nor any other life insurance agent should be using the term "TAX-FREE" with abandon when it is tied to any life insurance product. The only aspect of life insurance that truly is tax-free in most instances is the DEATH BENEFIT paid to the beneficiary. And even then, there are some instances (more today than at any other time in the history of life insurance) where a portion of the death benefit proceeds is taxable to the beneficiary, because the beneficiary is actually PROFITING from the money -- receiving UNEARNED INCOME -- as the result of a viatical or other life settlement or STOLI transaction under the IRC "transfer for value" rules.
So, if you'd like my advice (I'm sure you don't), you'll exchange TAX-DEFERRED for tax-free in your dialogue. Then you won't come even remotely close to an E&O action based on your advice to your clients.
Now, as to
You are a very dangerous salesperson if you make accusations and assumptions like this with your customers.
Please be specific about what you are calling an accusation or an assumption and tell me what I've said that is anything other than the truth, and I'll be happy to respond.
Posted: Mon Nov 28, 2011 07:42 pm Post Subject:
There is not a single life insurance policy in force today, or that was in force in the past that ever said, IN WRITING, "This policy will provide you with tax-free income in the future." Show me one that does, and I'll make a video of me eating the thing and post it on YouTube.
If an insurance company did give tax free income, it wouldn't be in writing because that would be a function of the tax laws and not the insurance contract.
Along the same lines, we know that a life insurance policy with the same insured and owner is usually tax free to the beneficiary, you'll never see this in a policy because an insurance contract can't make tax law promises.
Posted: Mon Nov 28, 2011 07:43 pm Post Subject:
Show me one that does, and I'll make a video of me eating the thing and post it on YouTube.
(Max, you are correct in this case.)
Who are you kidding? You can't even admit that you are wrong on this board that nobody reads.
Why can't you admit when you do happen to be wrong?
Posted: Mon Nov 28, 2011 10:03 pm Post Subject:
What a joke.
Posted: Wed Nov 30, 2011 03:45 pm Post Subject:
What a joke.
Care to explain?
Apparently you believe that I made some kind of mistake.
Let me give you one more example that ought to lay your argument in the grave once and for all:
You want to buy a house or a car, but you don't have all the money that it takes to do so. The realtor or the car salesman tells you, "No problem, you can easily qualify for a loan, and you'll make monthly payments until the loan is paid off."
People understand that. You understand that. So far, that's the same as telling a cash value life insurance policyowner, "If you need some cash, you can borrow it from your policy's cash accumulation."
Now, you, as a life insurance agent, want to invite people to buy your product because they can have "tax-free income" from the policy (in the form of a policy loan, as you mentioned). So you go around town marketing life insurance for its "tax-free income for you" in retirement (the owner) rather than its "tax-free death benefit" to the beneficiary (as found in the Internal Revenue Code).
Here's the problem: When you talk about "tax-free income" you're talking about turning loaned money into income. That's not income.
What you suggest is EXACTLY THE SAME as the realtor or the car salesman telling a person: "Oh, you don't have the cash? No problem. You can buy your house (or car) with TAX-FREE INCOME."
"What?" the person says. "I'm borrowing money from the bank, how is that TAX-FREE INCOME?"
Then they ask:
"Please, explain that to me, Mr. Tax-FreeIncome."
We're waiting to hear what you have to say.
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