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: Wed Nov 30, 2011 08:34 pm Post Subject:
I understand that you want to be technical. When I sell a life insurance policy for the purpose of generating an income at a later date, my clients understand that they are taking loans from their policy. They understand that this loan is tax free and that is a benefit of life insurance. They also understand that the policy they are buying is not intended to be a death benefit although it does provide one in case of an untimely death.
The fact that you have to be so ANAL to digest the whole tax free income thing is disturbing. Are you this anal with everything you do? So if some one says they want to have a sandwich for dinner and it is 12 noon, do you make sure they understand that the correct expression should be it's lunchtime? I wonder how many times you go on an appointment and talk yourself out of a sale? Some asks you what time it is and you tell them how to build a clock. That is what I think is a joke, your inability to stop beating a dead horse!
In conclusion: Who cares if the money that you will be receiving at a later date is interest earned or a loan? It is money that you can use in your retirement years that is tax advantaged! Now go away!
Posted: Wed Nov 30, 2011 08:47 pm Post Subject:
They also understand that the policy they are buying is not intended to be a death benefit although it does provide one in case of an untimely death.
This is a scary post. If the primary reason for permanent life insurance isn't to have a permanent death benefit, the client is probably getting screwed.
Posted: Thu Dec 01, 2011 10:55 pm Post Subject:
I've stayed away from this thread primarily due to the sophomoric level of discourse. Seriously? Now, I have to say something.
This whole idea of "tax-free income" through life insurance is patently ridiculous. While it's true that you can get tax-free loans via the cash value element in a permanent life insurance policy, please remember that you're "robbing" from the death benefit. Every loan detracts from the amount payable in the event of death.
Is it possible that a loan could become taxable? Yes, absolutely. While it doesn't happen commonly, I have definitely seen it occur. I wonder- can any of you out there tell me how a policy loan could become taxable? Just curious to see if you can babble beyond your theoretical expertise.
As well, there are other methods of receiving tax-free income outside of life insurance. Double tax-free muni's for one. Life insurance was never intended to be an investment- it's intended to provide a death benefit in the event of death, and not to provide a method by which a person may amass millions of dollars without paying taxes.
As well, are the clients aware that the premiums necessary to provide a decent "loan balance" through the cash value are going to be extraordinary? Also remember that you can't just shove premium into the policy as you see fit. UL policies have strict corridor and other guidelines that could easily MEC or violate TEFRA guidelines with too much premium.
Comments?
InsTeacher 8)
Posted: Fri Dec 02, 2011 07:02 pm Post Subject:
can any of you out there tell me how a policy loan could become taxable? Just curious to see if you can babble beyond your theoretical expertise.
As I've stated elsewhere, if a policy lapses with money borrowed beyond the cost basis in the contract, every penny that exceeds the cost basis is taxable. And that includes the cash taken from a UL policy to pay monthly cost of insurance and other expenses when the "planned premium" is insufficient to pay the COI when due.
This is what caused many folks to lose their life insurance AND end up with a tax bill from the IRS for "phantom income" courtesy of their lapsed universal life insurance policy in the 1980s or 1990s -- due primarily to the words of the agents who told their clients, "Your policy will pay for itself, and you can have all the money tax-free."
Notice the words: phantom income. Not tax-free income.
Thanks, InsTeacher for your input. We understand each other.
They also understand that the policy they are buying is not intended to be a death benefit
I almost missed that one.
This is what makes TaxFreeIncome and others like him so dangerous. If life insurance were intended to be anything other than a death benefit, it would not be called life insurance. In fact, we only call it "life insurance" because people wouldn't want it for what it really is: DEATH INSURANCE.
If you want tax-free income, look to a Roth IRA or, as InsTeacher stated, "double tax-free" municipal bonds. Aside from those, there are few other genuine options.
This is a scary post. If the primary reason for permanent life insurance isn't to have a permanent death benefit, the client is probably getting screwed.
100% correct.
BTW . . . California courts are now [properly] recognizing all forms of UL as [potentially very costly] TERM life insurance, not permanent insurance. Only Whole Life policies (and other policies in that same vein, such as endowments) now qualify, in the eyes of the court, as "permanent" insurance.
Posted: Fri Dec 02, 2011 07:11 pm Post Subject:
Who cares if the money that you will be receiving at a later date is interest earned or a loan?
The folks at the Internal Revenue Service have some concerns, because they know what you don't.
Posted: Fri Dec 02, 2011 07:49 pm Post Subject:
BTW . . . California courts are now [properly] recognizing all forms of UL as [potentially very costly] TERM life insurance, not permanent insurance. Only Whole Life policies (and other policies in that same vein, such as endowments) now qualify, in the eyes of the court, as "permanent" insurance.
In general, I agree with this.
However, why would a policy with a secondary guarantee not be considered permanent?
Ex. Jim buys a $100,000 WL policy for $1,000. As long as he pays his $1,000 premium, he is guaranteed to have $100,000 of coverage.
Jim also buys a $100,000 UL policy with a secondary guarantee for $700. As long as he pays his $700 premium, he is guaranteed to have $100,000 of coverage.
Why is the first example permanent and the second is not?
Posted: Fri Dec 02, 2011 09:30 pm Post Subject:
I'm not even going to try to second guess the California Court of Appeals on this one. It's the case I referred you to in the other thread: Fairbanks v. Farmers. The court said this:
However, a universal life policy remains in effect only as long as there is sufficient money in the accumulation account to pay the costs of insurance. As discussed above, the cost of insurance is generally lower when one is young and increases when one ages. Plaintiffs therefore reason that, in order for a universal life policy to remain in effect in the later years of one's life, it is generally necessary to either (a) build up the accumulation account with large premium payments in the early policy years or (b) pay substantially increased premiums when one is older. Moreover, the actual premium amounts that will keep the universal life policy in effect cannot be determined when the policy is purchased, as interest and risk rates are not predictable (other than that they will be within the extreme limits set by the policy). The fact that a universal life policy requires high premium payments in early years to remain in effect in later years, particularly when interest rates are low, is at the heart of plaintiffs' case.
The so-called "secondary guarantees" was not a topic before the Court, so there was no reason to go in that direction.
But, in reading the Court's entire opinion, I believe they have the same understanding of UL that I try, repeatedly, to share here. Compared to Whole Life (that they characterize as "permanent" from the perspective that all one has to do is make their premium payments to keep the insurance in force), UL is not "permanent" in the sense that even though a person pays EXACTLY the amount of "planned premium" the agent calculated based on the illustration, that minimum funding will not support the policy forever if the assumptions are not sustained over time.
Concerning the secondary guarantees, if the client pays 100% of the premiums on time and without fail, that guarantee will endure and prevent the policy from lapsing. But, as I have said in many other posts, what guarantee doe the client have that he/she will not inadvertently miss one payment in the next 70-80-90 years (to age 121) and forever lose the guarantee?
I think that the Court, faced with that question, would still consider "GUL" as term rather than WL. We know that failure to pay premiumS in WL will eventually kill that policy, but missing just one premium payment in 70-80-90 years will not. That policy would endure, albeit minus the value of one payment + interest over all those years.
You have to understand that your position and mine on the matter of the guarantee in UL is one of mostly philosophical distinction. I present UL in the "worst-case scenario" mode, so that if the client is comfortable with that, then fine, he knows the hazards. Anything less as far as the sales communication is concerned, in my philosophy of life insurance, is not in the client's best interests.
Posted: Fri Dec 02, 2011 10:16 pm Post Subject:
Max, thanks for the response. Too me, it simply sounds as if GUL wasn't part of the court's decision. All that one has to do with it is make their payment. Keep in mind that it can be done with a single premium and no future premium will be required.
With GUL, it is always presented in the worst case scenario mode. It is always paid with the minimum premium because adding more premium doesn't give it extra safety.
Posted: Sat Dec 03, 2011 11:35 am Post Subject:
it simply sounds as if GUL wasn't part of the court's decision
It was not. The case involved an attempt to certify a class action against Farmers for, among other things, illustrating an 11.5% Current Interest Rate in their Non-Guaranteed columns, and alleged other marketing misrepresentations of UL products as having "vanishing premium" and being represented as "permanent insurance."
In the view of the Appellate Court that upheld all of the lower court decisions to reject class certification, the real problem was the Plaintiffs failed to show that there was any "common" cause of action among all of the class members. Although Farmer's admitted issuing illustration software that did use the excessive interest rate, they insisted that not all agents used it in their presentations. They also insisted that the Plaintiffs failed to show that all agents used the same presentation with clients, and other similar inconsistencies.
I think the attorneys representing the Plaintiffs failed to properly understand UL, how it's marketed, and how it works internally well enough to make a stronger case.
Mark Colbert, in referring one of his clients to me for some assistance, actually pointed me to this case and we had a chance later to discuss this very point at some length. There very well may be another attempt to bring this case as a class action now that some additional discovery is being attempted, and the Plaintiffs have seen how the Court treated their positions.
It will be interesting to follow. If you want to read the entire Court of Appeals opinion, it is downloadable here: http://www.leagle.com/xmlResult.aspx?xmldoc=In%20CACO%2020110713004.xml
Posted: Sun Dec 04, 2011 01:17 am Post Subject:
Pulling my hair out! Life insurance can be sold for many different reasons. If a policy is sold to provide an income then that is its purpose. Who cares if it "robs" the policy of its death benefit, IT WASN'T SOLD FOR THE PURPOSE OF A DEATH BENEFIT! If you want a policy for the purpose of a death benefit, then you sell another policy for the purpose of a death benefit. There is nothing wrong with selling a policy for the purpose of having it provide an income at a later date.
As far as selling tax free municipals, you can't guarantee the client that the municipality is not going to go bankrupt and the client lose their money. If you think that investing your money in the stock market is a good idea, should I remind you what happened in 2000 and again in 2007-08?
There is nothing dangerous about a person funding a policy for the purpose of having an income at the time of retirement. What is dangerous is those of you that insist on selling securities only for your clients to lose their money when the stock market crashes when you clients need the money most. As far as the IRS goes, they can do nothing about an individual funding a life insurance policy to avoid paying taxes at a later date. Nor will they do anything because it is allowed in the tax code. Now let me say one more thing. I have dozens of agents that contact me on a daily basis and everyone of them think (you Max) are dead wrong! These agents see the value of selling life insurance for all kinds of different reasons other that for just a death benefit. So go take your LIBERAL ideas and spread them elsewhere.
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