State Probes Into Wrongful Life Insurance Practices May Lead To Your Lost Policy

The nation’s largest life insurance companies are feeling the heat as some states investigate wrongful insurance practices, particularly with respect to locating beneficiaries after an insured has died. In fact, it is estimated that tens of thousands of life insurance beneficiaries have been deprived of approximately $1 billion (or more) in unclaimed proceeds. Many of the life insurance companies currently under fire continue to claim that it is the sole responsibility of the beneficiary to notify the company of an insured’s death.

Life insurance beneficiaries often do not know a policy exists, however, and may not be in the best position to find out. Sometimes beneficiaries know about a loved one’s policy but do not know which life insurance company to contact and are unable to locate the policy documents.  Even worse, life insurance companies may mislead a beneficiary who does not have a copy of the policy and deter them from filing of a claim.  When thousands of policies go unclaimed every year, insurance companies just sit on the money.

But a life insurance company does not know when an insured has died, right? Wrong. State probes revealed that these companies have routinely checked the Social Security Administration’s ‘Death Master File’ for decades to discontinue annuity payments.  Until recently, life insurance companies never used the same source to notify beneficiaries of unclaimed policies.

In the past several months, multi-state settlement agreements have been reached with leading life insurance companies, including Prudential, John Hancock, and Metropolitan Life. The States of Pennsylvania, New Jersey, Colorado, New York, California, and Florida are among the leaders of these probes. As a condition of the agreements, participating life insurance companies will be required to improve their practices and make better attempts to locate the beneficiaries of unclaimed policies. The problem with locating past unpaid beneficiaries, though, remains.

The issue that state regulators are not addressing is the inability to locate older records of unpaid policies. Life insurance companies are only required to keep records of “terminated” policies for a certain period of years. Consider that when an insured dies and a life insurance company no longer receives premium payments, the policy will be treated as “terminated.”  Years later, because these policies are not properly held as unclaimed property, the records are destroyed, leaving the beneficiary responsible for proving the life insurance company’s liability. Of course, if the beneficiary had such proof, the claim would not have been delayed.

If you believe that an insurance company owes you money, speak to a life insurance attorney about your options right away.  The Life & Property Insurance Law Offices of Heather D. Lee can assist you in filing your life insurance claim, demanding that the company pay you immediately and with all applicable interest accrued as a result of the delay.  We work aggressively to collect wrongfully delayed and denied life insurance claims and do not charge any fees whatsoever unless we are successful.

Heather D. Lee, Esquire Wins Reinstatement Of Policy When Life Insurance Company Failed To Give Notice Of Payment Lapse

Insurance companies must generally notify an insured when a policy is at risk of lapsing due to nonpayment.  Such notification may be required by statute, as a term in the insurance contract, or by customary practice.  Policies commonly provide for a grace period of thirty-one (31) days, which allows an insured to avoid cancellation of insurance coverage if premiums are paid within the specified time-frame.  This is especially important with respect to life insurance policies because coverage is based on the applicant’s health at the time the policy becomes active.  In other words, if a life insurance contract lapses after the grace-period expires, reinstatement is subject to the same medical underwriting requirements as an application for a new policy.

Consider the following example: Larger-Than-Life Insurance Company (LTL) issues a life insurance policy to Youthful Yolanda, who faithfully pays her premiums for 15 years by monthly automatic withdrawals from her bank account.  Last month, though, Yolanda’s premium payment was returned due to insufficient funds in her account, triggering a 31-day grace period.  Despite LTL’s customary practice of notifying insureds when automatic premium withdrawals are returned, it fails to notify Yolanda that her policy will soon lapse. Unfortunately, Yolanda did not realize the payment was returned, resulting in the cancellation of her life insurance policy.  Since Yolanda is not so youthful anymore, and her health has changed over the past 15 years, she is no longer eligible for a new life insurance policy.  Even though LTL is entitled to keep all of her previous payments, Yolanda no longer has coverage and LTL refuses to reinstate her lapsed policy.

This is a fairly common story, with variations.  Sometimes insurance companies mail the appropriate notification too late, or to an incorrect mailing address because it has failed to process an address-change request.  Just this month, the Life & Property Insurance Law Offices of Heather D. Lee, Esquire successfully fought for reinstatement of a life insurance policy that lapsed when a major insurance company mailed notification of an overdue premium payment after the grace period had already expired.  Even a timely mailing may not contain the proper information to provide sufficient notice, such as the amount due or the date a policy will terminate.

If your life insurance policy has lapsed for nonpayment, or if you are a beneficiary whose claim has been denied because a policy lapsed prior to the insured’s death, you should speak to an experienced life insurance lawyer about your rights.  Heather D. Lee, Esquire offers free consultations on all life and property insurance cases.