Is this legal?

Submitted by spurs.fan on Sun, 08/10/2008 - 21:55

I just discovered my wife has been paying $62 a month on a $3000 life insurance policy for her grandfather for over 10 years. It's not too smart, I know. But, is this legal?

Posted: 10 Aug 2008 11:50 Post Subject:

The insurance company doesn't care who pays the premium.

Nothing illegal about your wife paying the premium even if she's the beneficiary.

The not to smart comment is right on the money or off the money depending on your point of view and 4th grade math.

$62 per month X 12 months = $744 paid per year X 10 years = $7,440 paid in premium for a $3,000 policy is not too smart or should I say,..... Mathematically challenged.

It is probably a Modified Whole Life Policy with a restricted death benefit for the first two years sold on TV by Alex Tribec and Grandpa bought "3 units" for ONLY 68 cents per day per unit and "no agent will call you and its guaranteed issued without any medical questions."

Those type policies give the life insurance industry a black eye, but, on the other hand, nobody is putting a gun to anyone's head forcing them to buy clearly worthless paper.

For those policies to be advantageous for the life insurance buying public they either need to die by accident the day after the policy is issued or die on the first day of the third policy year.

Beyond that your premium paid "in" relative to the death benefit paid "out" is simply not worth it.

Posted: 11 Aug 2008 09:32 Post Subject:

As Gary has already explained, it really doesn't matter who pays the premium for the policy.

We often see that the parents pay the premium for the plan taken on their children. Its quite a normal phenomenon. Your wife hasn't done any thing illegal by paying the premium for the plan of her grandfather, who otherwise may not be able to continue with the coverage.

However, the premium amount sounds odd to me. I'd like to agree with Gary on this issue as well.

Regards,
Juanita

Posted: 11 Aug 2008 09:50 Post Subject:

Those type policies give the life insurance industry a black eye, but, on the other hand, nobody is putting a gun to anyone's head forcing them to buy clearly worthless paper.



Agreed, but isn't that the reason that we rely upon the insurance agents to guide us towards the right direction.

The insurance agents are required to evaluate the applicant's needs and to suggest a solution accordingly.

What the poster is spending for the coverage is absurd.

~Jeremy

Posted: 11 Aug 2008 10:17 Post Subject:

Jeremy Holter wrote:

but isn't that the reason that we rely upon the insurance agents to guide us towards the right direction.


:roll: [sarcasm]Yes, but only in theory. Alex Tribec on TV assured you NO AGENT WILL CALL YOU. It's best you figure it out on your own that paying 68 cents per day per unit makes that policy the most expensive form of life insurance on the market.[/sarcasm] :roll:

An agent would point out the folly in the premium vs benefit ratio and direct a client to a suitable alternative and earn his/her commission in the process. Mr. Tribec touting the fact NO AGENT WILL CALL YOU allows the insurance company to legally rob you by having you screw yourself.

Remember, the insured either needs to die by accident the day after the policy is issued or die on the first day of the third policy year.

Posted: 11 Aug 2008 10:18 Post Subject:

I think the OP just left off a zero or two... :shock:

Posted: 11 Aug 2008 01:21 Post Subject:

Lori,

A friend of mine just last week dropped off a "Modified Benefit Whole Life Policy" - "Limited Death Benefit During First Two Policy Years" - for me to analyze.

Mom was 51 years old when she bought the policy from Alex on TV.

Premium $15.90 per month for a $3,692 death benefit BEGINNING the 1st day of the 3rd year.

Cash value after 20 years....$1,276

Premium paid after 20 years....$3,816

She bought two (2) "units" of Life Insurance.

Cash value at age 100.......$3,692
Death benefit at age 100....$3,692
Premium paid to age 100....$9,349

[Humor]
But on the bright side.....NO AGENT WILL CALL YOU!



Answer clue: The insurance company legally robs you by having you screw yourself.

Question: What's a "Modified Benefit Whole Life Policy" sold by your host on TV and endorsed by AARP?
[/Humor]

Posted: 12 Aug 2008 12:16 Post Subject:

I find it so hard to believe that ANYONE would purchase such a thing...I guess if you can't do third grade math maybe? :? these types of policys should be illegal.

Posted: 12 Aug 2008 05:00 Post Subject:

Wow, I think I'll just stick to the infomercials about the Magic Bullet, Ron Popeils amazing rotisserie and knife set, and those lovely Debbie Meyer green bags. I haven't personally seen Mr. Jeopardy selling, or attempting to sell, anything. I bet he got paid a million dollars to do the commercial, and because he's on there everyone just picks up and dials because they trust the celebrity on the screen. What a shame. spurs.fan, I hope you have read the wonderful advice on this thread and told your wife to cancel the policy immediately. Oh and just my personal opinion, boo Spurs! :P

Posted: 12 Aug 2008 09:56 Post Subject:

But just how expensive is $15.90 per month for a $3,692 death benefit?

Now the comparision below is unfair because you can't compare term life insurance with cash value life insurance and definitely NOT against Modified Benefit Whole Life that's guaranteed issued. But just looking at how much money the insurance company has at risk vs premium paid should be an eye opener if you can qualify medically.

A female age 51 non-smoker (worst rates) could buy a $100,000 - 10 year level term policy for $21.79 per month. The prefrerred plus rates (best rates) are $14.79 per month.

And now you know why A. L. Williams back in the day was soooooo hissed off!

But keep in mind the client in my example did this to herself.

Posted: 12 Aug 2008 10:19 Post Subject:

Hi there,
Even I'd agree with you when all you have to say is-

It's not too smart, I know.


Certainly not too smart..but I'm sure Lori would scream at me when I add saying "all wives are made up of the same soft mud.."

May be it is the same case with you..it could well be the case that your wife is the only beneficiary & she is more concerned to maintain this policy keeping in mind the reduced chances of obtaining another coverage for her grandfather with his current age & health conditions. It is not the question if the laws allow her to pay for it or not...the real decider is whether she is going with her conscience or not...if required you may need to sit & explain today's realities to her. All the very best! ArindamSenIndies

Posted: 12 Aug 2008 10:22 Post Subject:

I'm sure Lori would scream at me when I add saying "all wives are made up of the same soft mud.."

You got that right! Are you kidding me, Arindam ? Do you have a wife? What does that mean that all wives are dumb? :? :twisted:

Posted: 12 Aug 2008 05:07 Post Subject:

What? :shock:

What's that? :?

Did I read what I thought I read? :?:

Did he say? "all wives are made up of the same soft mud.."

Take this......and may your auntie's sister wash your mouth out with soap.

How 'bout you and Lori go for a little swim?

Posted: 12 Aug 2008 08:33 Post Subject:

Did he say? "all wives are made up of the same soft mud.."

Had to re-read it myself about six time! :roll: :evil:

Posted: 13 Aug 2008 09:53 Post Subject:

BTTT:

I find it so hard to believe that ANYONE would purchase such a thing...


These policies are purchased by persons who are UN-insurable and/or UN-educated.

$15.90 per month for a $3,692 death benefit doesn't sound or seem like a lot of money to the insured person since they don't have anything to compare it against.....except maybe the term life commercials.

If they die by "accident" during the first two years the company pays the full $3,692. If they die by some disease process during the first two years the company's liability is limited to refunding the premium paid plus interest.

Which is why I stated above:
For those policies to be advantageous for the life insurance buying public they either need to die by accident the day after the policy is issued or die on the first day of the third policy year.

these types of policys should be illegal.


Hmmmmmm, no.

The insured is wanting a life insurance company to issue a policy WITHOUT submitting any evidence of insurability.

Common sense should tell you that is going to be the very most expensive life insurance policy on the market that you sold yourself.

I guess if you can't do third grade math maybe?


Exactly.

I don't think they start teaching the multiplication tables until 4th grade.

Posted: 13 Aug 2008 10:55 Post Subject:

The insured is wanting a life insurance company to issue a policy WITHOUT submitting any evidence of insurability.



You mean to say that these plans don't require medical underwriting or such to issue the policy, only the promise to pay the premium from the policy holder is sufficient to receive the coverage ?? :roll:

Posted: 13 Aug 2008 11:59 Post Subject:

Yes.

Can you imagine what the premium would be for an 18 year old male for auto insurance if they could get a policy without having to submit their driving record, tickets, DUIs, reckless driving citations, suspensions etc.

Simply GUARANTEE ISSUE the policy!
The premium may be $1,000 per month or more.

The same concept applies here and hence the cost per thousand for the life insurance is through the roof.

These policies truly aren't worth the paper they are printed on BUT no agent advisor was involved in the transaction and BECAUSE of that fact:

The insurance company can legally rob you by having you screw yourself.

Posted: 18 Aug 2008 01:27 Post Subject:

My question was meant to ask if it is legal for an Insurance Company to continue to charge the $62 each and every month. This was not a policy bought through TV. I remember when the agent used to come by each month to pick up the check. Shouldn't they have converted the policy or are they (or the agent) just pocketing the monthly premium? I beleive this was a policy sold to her elderly grandmother and continued out of a promise made to her grandmother before her death. I think it's a company called American National Insurance. Can they keep ripping her off?

Posted: 18 Aug 2008 12:07 Post Subject:

My question was meant to ask if it is legal for an Insurance Company to continue to charge the $62 each and every month.


YES.

An insurance company charging premium to provide life insurance is perfectly legal.

Life insurance policies terminate in ONLY one of two ways:
#1) the insured person dies;
#2) the contract owner cancels the policy.

Why don't you have a discussion with your wife and grandpa and figure out at this point whether or not it would be better to surrender that policy for its cash value or continue making the premium payments?

Nobody on an Internet message board can help you. And $62 per month for a $3,000 policy isn't enough information without seeing the contract itself or without knowing the current cash surrender value of the policy.

Your comments below are non-sense rhetoric:

My question was meant to ask if it is legal for an Insurance Company to continue to charge the $62 each and every month.


Shouldn't they have converted the policy or are they (or the agent) just pocketing the monthly premium?


I beleive this was a policy sold to her elderly grandmother and continued out of a promise made to her grandmother before her death.


Meaning.... your wife continued a perhaps useless, under performing policy, on grandpa's life to keep a "promise" to her grandma?

What's the promise? Please pay more in premium than perhaps the policy's death benefit so when grandpa dies she get's back less than what she paid in premium? :shock: That's the same method by which average American's play the stock market and then when they lose they go ALL-IN and try to make it up on volume!!! :shock: :shock: :shock:

Can they keep ripping her off?


See statement above and below:
Life insurance policies terminate in ONLY one of two ways:
#1) the insured person dies;
#2) the contract owner cancels the policy.

Posted: 19 Aug 2008 11:01 Post Subject:

Just to set the record straight the "guest" post was me.

I had a corrupt cookie monster gremlin that I had to dispose of preventing me from logging on or off. :wink:

Posted: 22 Aug 2008 09:31 Post Subject:

I am puzzled to learn that there is such life insurance policy where the policyholder has to pay $62 a month or $744 a year for a $3000 benefit.

I wonder if there are other policy benefits that were not mentioned.

To my knowledge, term insurance annual premium is normally below 1% of the sum assured of the policy, whole life annual premium is around 2-3% of the sum assured and endowment annual premium varies from 4-6%.

$744 a year is a whopping 24.8% of $3000. Could there be some typo error where the $3000 is actually $30000?

Posted: 23 Aug 2008 10:47 Post Subject:

I am puzzled to learn that there is such life insurance policy where the policyholder has to pay $62 a month or $744 a year for a $3000 benefit.


These are GUARANTEED ISSUED policies.

No underwriting, no medical questions, no attending physician statements, no medical records, no para-med exam, no blood, no urine, no height, no weight, no nothing... EXCEPT your signature and your check.

You can have AIDS, cancer, heart attack, stroke, diabetes, be 5 foot tall and 500 lbs, have cognitive impairments, DUIs, drug addict, crack addict, run a meth lab, be a street walking worker, AND THEY WILL STILL ISSUE THE POLICY BECAUSE THEY DON'T ASK ANY QUESTIONS!

These are very small face amount contracts with HUGE premiums relative to the cost per thousand.

I'll say it again:
The insurance company can legally rob you by having you screw yourself.

I'm not quite sure which is worse???

These contracts that EVERYBODY qualifies for OR the insurance company that advertizes a male age 40 could get $250,000 of life insurance coverage for less than $15 dollars per month that NOBODY qualifies for?

Could being the operative word.

Well at least they underwrite then offer you a contract at double the advertized rate. :shock: :roll:

Posted: 28 Aug 2008 07:25 Post Subject:

Even if such insurance is not illegal, there is moral issue here.

Insurance should be a cost-effective way for people to transfer their risks and insurers manage the risks by assessing the risks and decide appropriate amount of premium.

In the absence of cost-effective element and risk assessment, these guaranteed issued policies appear more than a gambling tool.

The insured has to die early so that there is a financial gain. Otherwise, he becomes a loser if the total premium paid is more than the policy benefit.

I understand that such products are meant for people who are uninsurable.

If that is the case, there should be some remark on product brochures, application forms or contracts to notify the customers the intention of such insurance. Just like the rating guide for movie goers. There are movies rated PG and there are movies rated 18SX etc.

Posted: 10 Sep 2008 05:10 Post Subject:

I'll bet the mud smells nice

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