WHAT IS REQUIRED TO NOTIFY THAT INSURANCE WILL EXPIRE?
Total Comments: 15
Posted: Sat Nov 15, 2008 01:08 pm Post Subject:
What about grace periods?
(ins teacher) Just throwing this in for the 'masses'...Ins. teacher is speaking about life insurance (i assume)...most auto/homeowners, etc, do not have any grace periods...
Posted: Sat Nov 15, 2008 04:33 pm Post Subject:
On page #12 of their universal life policies, Metropolitan Life states:
Annual Report: Each year we will send you a report showing current death benefit, accumulation fund and cash value for this policy.
It will also show the amount and type of credit to and deduction from the accumulation fund during the past policy year.
Right below this, there is a section that says,
Limitation on sales representative's or other person's authority:
No sales chairperson it is or other person except our President, Vice- President, or Secretary may (a) make or change any contract of insurance; or (b) make any binding promises about policy benefit; or (c) change or waive any of the terms of this policy. Any change is valid only if made in writing and signed by our President, Vice President, or Secretary.
New York Life, Prudential, Allstate, Jefferson National, and a host of others have similar paragraphs in their policies.
In my opinion, what this means, in essence is: Yes, we'll send an annual report to the address we have on file and you need to understand it. However, if it is differs in any way from what your agent told you at the time of sale, too bad.
The grace period sections state:
If the cash value on any monthly anniversary is less than the monthly deduction for that month, there will be a grace period of 61 days after that anniversary to pay an amount that will result in a cash value being large enough to cover the monthly deduction. We will send you a notice at the start of the grace period. We will also send a notice to any assignee on our records.
If we do not receive a sufficient amount by the end of the grace period, your policy will then end, without value. However, your policy will not end during the first two policy years if a minimum premium amount is paid and no loans have been made.
Nothing I've posted here is meant to contradict, only to inform. I feel somewhat certain, however, that the companies will do what's best for them and then - what's best for the policy holders.
Posted: Sat Nov 15, 2008 10:48 pm Post Subject:
Lori said:
Just throwing this in for the 'masses'...Ins. teacher is speaking about life insurance (i assume)...most auto/homeowners, etc, do not have any grace periods...
I was commenting on life insurance. Pretty much a standard minimum grace period of 30 days for most policies, however the law allows for a carrier to give more time than the statutory minimum. As far as auto and homeowner's policies, there are quite a few states that allow a "late payment" period, usually around 15 days, where the insurer will accept a payment after the due date and keep the policy in force uninterrupted. Losses during that period are not normally covered unless the premium was paid prior to the loss. "Reinstated without lapse" is the watch-phrase, but the term "reinstastement" in and of itself indicates a lapse in coverage.
InsInvestigator included in his post language from a Universal Life insurance policy. UL policies fund the cash value account differently than other cash value contracts. UL policies are primarily a hybrid product that functionally combine term insurance and a cash value account. The cost of the term insurance is deducted monthly from the cash value account instead of being taken directly from the premium. As such, as long as there's enough cash value in the account, the policyowner doesn't even have to send in a premium. Here's a quote:
If the cash value on any monthly anniversary is less than the monthly deduction for that month, there will be a grace period of 61 days after that anniversary to pay an amount that will result in a cash value being large enough to cover the monthly deduction. We will send you a notice at the start of the grace period. We will also send a notice to any assignee on our records.
If you look at the language, it indicates that the costs are deducted from the cash value, and there has to be enough cash to cover the deduction. If there isn't enough cash, because it's all been used up to pay for those deductions, then the policy will lapse. They are giving you 61 days (perfectly legal) to cough up enough premium to keep it in force. After that, poof! Policy over. Nothing left, no more insurance. The "assignee" they are referring to would be a "collateral assignee" in which the policyowner has used the cash value in his policy as collateral on a loan from other than the insurer. The assignee has superceding rights to the cash value in a policy equal to the amount owed on the loan. :?
As far as the other quoted sections:
Annual Report: Each year we will send you a report showing current death benefit, accumulation fund and cash value for this policy.
It will also show the amount and type of credit to and deduction from the accumulation fund during the past policy year.
This is all due to various "Notice of Information Act" and Graham-Leach-Bliley legislation. UL policies have been sening annual notices forever I think. I have a UL policy that I bought in 1983 and they send me quarterly reports. Just a bunch of numbers in columns that no one outside the business, and many inside the business don't understand. Next:
Limitation on sales representative's or other person's authority:
No sales chairperson it is or other person except our President, Vice- President, or Secretary may (a) make or change any contract of insurance; or (b) make any binding promises about policy benefit; or (c) change or waive any of the terms of this policy. Any change is valid only if made in writing and signed by our President, Vice President, or Secretary.
This is statutory and appears in every state. No person other than officers of the insurer are allowed to make changes to anything in the contract. I have heard I don't know how many producers and salespeople babble on about coverage in the contract in a vain attempt to interpret that coverage. Then the customer thinks something is covered for a particular hazard, and finds out later that it isn't. "The contract is the contract." Nothing an agent says, writes or promises is valid unless it's contained within the contract of insurance. The customer might get satisfaction, but not from the policy- he'll get it by suing the agent under E&O.
Don't worry about contradictory statements- that's what makes America great! I always enjoy a good challenge, and I'll be the first to admit if I'm wrong or have no clue. Thankfully, that rarely occurs! lol :lol:
InsTeacher 8)
Posted: Sun Nov 16, 2008 12:10 pm Post Subject:
"Reinstated without lapse"
Oh yeah, I see that in about half the claims...(ten days in my area)...but (per the Ins. guru's in this area) that is NEVER to be confused as a 'grace period' :roll: I know I know....samantics in my book too, however I believe in a true 'grace period' a claim could result, the premium must be accepted...in the other, the premium does not have to be accepted, (the ten or 15 day deal)...
Posted: Mon Nov 17, 2008 01:26 am Post Subject:
I believe in a true 'grace period' a claim could result, the premium must be accepted...in the other, the premium does not have to be accepted, (the ten or 15 day deal)...
Absolutely correct. With car and home policies, the insurer would have to actually accept the premium (the agent counts as the company here, too) in order for the coverage to be reinstated. Most carriers will also have the insured sign a statement that no losses have occured during the lapse period, an "LPR" statement.
In life and health insurance, they are true "grace periods" that differ from the "late payment" period commonly afforded car and home insurance. In life and health, the premium must be accepted and coverage continued without interruption if the premium is paid within the statutory grace period. Claims that occur during the grace period are covered, period. The insurer has the right to deduct the unpaid premium from the claim payment.
Posted: Sat Nov 15, 2008 01:08 pm Post Subject:
What about grace periods?
(ins teacher) Just throwing this in for the 'masses'...Ins. teacher is speaking about life insurance (i assume)...most auto/homeowners, etc, do not have any grace periods...Posted: Sat Nov 15, 2008 04:33 pm Post Subject:
On page #12 of their universal life policies, Metropolitan Life states:
Annual Report: Each year we will send you a report showing current death benefit, accumulation fund and cash value for this policy.
It will also show the amount and type of credit to and deduction from the accumulation fund during the past policy year.
Right below this, there is a section that says,
Limitation on sales representative's or other person's authority:
No sales chairperson it is or other person except our President, Vice- President, or Secretary may (a) make or change any contract of insurance; or (b) make any binding promises about policy benefit; or (c) change or waive any of the terms of this policy. Any change is valid only if made in writing and signed by our President, Vice President, or Secretary.
New York Life, Prudential, Allstate, Jefferson National, and a host of others have similar paragraphs in their policies.
In my opinion, what this means, in essence is: Yes, we'll send an annual report to the address we have on file and you need to understand it. However, if it is differs in any way from what your agent told you at the time of sale, too bad.
The grace period sections state:
If the cash value on any monthly anniversary is less than the monthly deduction for that month, there will be a grace period of 61 days after that anniversary to pay an amount that will result in a cash value being large enough to cover the monthly deduction. We will send you a notice at the start of the grace period. We will also send a notice to any assignee on our records.
If we do not receive a sufficient amount by the end of the grace period, your policy will then end, without value. However, your policy will not end during the first two policy years if a minimum premium amount is paid and no loans have been made.
Nothing I've posted here is meant to contradict, only to inform. I feel somewhat certain, however, that the companies will do what's best for them and then - what's best for the policy holders.
Posted: Sat Nov 15, 2008 10:48 pm Post Subject:
Lori said:
Just throwing this in for the 'masses'...Ins. teacher is speaking about life insurance (i assume)...most auto/homeowners, etc, do not have any grace periods...
I was commenting on life insurance. Pretty much a standard minimum grace period of 30 days for most policies, however the law allows for a carrier to give more time than the statutory minimum. As far as auto and homeowner's policies, there are quite a few states that allow a "late payment" period, usually around 15 days, where the insurer will accept a payment after the due date and keep the policy in force uninterrupted. Losses during that period are not normally covered unless the premium was paid prior to the loss. "Reinstated without lapse" is the watch-phrase, but the term "reinstastement" in and of itself indicates a lapse in coverage.
InsInvestigator included in his post language from a Universal Life insurance policy. UL policies fund the cash value account differently than other cash value contracts. UL policies are primarily a hybrid product that functionally combine term insurance and a cash value account. The cost of the term insurance is deducted monthly from the cash value account instead of being taken directly from the premium. As such, as long as there's enough cash value in the account, the policyowner doesn't even have to send in a premium. Here's a quote:
If the cash value on any monthly anniversary is less than the monthly deduction for that month, there will be a grace period of 61 days after that anniversary to pay an amount that will result in a cash value being large enough to cover the monthly deduction. We will send you a notice at the start of the grace period. We will also send a notice to any assignee on our records.
If you look at the language, it indicates that the costs are deducted from the cash value, and there has to be enough cash to cover the deduction. If there isn't enough cash, because it's all been used up to pay for those deductions, then the policy will lapse. They are giving you 61 days (perfectly legal) to cough up enough premium to keep it in force. After that, poof! Policy over. Nothing left, no more insurance. The "assignee" they are referring to would be a "collateral assignee" in which the policyowner has used the cash value in his policy as collateral on a loan from other than the insurer. The assignee has superceding rights to the cash value in a policy equal to the amount owed on the loan. :?
As far as the other quoted sections:
Annual Report: Each year we will send you a report showing current death benefit, accumulation fund and cash value for this policy.
It will also show the amount and type of credit to and deduction from the accumulation fund during the past policy year.
This is all due to various "Notice of Information Act" and Graham-Leach-Bliley legislation. UL policies have been sening annual notices forever I think. I have a UL policy that I bought in 1983 and they send me quarterly reports. Just a bunch of numbers in columns that no one outside the business, and many inside the business don't understand. Next:
Limitation on sales representative's or other person's authority:
No sales chairperson it is or other person except our President, Vice- President, or Secretary may (a) make or change any contract of insurance; or (b) make any binding promises about policy benefit; or (c) change or waive any of the terms of this policy. Any change is valid only if made in writing and signed by our President, Vice President, or Secretary.
This is statutory and appears in every state. No person other than officers of the insurer are allowed to make changes to anything in the contract. I have heard I don't know how many producers and salespeople babble on about coverage in the contract in a vain attempt to interpret that coverage. Then the customer thinks something is covered for a particular hazard, and finds out later that it isn't. "The contract is the contract." Nothing an agent says, writes or promises is valid unless it's contained within the contract of insurance. The customer might get satisfaction, but not from the policy- he'll get it by suing the agent under E&O.
Don't worry about contradictory statements- that's what makes America great! I always enjoy a good challenge, and I'll be the first to admit if I'm wrong or have no clue. Thankfully, that rarely occurs! lol :lol:
InsTeacher 8)
Posted: Sun Nov 16, 2008 12:10 pm Post Subject:
"Reinstated without lapse"
Oh yeah, I see that in about half the claims...(ten days in my area)...but (per the Ins. guru's in this area) that is NEVER to be confused as a 'grace period' :roll: I know I know....samantics in my book too, however I believe in a true 'grace period' a claim could result, the premium must be accepted...in the other, the premium does not have to be accepted, (the ten or 15 day deal)...Posted: Mon Nov 17, 2008 01:26 am Post Subject:
I believe in a true 'grace period' a claim could result, the premium must be accepted...in the other, the premium does not have to be accepted, (the ten or 15 day deal)...
Absolutely correct. With car and home policies, the insurer would have to actually accept the premium (the agent counts as the company here, too) in order for the coverage to be reinstated. Most carriers will also have the insured sign a statement that no losses have occured during the lapse period, an "LPR" statement.
In life and health insurance, they are true "grace periods" that differ from the "late payment" period commonly afforded car and home insurance. In life and health, the premium must be accepted and coverage continued without interruption if the premium is paid within the statutory grace period. Claims that occur during the grace period are covered, period. The insurer has the right to deduct the unpaid premium from the claim payment.
InsTeacher 8)
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