Ethlical FE Life Insurance Replacements

[WinoBlues]

We definitely have a terminology difference here. I have always been told that to contest a claim is the same as to rescind a claim. Plus, the definition of contest is "to oppose as mistaken or wrong". An investigation is not opposing the claim, it is just making sure it is valid and does not need to be opposed.

They investigate 100% of claims within the first 2 years, but they do not contest/rescind them automatically.

Legally, they can only rescind/contest in the first 2 years, and only for a "gross misstatement", fraud, or suicide.

Also, most companies start the contestability period over if a policy lapses and is then reinstated within the reinstatement period.

That.

Many people forget the reinstatement contestability reset. Even if it is a non proof of insurability reinstatement. I have a Vantis claim now that the person died between day thirty and day 60 of no premium payment. They paid, but they paid a reduced paid up amount of $29. under non forfitures.

 

[jdeasy]

Was it Americo???

I'm not gonna verify your guess right now as I have some beneficiaries in talks with an attorney over a rescission with the company I'm talking about. So I'm not going to mention them publically right now.

 

[WinoBlues]

What about if a client is in the middle of robbing a bank when he is killed in the first 2 years? What do you think the interns company would do?

Ha, Only and Never are two of the gotcha words.

 

[scagnt83]

What about if a client is in the middle of robbing a bank when he is killed in the first 2 years? What do you think the insurance company would do?

It would depend on the exclusions listed in the contract. Some list criminal acts and others do not. Some use the term "self inflicted", which could possibly be used to justify Contesting a criminal act. Some outright list the term "criminal act" in the Contestability Clause or in the general exclusions.

So it would depend on the carrier and the product.

 

[SPUR CITY]

It would depend on the exclusions listed in the contract. Some list criminal acts and others do not. Some use the term "self inflicted", which could possibly be used to justify Contesting a criminal act. Some outright list the term "criminal act" in the Contestability Clause or in the general exclusions. So it would depend on the carrier and the product.

Now you say it depends on the carrier and the product but earlier you kept saying "ONLY".


Blanket words and statements are dangerous.

 

[scagnt83]

Now you say it depends on the carrier and the product but earlier you kept saying "ONLY".


Blanket words and statements are dangerous.

I said "only" just once pertaining to the specific reasons. But yeah, you got me. I should have thrown in a "usually".

My original point was not about the specific clauses within contestability provisions. It was that during a replacement a new contestability period USUALLY should not be a major issue assuming you are dealing with a law abiding and honest citizen who does not plan to lie, harm themselves or others, or defraud the carrier. Even if any of that does happen, assuming the agent was not aware of the intent, it would still be an ethical replacement as long as the new policy met the stated needs better than the old one.

But in all seriousness, this is where being picky about what carriers you write really does make a difference. And higher rated carriers tend to have more favorable contestability language in my experience.

 

[rousemark]

We definitely have a terminology difference here. I have always been told that to contest a claim is the same as to rescind a claim. Plus, the definition of contest is "to oppose as mistaken or wrong". An investigation is not opposing the claim, it is just making sure it is valid and does not need to be opposed.

They investigate 100% of claims within the first 2 years, but they do not contest/rescind them automatically.

Legally, they can only rescind/contest in the first 2 years, and only for a "gross misstatement", fraud, or suicide.

Also, most companies start the contestability period over if a policy lapses and is then reinstated within the reinstatement period.

In legal terms, the word "contest" means to challenge... In other words the company challenges the validity of a claim and therefore does not pay it. They investigate a contestable claim and if they find sufficient cause then they will challenge or "contest" the claim.

 

[donamese]

People often forget of the DOI, courts, etc. and their outlook on such matters.

Client saved $3 a month
Agent gets paid 100%+ commissions
Beneficiary would have received 15K
Beneficiary received 0 because of rescission

Company will pay over 15K in lawyer fees just to show up and prove their innocence. Jury will more than likely cater to the emotions of the deceased's family instead of the salesman and the big bad insurance company. Even though the client may have lied on the application, they were just old and probably a little confused per their attorney. Better yet, the agent told them to say they were 100lbs lighter so they could get approved.

 

[John Galt]

People often forget of the DOI, courts, etc. and their outlook on such matters.

Client saved $3 a month
Agent gets paid 100%+ commissions
Beneficiary would have received 15K
Beneficiary received 0 because of rescission

Company will pay over 15K in lawyer fees just to show up and prove their innocence. Jury will more than likely cater to the emotions of the deceased's family instead of the salesman and the big bad insurance company. Even though the client may have lied on the application, they were just old and probably a little confused per their attorney. Better yet, the agent told them to say they were 100lbs lighter so they could get approved.

Any documented cases involving an actual FE policy that this has actually happened? That would be some good bathroom reading material.

 

[donamese]

Any documented cases involving an actual FE policy that this has actually happened? That would be some good bathroom reading material.

Not able to find any of the ones I remember from when I worked for a carrier but they would happen a couple times a year. Sometimes it is the agent clean sheeting or coaching, sometimes the client lying to the agent. Either way, do you think the client is going to go after the 30K annual agent or the multi-million dollar company? The sad truth is, most companies will settle out of court regardless because it is cheaper. A 10k settlement costs less than what it would be to pay attorneys to prepare for a trial and to put all the hours in court even if they know they will win, they will end up paying more.

There is a lot that companies have to deal with that most agents have no idea. For example, in KS, if you put send out a mailer or put something on your web page that doesn't fly with the DOI but it has the carrier name on it....they get fined. Doesn't matter that you did not get the carriers approval, the company will be fined regardless because you as an agent are considered an "employee" of the company.