Help with Insurance Policy

[keepthemcool2016]

Question for you all on an insurance policy:

• My sibling and I are 50/50 beneficiaries of a $400K Face Value Life Policy issued in 1985 by an AM Best A++ carrier. Policy is a "flex premium life w/adjustable death benefit to age 95 (expiring in 2039)
• I began paying the policy in 2007 after parents divorced and dad had no money. He had accrued a $45K loan which I paid to him in cash to give him money to help settle a divorce. In total, I've paid about $70K between the loan and $35K in premiums over the past 15 years.
• Annual billing is in October of each year, and the carrier does not allow me to handle any servicing of the policy online - I can only view the face value of the policy and make 'guest payments' to the policy. I receive nothing other than an email payment confirmation. After being pretty frustrated last year I took this up with corporate and asked for an ability to manage and view my policy online. After 3 months with "executive service" they did nothing.
• I work in structured finance credit, so I wouldn't say I'm financially challenged, but I'm also not an actuary. When I requested (multiple times) a copy of premium history, I got a sh*tty excel version listing the dates I made a payment, and the running total of premiums made. On multiple occasions in writing and via certified mail, I requested a breakdown of this to know what the planned premium and actual premium were, and was never provided with any documentation, even though there are specified maximum payments in my policy with respect to policy, expense, and mortality charges.
• Do I not have the right/ability to demand this? Billed premiums have increased from $3K pre-COVID/interest rate increases to $5K for 2020, $7K for 2021, $13K for 2022, and now $16K for 2023.
• The policy reflects maximum payments (mortality, policy and expense charges) annually which are never separated from the premium.
• As I mentioned above, no accounting has ever been provided explaining to me what charges are actually being covered, what I've paid for, and what the planned premium cost is comprised of.
• I've got the actual policy with several separate tables with max cost of insurance including policy fee, expense, and mortality charges, but the tables are segregated into the first $150K and second $250K noting charges which apply while the "policy in full force" and those where "the policy is in force as extended term insurance". This is then further segregated into what appears to be an initial face value of $150K in 1985 when the policy was issued, and a $250K supplemental face value issued the subsequent year in 1986).
• My MO over the last 15 years is 1) get irate, 2) try to get help servicing/understanding my policy, 3) never get resolution, and 4) repeat each year. Given the drastic increase in policy premiums, I'd appreciate any suggestions, feedback, help of any kind on figuring out what to do here. I'm about to write a letter to the insurance commissioner as I'm pretty frustrated.

Thank you and please let me know if I've omitted something that y'all need to help figure this out.

 

[honeybee81]

@keepthemcool2016 It sounds like your father is still the owner of the policy.

 

[keepthemcool2016]

@honeybee81 My father is the insured. I’m the beneficiary (and also paying for all aspects of it). Policy has been assigned to me.

 

[r3g3nt]

@keepthemcool2016 A beneficiary does not have any rights to service the policy. Your father is the owner and the insured.

The reason for the increase in premium is because this is Universal Life, and the cost of insurance increases each year as he gets older. Get your father on the phone with you and request an inforce illustration requesting the premium necessary to carry the policy to maturity. Or have him sign paperwork to change ownership to you.

 

[keepthemcool2016]

@r3g3nt Thanks for the feedback / comment. The policy was assigned to me several years ago. Maybe I didn’t explain it correctly but other than being the insured, I have all rights as the policy owner and my dad signed all the paperwork.

I’ve requested what you said several times (but never with the appropriate terminology). I’ll request the jnforce illustration and see if that helps.

Is it typical in a policy like this that they provide zero breakdown of the premium charges even upon repeated requests, and provide zero servicing of the policy? I don’t understand how hard it is to provide a breakdown of the planned premium against the billed premium and paid premium and loan(s) if any, against the policy.

 

[r3g3nt]

@keepthemcool2016 You should specifically request “an inforce illustration showing the premium required to carry the policy to maturity and include the policy fees/expenses in the illustration”

They should be able to provide information on current COI charges. Also, the annual statement will give you a good idea of costs. It should show “monthly deductions” for the year, which is the cost of insurance for that year that’s coming out of the cash value. Compare that to the premium you’re paying.

 

[keepthemcool2016]

@r3g3nt Thank you so much for the feedback. I will request this today. Appreciate the help for letting me know what to ask.

 

[jwalk33]

@keepthemcool2016 As it’s been mentioned request, or with your dad, request an in force illustration. It’s not likely going to be favorable.

What’s likely happened is the original planned premium was issued during a very high interest rate period. (1985). The interest crediting rate was maybe 10-12% at the time of purchase and illustrated to stay at that level forever. The original premium was based on that. The crediting interest rates decreased and for years have likely been crediting the minimum, likely 4%. As a result the cash value is much lower than originally illustrated and there is not enough cash value in the policy to offset the increasing cost of insurance which is based upon current age.

The assigned policy does not give you ownership rights of the policy if it is a Collateral Assignment. What is assigned to you is normally the death benefit and that is all.

Online/phone access is tied to the policy owner, just like a bank or investment account, and is connected through the SSN/Tax ID. Life insurance is property. Some carriers will allow a 3rd party to call and access values with authorization. Some of these older policy management systems may require you to tell the service person to look up that authorization.l they have on file.

 

[keepthemcool2016]

@jwalk33 I really appreciate the comments. To clarify, I have full ownership received through POA, and not an assignment. They just literally refuse to service my policy online. I'm at the point of trying to get a regulator involved.

I requested an in force illustration and was told the following. To clarify, all they sent me which triggered that I owed any money was a letter stating the policy was in the Grace period, and now I'm told it is in lapse pending state (this sounds like BS) to me - any thoughts?

"We appreciate the opportunity to assist you with your client’s needs. This letter is in response to the illustration request received on (DATE) for policy number (NUMBER) . The In-Force Illustration cannot be completed at this time due to the policy status being in a Lapse Pending state. The policy would need to be brought back to good standing before an illustration can be run."

From my end, lapse pending is not the same as lapse, and their failure to adequately provide notice of policy due dates and amounts has led us to this period. Thoughts?

 

[jwalk33]

@keepthemcool2016 You’re welcome. These situations suck. What carrier is it? My assumption is there would need to be an online authorization form. If that’s even possible as POA. The policy should be in your dad’s name still though. You are then authorized to access the policy for him. You’re not a trustee or direct owner.

That’s the least of your worries.

An in force illustration cannot be run while the policy is in a lapse status. The policy has to be in force to run it. That is the case across the industry.

Can you pay the minimum premium required to get the policy into in force status? Then request the illustration? If you do that be sure you pay enough premium to keep the policy in force long enough for them to have time to then run the illustration.

I wonder if the planned premium was increased when he increased the insurance by $250,000. It was not enough premium or the premiums were not paid. Was the entire loan and interest paid off? The annual statements usually state to what age the policy will continue at the current premium amount.

Be sure to ask for varying durations if possible. He’s about 80? They will illustrate premiums needed to keep the policy in force to maturity. If the policy can accept the amount of money needed to do so. You will also want to know what happens to the policy at maturity. Some just return the cash value to the owner and some have a policy extension rider.

It may come to understanding your dads health and life expectancy to determine if continued premium payments make sense.

 

[jwalk33]

@keepthemcool2016 It’s shitty they are not providing past statements. An adjustable life policy may not show a breakdown of policy fees/expenses. If it’s a universal life policy that should be available.

 

[fendertele52]

@jwalk33 Who said anything about a collateral assignment? What OP describes sounds like an absolute or gift assignment, which does change the ownership. Collateral assignment wouldn't even make sense in this context.

 

[jwalk33]

@fendertele52 Just a thought since he cannot access info.. Yes, if his dad owes him money they could arrange a collateral assignment.

 

[easternpresent]

@keepthemcool2016 Do you have a copy of the policy?

 

[keepthemcool2016]

@easternpresent Yes I do - Need something from it?

 

[easternpresent]

@keepthemcool2016 Instead of requesting a history of premium payments. Can you request an in force illustration? (Or have your father request it)

That would tell you more.

It’s good you have a copy of the policy. You can definitely have an agent review it.

 

[keepthemcool2016]

@easternpresent Thank you. Should I take this to another agent? The guy who is supposedly "in charge of my policy" noted he had retired (e.g., he's the advisor listed as the person responsible for my policy, and was responsive in getting me documentation, albeit not what I'm asking for).

 

[jesmo]

@keepthemcool2016 I would have them go over the policy with both of you on the phone or in person if possible. It seems like the interest from being borrowed against has made the payments higher or maybe how it is designed to increase cash value so the payments are higher. You could be the owner, but you want to verify.

Being issued in 85, that policy may have no equivalent from the company, but they should have records. Or maybe they do not have the records.