Q. I purchased a life insurance policy, and now I have decided I don't want it. My agent told me I have a "free look" period. What does "free look"; mean?
A. You are allowed no less than 10 days from the date a life insurance policy is delivered to review and evaluate the policy. A policy sold by mail order must provide a 30-day review period. Should you elect to return the policy for any reason, during the "free look" period, the insurance company must refund to you any premium paid.
Q. Can an insurance company void my policy if I made a mistake in completing the application?
A. The insurer may contest a life insurance policy during the first two years after its date of issue. If the insurer finds that a material misrepresentation was made in the application that would have affected the insurer's decision to issue the policy, the carrier may void the policy. The company would have the responsibility only to refund premiums paid.
Q. A family member has died. We are sure that he had insurance policies, but we cannot find any. Can you check to see what policies exist?
A. The South Carolina Department of Insurance does not have a data base of policies issued on residents of our state. And, there is no national data base of policies issued. We suggest that you look through the person's checkbook to see if there have been any checks written out to a specific insurance carrier. We can provide you with the name and address of that carrier, and you can contact them for assistance.
If the person worked outside the home, check with the employer for group life insurance or even individual insurance policy that may have been deducted from the paycheck.
If the person was a member of a fraternal organization, check with that organization to see if membership provided any coverage.
Q. What is a Universal Life Policy?
A. A type of Whole Life policy that utilizes Annual Renewable Term insurance and a cash fund that pays interest according to defined market factors. The insured can adjust the amount of insurance downward and upward, subject to the insurer’s underwriting guidelines. Premium payments are pre-determined based on loss experience and investment return assumptions. The amount the insured pays is flexible but must be adequate enough to fund the actual cost of insurance which increases each year with the attained age of the insured.
Q. The life insurance company has rescinded my husband's life insurance policy because the application indicated that he did not have high blood pressure even though he did. We told the agent that he had high blood pressure but the agent indicated no on the application. Why should the company be allowed to deny my claim?
A. When the applicant signs the application, he/she attests that information contained in the application is true and the insurance company can rely upon it's accuracy. It behooves the applicant to read the application before signing to make sure that the underwriting insurance company is not misled by the information contained therein.
Q. The agent told us that my husband's health problems were minor and there was no need to mention them on the application. The insurance company now will not honor his claim. Shouldn't the company be held liable for the agent's actions?
A. This involves a question of fact about what was said or understood between the agent and the applicant and places the applicant in a compromised position. In addition, the agent's contract with the company generally holds the company harmless for statements or actions made by the agent that violate the terms of the agent's agreement and underwriting standards.
Q. I took out a universal life policy 10 years ago and have paid the premium amount indicated as the planned premium on my contract. I just received a letter from the insurance advising that if I don't pay considerably more that my insurance will lapse. How can this happen?
A. More money may be required to fund your policy for several reasons, all stemming from the fact that the assumptions originally made by the agent when the policy was sold have not been realized. The rate of return on the cash accumulation may not have been as good as expected and the cost of the insurance increased dramatically due to attained age and loss/overhead expense factors. You may have taken a loan or withdrew money from the cash fund, thereby, depleting the funds available to pay for the increasing cost of insurance.
Q. The agent guaranteed that the money paid into the universal life policy would be more than adequate to keep the insurance in force for the rest of my life. I just received a notice from the insurance company that my policy will lapse if more premium is not paid. How can this happen?
A. Always read the fine print on life insurance projections. Projections are used by an agent to give you an idea what your policy will look like in the future in terms of premium cost, cash value and amount of insurance. The projection, however, is based on assumptions and is not a guarantee. Always request a projection based on the guaranteed rate of return and base your decision accordingly.
Q. Can I terminate a universal policy at any time and receive the cash fund?
A. You can terminate at any time, however, the cash proceeds will most likely be subject to a Surrender Charge. The amount of the surrender charge and the number of years the surrender charge applies will vary based on the type of policy purchased.
Q. Are all life policies covered by the Life & Health Guaranty Association?
A. All life policies issued by member companies of the Association which includes all companies licensed to transact life insurance in this state are protected by the Association.
Q. Does the Insurance Commissioner's Office have records or the means to determine if an insurance company ever issued a life insurance policy to a person?
A. No. There is not database that list policyholders and the company which insures them. Every insurance company that issues or has issued life insurance policies in South Carolina would have to be contacted. There are hundreds of licensed life insurers in this state as well as many others that have either been sold or become insolvent which would making a search impractical and likely unproductive.
Q. What can a person do to determine if a life insurance policy was ever issued to a particular individual?
A. Some of the things a person might do is contact life insurance agents in the area where the person lived. Other steps would include: examine relative's bank statements, check registers, contact the employee benefits office of your relative's former employer and income tax records which may list interest income on the cash value of a life policy. You might also contact the Unclaimed Property Section of the South Carolina Treasurer's Office at 803-734-2101 who receives life insurance proceeds from insurers who are unable to locate the owner/insured.
Viaticals
Viatical Settlements is the sale of a life insurance policy of a terminally ill individual who is the owner of the policy to a third party. The third party pays the owner a discounted sum of the policy face amount and assumes ownership of the contract and becomes responsible for all future premium payments. A Viatical is not a regulated insurance product. All questions and complaints regarding Viaticals should be directed to South Carolina Attorney General's Office at 803-734-9916.
