Did your Provident Mutual life insurance policy lapse after many years of paying premiums?
You may have been charged fees that were higher than they should have been without knowing it. This, of course, will cause a policy to lapse. The average consumer doesn’t have the training needed to understand how fees are supposed to be determined in a life insurance policy, and therefore they won’t know if they are being charged the right amount.
Even when premiums are paid into a life insurance policy the annual fees may be more than the premiums. This fee structure, unlike other types of insurance, is unique to life insurance and can cause a lot of confusion.
What allows a policy to continue in-force for some time, even though premiums are insufficient, is a policy clause that allows the insurer to deduct money directly from the policy cash value. So, for example, if the annual policy fees are $1,000 and the premium payment is only $600, the insurer will deduct $400 from the policy cash value to make-up the difference.
This clause can drain a policy of its cash value without the owner knowing it and trigger a lapse of coverage. What makes this dangerous is that the policy owner won’t be notified of the $400 shortage until after it’s deducted, and possibly not until 11 months later — when the Annual Statement is generated. And, the owner will only have 60 days to pay extra premiums to keep their policy in effect if the cash value gets depleted.
The other event that puts a policy at risk of lapsing is when an insurer over-charges the policy fees. Even if the owner gets an Annual Statement he will only know how much the fees were. But the Annual Statement won’t inform the owner of how the fees were determined — and that is the critical information. This determination requires a trained expert. If you don’t know how much the insurer should be charging, you’ll only be assuming that the charges on the Annual Statement are correct.
If an insurance company has charged higher fees than the policy allows then the possibility of policy lapse accelerates.
If it’s determined, after a thorough examination of your policy, that your insurer has over charged you for your life insurance coverage you may be entitled to several remedies, including:
A return of your premiums.
A reinstatement of your lapsed coverage – even if your health has declined.
Payment of death benefits from a lapsed policy.
Cash credits.
The Center for Life Insurance Disputes can do a thorough examination of your policy and determine if you were charged fees beyond what the policy allowed. If so, we will consult on your options and execute to recover your chosen remedies.
For your policy examination please contact us at
(888) 428-4868
See Connecticut Law Tribune article regarding excessive policy fees (link)