While there are some good, trustworthy companies out there doing business, unfortunately, there are a lot of bad apples as well. Before you buy life insurance, you should do some more research on what the industry is like so that you can better understand what’s going to happen. Here are some common issues you should be aware of.
1. Brokers Can Get Paid More For Selling One Type of Policy Over Another
Life insurance companies pay the brokers that sell their policies a commission for closing a deal. This is an incentive for those working in life insurance to steer people into one policy over another because it benefits them financially. For example, if you were looking at buying a term life insurance policy and a whole life policy, both of which were comparably priced but had different qualities, your broker might have been paid more by the company if they sold you the whole life rather than the term. In this case, it would be in their best interest to convince you to go with the second option, though it may not be what’s best for you long-term. Make sure that you understand all of your options and that nobody is to push or persuade you into buying a policy that you don’t want or need.
2. The claim you submitted was wrongfully denied
When applying for life insurance, make sure that you are 100% accurate on all of your applications. If there is a mistake or if one of the companies requires more information, make sure to provide it promptly so that you can keep your claim moving forward. Life insurance companies are making their money by taking premiums from customers and not paying out as many claims as they should. This means that whenever possible, they will look for reasons to deny claims instead of approving them. If you live in Texas, you can hire a life insurance claim attorney in Houston and they will take care of your problem. Also, make sure that you submit all the required information and documentation to ensure that your claim won’t be denied.
3. The Company is Pushing Exclusions Rather Than Coverage
When looking at life insurance companies, make sure to read all the fine print rather than simply focusing on what’s in large font. Sometimes the important details are buried in the text, and that’s why it’s best to read everything thoroughly. This is especially true when they list exclusions — clauses they don’t have to mention because most people already know about them — rather than positive coverage. For example, if you look at a cancer exclusion, you’ll see they don’t have to pay for treatment related to cancer, even if the policy states that it covers any medical condition or illness imaginable. Be wary of large companies with lots of exclusions that offer policies with decent premiums because in some cases these can be false claims.
4. The Insurance Company Doesn’t Have Enough Money to Pay Out Claims
Some life insurance companies simply don’t have enough money in their reserves to pay out claims. This is because they’ve mismanaged their funds, or perhaps because they sold policies that would be difficult to pay back down the road. Either way, this is a serious issue because if you buy a policy and then find out that they can’t pay it back to you in the event of your death, it will be considered worthless to you. In some cases, these companies don’t live up to their promises and may not make any payment at all, which is why it’s important for customers to always do their research before buying from a company.
5. They Use False Advertising to Sell Policies
Finally, if you see a company advertising on television or online that seems too good to be true, then it probably is. These claims typically aren’t scams, but rather companies that want to increase their revenue by offering policies that they cannot provide once you sign on the dotted line. For example, some life insurance providers sell ‘vanishing premiums’ which means that after an initial period your monthly rate will go down significantly because you’ve paid for part of the policy already. That sounds like a great offer until they don’t tell you that any rates or fees will stay the same for as long as you hold the policy.
Life insurance companies aren’t going anywhere anytime soon. In fact, millions of people have life insurance policies, and it’s a multi-billion dollar industry, so they’re not likely to disappear any time soon. That doesn’t mean that you shouldn’t be aware of the common issues with life insurance companies that could cause problems down the road for you and your family.