Like
any industry, there's always some bad
apples but life insurance is a heavily
regulated industry with a great deal of
consumer protection at the State and
Federal level. This is important
since the decision you're making might
have ramifications decades from now when
the life insurance benefit is needed
(hopefully not). Let's look
at how you're protected.
It's important to first understand that
most of the protection for consumers is
done at the State level through the
various State's Department of Insurance.
The carriers and life insurance brokers
must comply with their rules and there
is a process of licensing in the case of
the brokers to make sure they keep up
with their ethical and professional
requirements through continuing
education. The protections break
down into a few different areas so let's
cover some of the most important.
Truth in life insurance advertising.
This should be pretty obvious and the
industry is pretty good in comparison
with other industries. A life
insurance carrier or broker cannot
advertise falsely. They cannot use
teaser rates without explaining what
that rate represents (for example, a
rate must be based on a certain age,
health status, etc). They can't
just print the lowest rate on the market
without showing that applies to.
The rates usually have to be approved by
the Department of Insurance. There
may even be governance on how much a
rate can increase depending on the State
but this is rarely an issue with term
life insurance since the premium is
fixed. A carrier or broker cannot
bait and switch (i.e. that one real
cheap car price listed which isn't
available at the lot). Keep in
mind that the term life rate you are
quoted online may be different than the
final offer by the carrier based on your
health status, application, and
paramedical exam. The quoted rate
is based on a certain set of criteria
which may be different than your actual
health situation (sometimes...even to
your surprise at the result of a
paramedical exam).
General ethical responsibilities.
You go into a life insurance purchase
with the expectation that if you pay the
premium over the course of the policy,
it will pay out if need be. Many
in the general public have an uneasiness
about life insurance companies (or
insurance in general) but complications
during claims payment are rare and we
stick with the better companies to avoid
hassles. We can always help our
clients at the time of benefit payment
and it's helpful just to have a 3rd
party advocate but the process is pretty
clean in most cases. The local
Department of Insurance would be the
destination for complaints or conflict
resolution if you exhausted your avenue
with a tricky claims payment. You
can google "Department of Insurance"
followed by your State to initiate this
process.
Life insurance brokers also have
requirements to protect consumers.
The key ones are as follows.
Twisting and Churning.
Essentially, this is the fraudulent
process by which an unethical insurance
agent tries to get you to replace a
perfectly well-suited life insurance
policy to buy a new replacement one so
that he/she can earn commission.
There are situations where a person is
on a very expensive life insurance
policy they can no longer afford (or
shouldn't be overpaying for). If a
life insurance agent is offering you
about the same as what you have now
merely for replacement, that's a big
warning sign. Whole life also
comes into play here where the cash
value is used to pay for the policy of
another plan. Whole life is
expensive in general but it you really
need a professional and ethical life
insurance broker to look at your
situation and explain to you the
benefits and disadvantages to any
proposed changes. A life
insurance should present you with all
the information you need to make a good
decision.
In
order to take full advantage of the
protection available through the
Department of Insurance, there are a few
key points for you as the
applicant/insured. Always be
honest, thorough, and complete with the
information you provide during the
enrollment process. If a carrier
find fraud on your behalf, it can
jeopardize your life insurance benefits.
Avoid anyone who tells you to be less
than honest in order to get approved.
Ultimately, it's a risk to you and your
life insurance coverage. |