Life insurance question

[weirdjim]

LIFE INSURANCE:

You're betting somebody you are going to die;
They are betting you are going to live;
You hope they win;
And you are paying for the privilege.


Jim

 

[asechrest]

On the same note, I'm dealing with a friend right now who (long story) had collision and liability insurance on a car that they had no interest in (their name was no where on the loan, title, etc). Scum bag insurance co still was happy to take their premium, even with no insurable interest

Now the car got smashed, for a valid reason the insurance company won't pay out for collision, ALSO they won't pay the state minimum property damage to the cars actual owner.

But yes, please continue to tell me how insurance is anything other then a expensive joke

In general, procuring an insurance policy when you have no insurable interest violates a fundamental tenet of insurance -- the principle of insurable interest -- creating moral hazard by incentivizing intentional loss for profit.

You expect the insurance company to enter into the contract in good faith, and the insurance company expects the same from you, and they expect it without having to hire a private investigator to be sure you're telling the truth. It looks like your friend is suffering the consequences of failing to enter into the contract in good faith.

They won't pay property damage to the car's owner because there is no insurance policy to pay said coverage. The contract is null and void because I assume they have rescinded the policy. If so, your friend will have all premiums refunded to him.

Sounds like what he needed was a non-owner policy.

 

[N801BH]

In general, procuring an insurance policy when you have no insurable interest violates a fundamental tenet of insurance -- the principle of insurable interest -- creating moral hazard by incentivizing intentional loss for profit.

You expect the insurance company to enter into the contract in good faith, and the insurance company expects the same from you, and they expect it without having to hire a private investigator to be sure you're telling the truth. It looks like your friend is suffering the consequences of failing to enter into the contract in good faith.

They won't pay property damage to the car's owner because there is no insurance policy to pay said coverage. The contract is null and void because I assume they have rescinded the policy. If so, your friend will have all premiums refunded to him.

Sounds like what he needed was a non-owner policy.

Agreed....

The potential for fraud is ripe in cases like that...

 

[James331]

In general, procuring an insurance policy when you have no insurable interest violates a fundamental tenet of insurance -- the principle of insurable interest -- creating moral hazard by incentivizing intentional loss for profit.

You expect the insurance company to enter into the contract in good faith, and the insurance company expects the same from you, and they expect it without having to hire a private investigator to be sure you're telling the truth. It looks like your friend is suffering the consequences of failing to enter into the contract in good faith.

They won't pay property damage to the car's owner because there is no insurance policy to pay said coverage. The contract is null and void because I assume they have rescinded the policy. If so, your friend will have all premiums refunded to him.

Sounds like what he needed was a non-owner policy.

Nope, they haven't, and are still collecting premiums every month, as they have been for nearly a year!

Thing was the driver didn't BS them, didn't know much about insurance, insured my other friends car and wiped it out. Insurance doesn't want to pay out for a separate reason.

If they did their job and ran a DMV search like everyone does, they would have canceled within the 60days the law requires. If they simply had sales folk who know the laws this never would have happened.

But no, they just want their money.

 

[asechrest]

Nope, they haven't, and are still collecting premiums every month, as they have been for nearly a year!

Thing was the driver didn't BS them, didn't know much about insurance, insured my other friends car and wiped it out. Insurance doesn't want to pay out for a separate reason.

If they did their job and ran a DMV search like everyone does, they would have canceled within the 60days the law requires. If they simply had sales folk who know the laws this never would have happened.

But no, they just want their money.

You've lost me. Something's missing from the story.

 

[Lindberg]

You've lost me. Something's missing from the story.

Like why would you keep paying for insurance on a totaled car? And why would the non-owner need other than liability insurance?

 

[James331]

You've lost me. Something's missing from the story.

Nope, person one was going to my friends unused car car, said car was not being driven thus not insured, person one pulled a collision and liability policy, answered all the questions that the insurance agent asked.

Made some poor decisions and totaled the car, luckily it was just the car.

My friend hears about this, thinking the car was covered, due to the nature of the accident the collision coverage is not valid, we tell the insurance Co that it's not a collision coverage issue, but a liability one, as person one had zero interest in the car. Turns out, as you said, the insurance company was taking premiums for quite some time even though a "tenate" of insurance was...missing

 

[StinkBug]

You don't have to own a car to insure it. The insurable interest is the fact that he's driving the car and will have to pay if he gets into an accident. There's nothing illegal or even unusual about this.

The missing piece of the story here is that bit you mentioned about "due to the nature of the accident the coverage is not valid" Sounds like your friend did something that invalidated the whole policy.

Just like everyone said, something is missing from the story. Sounds to me like your friend was the one who didn't do right, and is now complaining that the insurance company doesn't want to pay out because he violated some part of the contract.

 

[chislands18]

I am quite sure the nature of life insurance payouts is such, that you will not "find out after the fact that your family isn't taken care of":

Exactly, if you're truthful on the application and you're dealing with a reputable insurance carrier (usually AM Best rated A or better), you don't have a problem - When I said "find out after the fact that your family isn't taken care of", I was referring to someone who overtly lies on the application in order to get a better rating, and then passes away, only to find out that the death claim is rescinded and hence, leaving their family out in the cold. You're obviously much better off being truthful and knowing for sure that the claim will be paid, rather than running that risk.

To be honest, most of the life insurance carriers are on the up-and-up and will not try to rescind paying a claim - It's just not what they do. Trust me, they're doing just fine by collecting premiums from people who aren't passing away - As you said, with any type of insurance it's the law of large numbers and spreading out the risk.

In fact, I've seen 2 separate instances with 2 separate carriers where the policies ended up lapsing a couple of months prior, because the client forgot to pay their monthly bill and then they passed away due to a freak accident. Both carriers ended up paying the claims, along with 30-45 days interest, while the death claim was being processed. In both of these particular instances, the carriers had absolutely no contractual obligation to pay the claims, as the policyholders defaulted on their payments (obviously by accident), but they did the right thing, which is always great to see.

 

[asechrest]

You don't have to own a car to insure it. The insurable interest is the fact that he's driving the car and will have to pay if he gets into an accident. There's nothing illegal or even unusual about this.

The missing piece of the story here is that bit you mentioned about "due to the nature of the accident the coverage is not valid" Sounds like your friend did something that invalidated the whole policy.

Just like everyone said, something is missing from the story. Sounds to me like your friend was the one who didn't do right, and is now complaining that the insurance company doesn't want to pay out because he violated some part of the contract.

While I have seen some (usually lower-tier) carriers be unusually apathetic, on a standard auto policy you still need to have insurable interest in the vehicle being insured, and just driving it isn't usually enough.

Agree with the rest of your post. Something is missing.

 

[mtuomi]

Exactly, if you're truthful on the application and you're dealing with a reputable insurance carrier (usually AM Best rated A or better), you don't have a problem - When I said "find out after the fact that your family isn't taken care of", I was referring to someone who overtly lies on the application in order to get a better rating, and then passes away, only to find out that the death claim is rescinded and hence, leaving their family out in the cold. You're obviously much better off being truthful and knowing for sure that the claim will be paid, rather than running that risk.

I was just pointing out, tongue firmly in cheek, that after the claim you are usually dead, and are not finding out anything about how the claim is processed

 

[chislands18]

I was just pointing out, tongue firmly in cheek, that after the claim you are usually dead, and are not finding out anything about how the claim is processed

Oh.. I see - With text it's hard to sense the sarcasm, but I definitely get it now.. I promise that I'm not that much of a dumb, dumb.

 

[Henning]

Ha, if they successfully deny the claim does the beneficiary get the premiums back?
(they seem unearned to me)

Depends on the state rules, but typically no if there was deception involved. That makes a fraudulent application which forfeits the premiums payed.

 

[denverpilot]

Life insurance is protection for your survivors from your debt. Pay off your debt. Cancel your life insurance.

It can also replace income to ensure significant lifestyle changes or pre-planned expenses will still be possible, even in a debt-free, no, *especially* in a debt-free scenario, for survivors.

And a pretty large number of us will be departing in expensive ways in hospitals. Even going in debt-free, with savings, your survivors are likely to inherit debt that was accrued very rapidly in the last few years or even hours of your life, even with health insurance.

It costs about $30K to die of a stroke in a hospital a few hours after it happens. I can show you the bills if you like. And that is a pretty cheap way to go out these days. No long term illness.

Die debt-free with assets, the assets will be sold to pay that $30K bill. Die debt-free with assets and a modest life policy, the cash from the policy will pay that bill and leave assets intact for whatever your plan for them was.

There's also a hassle factor (besides your death) that can be eliminated. A life policy will put that cash in hand in days with a death certificate. Assets needing to be liquidated will always take longer. Of course if you have significant liquid assets and made sure to list them as Payable On Death to a beneficiary, that'd cover that problem also.

 

[paflyer]

It costs about $30K to die of a stroke in a hospital a few hours after it happens. I can show you the bills if you like. And that is a pretty cheap way to go out these days. No long term illness.

Isn't that why you have health insurance?

 

[denverpilot]

Isn't that why you have health insurance?

Most at that age are carrying catastrophic only policies with high deductibles and with perhaps 20% or more due from the deceased and the medical covering only 80% of "reasonable charges".

The point was, "no debt" doesn't mean you might not need a smallish life policy to cover final medical bills, burial/cremation, etc... if you haven't set aside cash for that purpose. All depends on who's screwed if you don't.