The FTC’s National Consumer Protection Week begins March 4. It’s an annual time for consumers to reflect on their finances, take into account ways to improve them and, most importantly, make sure they’re being treated fairly by financial corporations.
When it comes to life insurance, common accusations from purchasers and their relatives relating to seniors are that they’re being sold overpriced products, sold policies that don’t fulfill a promised need or that they’re pressured into unnecessary purchases. However, you can be your biggest advocate by better understanding the products and your options as a consumer.
We recommend seniors, and their family members, take this occasion to understand simple steps they can take to have greater confidence in their life insurance coverage and avoid feeling—or getting—scammed.
Buy while you’re healthy
One of the simplest ways to get an advantage when shopping for life insurance is to start while you’re still fairly young and healthy. Not only will you be offered better rates, but you’ll have a much wider selection of insurers and policies to choose from. Most insurers stop offering term policies over 20 years in length once you’ve turned 65, and those over 80 are unlikely to find a policy with over a 10-year term.
In addition, if you pass away shortly after purchasing a life insurance policy, you run the risk that your beneficiaries will not receive the death benefit. Life insurance policies come with a two-year contestability period after purchase, during which time the insurer is allowed to, and will often, investigate and contest the circumstances around your death. If, for example, there was any minor condition you failed to disclose, the insurer may reject the claim. Given these issues can often appear as the result of a simple mistake—life insurance applications have dozens of detailed health and lifestyle questions—getting coverage earlier in your life can help to ensure your family receives the death benefit you’re buying.
Understand the terms
The contestability period isn’t the only qualifier for payout that life insurance policies come with, so it’s important to understand all the details of your coverage before paying the premium. Guaranteed acceptance life insurance, for example, protects the companies that offer it by coming with a “waiting period”. This is a two- to three-year period after purchase and, if you die during the waiting period, your beneficiaries don’t receive a death benefit—just the amount you’ve paid in premiums plus interest.
The reasoning for this term is straightforward—insurers want to make sure terminally ill patients don’t buy coverage and pass away before paying a sufficient amount in premiums to cover the insurer’s costs. However, this waiting period is a common reason for families to accuse insurance companies of perpetrating a scam targeting seniors. This is why we strongly recommend you understand what you’re buying, and make sure to read all of the paperwork.
Have a payment backup plan
It’s a hard discussion to have with your family, but as you get older issues can arise if you haven’t appointed someone to help you manage your finances. Unfortunately, a number of seniors have paid life insurance premiums for decades just to have the policies lapse shortly before their deaths. This is often due to challenges later in life with memory, as you may need assistance to recall simply paying the bills. And, while insurance companies offer short grace periods during which you can reinstate coverage, every life insurance policy will eventually lapse if you stop making payments. It won’t matter how many years you paid them consistently.
Avoid high-pressure pitches
Life insurance is a big purchase, and you want to feel confident at the end of the day that you bought the right policy. However, life insurance is also complex, and trying to figure out your needs while evaluating a policy and answering a sales person’s questions can be hard to handle. Therefore, we recommend getting an understanding of what type of policy you want and how much coverage you need before speaking with an agent. And, should you choose to speak with an agent, meet on your terms. It’s generally a good idea to:
- Have a friend or family member with you that’s familiar with your financial objectives. They can jump in if you start to feel overwhelmed.
- If the meeting is in person, consider whether you feel comfortable having the agent in your house. Otherwise, schedule it in a more neutral location. And never let someone in that simply knocks on your door without an appointment.
- Come with your own set of questions for the agent. If you have a checklist of information you need from them written down, you’re more likely to come away with those details.
- Buy later. It’s unlikely you need life insurance that day, so take a few hours or days to consider the information and review your options.
Also know that if you do purchase a policy that you’re unhappy with, there’s a free look period during which you can get a refund, but it only lasts about a month after purchase.