How do Life Insurance Companies make money? I had always thought insurance companies use complex actuarial tables which enable them to predict, very accurately, how long people will live and the insurers figure that, over time, they will collect more money than they pay out. The latter part is true but not because of any actuarial brilliance. Insurance companies make money because a massive amount of all life insurance coverage lapses.
Most people pay into a term or whole life policy for years, sometimes hundreds of thousands of dollars, and then allow those same policies to lapse — and the insurance company never pays out a penny. If the insured passes away, then the company “processes the claim”, this is where they search for any possible reason to refuse to pay the death benefit. Some sources suggest that less than two percent of term policies ever result in a death claim.. (Hundreds of millions of death benefits also go unclaimed by the beneficiaries, but the insurance industry companies do not contact beneficiaries even though they have their contact information). Even if you paid every premium in full and on time, it may not be enough to ensure a payout will reach your beneficiaries when you’re gone. A task force of the National Association of Insurance Commissioners and at least three state insurance departments are currently investigating about a dozen large life insurance companies for failing to pay out more than $1 billion in death benefits on thousands of small policies. Many of these of these policies were small and bought by working class families.
Insurance companies could use the Social Security Administration’s Death Master File, the same file they use to stop annuity payments. But they don’t, so if the beneficiaries don’t file a claim, the money just sits in limbo. Policyholders can help make sure insurance companies match their benefits with their beneficiaries by informing heirs about the policies they hold, including the policy number, the issuing agency, and the value. Policyholders can also make sure beneficiaries’ most current contact information is on file with the insurance company.
Now that you know how they do it, don’t become a statistic. If your family falls on hard times, do whatever you can to pay your life insurance premiums. You do have options to avoid lapsing your policy, contact your agent or Expert Settlement Solutions for information on keeping your policy in good standing.
Expert Settlement Solutions is a Life Insurance claims consulting company. With over 20 years experience in the Life Insurance industry. Our aim is to settle claims amicably between our clients and the Life Insurance Company. Devastation is the feeling most people experience with the loss of a loved one. We make this process go easily and effortlessly for our clients allowing the families to focus on healing. Call NOW for a free consultation with one of our experts 570-213-5605.