Question Regarding Life Insurance

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SelfEmployed123
Posts: 180
Joined: Sun Apr 15, 2018 8:57 pm

Question Regarding Life Insurance

Post by SelfEmployed123 » Mon Jul 16, 2018 9:54 am

Hi everyone,

I recently purchased three term life insurance policies (for 10 years, 20 years, and 30 years respectively) for myself to protect my growing family. However, I've found out something trouble regarding the life insurance company I went with (let's call them Company X). I noticed in the policy documents that for each of the 3 policies, my premium are guaranteed for 10, 20, and 30 years. However, the premium for each policy will automatically increase after the term is up. In order to avoid that, it will be my responsibility to remember to call Company X three months in advance in order to cancel each policy and avoid the increase in premiums. I am generally a pretty organized person and more conscientious than most, but I am not confident I will be able to remember to call this company in 10, 20, and 30 years from now to cancel my policies. I called Company X but they said I would not be able to set the policies to automatically cancel after the term is up. Needless to say I am pretty annoyed about this...annoyed enough to go through the life insurance application/medical exam process again so that I can avoid having to deal with this. However, that made me wonder how prevalent this practice is.

For those of you with term life insurance, are your policies set up the same way or do your policies automatically expire after the term is up? Are there any life insurance companies you are aware of that do not pull this kind of trick that you would recommend?

Caduceus
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Re: Question Regarding Life Insurance

Post by Caduceus » Mon Jul 16, 2018 10:11 am

I don't understand your question. Doesn't term life insurance just terminate when the term is up? Why would the premium go "up" upon termination given that you don't have a valid policy anymore? Or do you have some other sort of insurance that's not simply a level term policy?

Rupert
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Joined: Fri Aug 17, 2012 12:01 pm

Re: Question Regarding Life Insurance

Post by Rupert » Mon Jul 16, 2018 10:16 am

Are your premiums automatically debited from your checking account? If so, can you stop paying that way? I pay my premium once annually by ACH transfer. The insurance company sends me an email reminder a month or so before the payment is due. When I'm ready to terminate the policy, I simply won't pay and the policy will lapse. I also think that if they withdrew a premium from your account after the term expired, you could call and cancel at that time and they would have to refund the premium to you. That's the way all insurance products I've ever encountered work. In other words, I don't think you have a problem.

SelfEmployed123
Posts: 180
Joined: Sun Apr 15, 2018 8:57 pm

Re: Question Regarding Life Insurance

Post by SelfEmployed123 » Mon Jul 16, 2018 10:23 am

Caduceus wrote:
Mon Jul 16, 2018 10:11 am
I don't understand your question. Doesn't term life insurance just terminate when the term is up? Why would the premium go "up" upon termination given that you don't have a valid policy anymore? Or do you have some other sort of insurance that's not simply a level term policy?
All policies are term life. My policies do not just terminate. Instead, the premium is guaranteed for a term of 10, 20, or 30 years and then goes up unless I cancel the policy. In other words, the policy could remain valid if I do not remember to cancel it. For the 30 year term, the policies after the 30 years are pretty crazy (like 20 or 30k per year if I let the policy ride). Obviously I will hopefully remember to cancel it. However, if something awful happens I guess I'll have to leave instructions for my spouse...
Rupert wrote:
Mon Jul 16, 2018 10:16 am
Are your premiums automatically debited from your checking account? If so, can you stop paying that way? I pay my premium once annually by ACH transfer. The insurance company sends me an email reminder a month or so before the payment is due. When I'm ready to terminate the policy, I simply won't pay and the policy will lapse.
Thanks. I'm glad I'm not the only one. That seems to be a good solution. If I have to remind myself to pay every year, I will theoretically remember to cancel the policies in time. That way, I can just not pay the policy I don't want to continue and it should terminate automatically.

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willthrill81
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Re: Question Regarding Life Insurance

Post by willthrill81 » Mon Jul 16, 2018 10:25 am

Most level premium term life insurance policies will allow the insured to convert to annually renewable term (ART) at the end at the election of the insured but before the level premium term policy lapses, but I've never heard of a company doing that automatically. They'll likely send you some kind of notice that the conversion will occur before it actually does. But the above recommendation to go off of auto-pay seems to be the surest way to avoid policy conversion.

And I think that you were smart to get three policies. You recognize that the financial ramifications of your passing decline as you age. I'm hoping to be at least close to financially independent by the time that my 20 year policy ends.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Miriam2
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Re: Question Regarding Life Insurance

Post by Miriam2 » Mon Jul 16, 2018 11:57 am

SelfEmployed123 wrote: . . . I noticed in the policy documents that for each of the 3 policies, my premium are guaranteed for 10, 20, and 30 years. However, the premium for each policy will automatically increase after the term is up. In order to avoid that, it will be my responsibility to remember to call Company X three months in advance in order to cancel each policy and avoid the increase in premiums.
Call the insurance company and ask them to explain that to you. Ask them if this is automatic and what type of policy you would be automatically put into, and if so, how you can ensure this won't happen.

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