On Its Face, the Policy Looks Outdated
Question: Last year I bought some expensive life insurance from a man I trusted. When the policy came, I thought there was a mistake. The policy was largely unrelated to what I had been told. I said I would return the policy for a refund of my large premium ($5,000), but they wouldn’t refund it. To my amazement, the law lets you return policies, after seeing them, only if the face amount is under $10,000--that’s right, $10,000! It must have been written during the Depression. I spent 6 hours preparing a fully documented complaint to the insurance commissioner, but they just told me to see a lawyer. I am a lawyer! The commissioner was worthless.
Please try to get that stupid $10,000 limit removed, and warn your readers to demand to see a policy before paying the premium!--R.G.
Answer: Yes, indeed, at least on the second advice: Read before paying the premium. But there’s another step before that, according to David Langenbacher, the Los Angeles-based chief of the underwriting service bureau for the state’s department of insurance. Before you even let the policy hit your hands, make sure that it contains a 10-day (minimum) “free-look” clause.
That $10,000 maximum refers to the fact that any life insurance policy with a face value no greater than that must contain the free-look provision--return it within 10 days of receipt and you can get your premium back.
And Langenbacher is in full agreement with you: That $10,000 maximum is, indeed, “hopelessly outdated. It goes back to the days when $10,000 in life insurance was a meaningful figure. Today, $100,000 would be much more reasonable, and someone in the Legislature really should propose a change in it.”
In spite of this, however, about 90% of the life policies written in California--regardless of the face amount--include the 10-day free-look clause anyway.
“About the only exceptions are some of the high-yielding universal-life policies or annuities.”
But, even though most policies carry the free-look provision, the consumer still has to be wary, Langenbacher warns. “Some agents will wait until 10 days after the policy is in effect before they’ll deliver it to the policyholder.”
What the law stipulates, though, is not 10 days after the effective date of the policy but 10 days after the policyholder has received it.
“This makes it imperative that--if the agent personally delivers the policy to you--you make him sign a dated receipt of its delivery. If it comes by mail, by all means save the envelope with the postmark,” Langenbacher warns. “Then, assuming that it does have the free-look provision, you should have no trouble getting your premium returned, as long as you can prove that you acted within 10 days of receipt. Send a copy of the agent’s receipt, or the postmarked envelope, back to the company demanding refund--and do this by certified mail, return receipt requested.”
In your case, according to the department of insurance records, it isn’t clear whether your policy had the free-look provision, because you didn’t move fast enough.
“Unfortunately,” Langenbacher adds, “even with the free-look clause, if you don’t act quickly, you’ve bought yourself a policy on the 11th day.”
Don’t sign anything . . . don’t pay anything . . . until you know, for sure, what you’re buying.
Campbell cannot answer mail personally but will respond in this column to consumer questions of general interest. Write to Consumer VIEWS, You section, The Times, Times Mirror Square, Los Angeles 90053.
