Many of us rely on health and life insurance to protect ourselves and our families. Most of us assume it'll be there when we need it. But will it?
Two stories from late 2010 show just that you may not actually have the insurance coverage you think you have - or even pay for.
A New York mother and widow can't collect over $2 million on her husband's life insurance policies. Instead, her husband's mistress may collect $500,000 on a policy the widow didn't know about.
The widow's suing Prudential and its agent for not honoring policies naming her as the beneficiary.
In a California lawsuit, prosecutors claim health insurance giant WellPoint is purposely canceling health insurance policies held by women with breast cancer.
It also claims the insurance company issued false and misleading press releases about its cancellation procedures and how they're in line with the new healthcare law.
People on both sides of insurance policies have responsibilities, or at least things they should do, to make sure everything is in place and proper working order.
For instance, when it comes to life insurance, agents usually owe their customers a fiduciary duty. That means they have to look out for their customers' best interests.
In the New York case, the widow argues the agent broke that duty. He purposely let her policies lapse, kept the premiums she paid on them, and tried to cover it all up. He was in on the husband's scam to take care of the mistress. If true, the agent broke the law.
Of course, the widow should have done some investigating. When, as she claims, she got "mixed messages" about which policies were in force, she should have contacted the insurance company for information. You can certainly go around your agent.
Insurance companies have to be careful about canceling policies when non-payment or policy lapse isn't at issue. The California case is a good example. Generally, insurance companies can't rescind or cancel a policy unless you lie on the insurance application.
Also, in some states, policies can't be canceled if the insured has, or later develops, certain physical or mental health conditions.
And, as of late September 2010, companies can't take back or cancel coverage to employees' children who have pre-existing conditions. In 2014, companies won't be able to cancel or refuse coverage to anyone with a pre-existing condition, such as the women in California.
What You Can Do?
Be proactive and make sure you have what you need:
- Review your insurance policies at least once a year. Call your agent and the insurance company itself and make sure you have what you think you have
- When possible, phone your insurance company before you have any medical treatment and make sure it's covered. If you're told it's not, ask for a written explanation of why
- Be careful changing beneficiaries in life insurance policies. Sometimes it isn't allowed without the original beneficiary's permission. In community property states, you can't do it unless your spouse agrees to the change
- Pay your premiums! If you have trouble remembering to write a check, arrange for automatic withdrawals from your bank account or credit card payments
Insurance is important. Don't assume it's there. Make sure you have it when you actually need it.
Questions for Your Attorney
- Do I need my spouse's permission to take out a life insurance policy in her name?
- What should we do about life insurance policies if we're getting a divorce?
- Can an insurance company cancel my healthcare coverage right now because of a pre-existing condition?