How Life Insurance Companies Take Advantage Of Policyholders

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Aug 5, 2019

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Life insurance companies are often in the news about their bad faith insurance tactics and how they take advantage of policyholders or beneficiaries who they know won’t fight back or simply cannot. Our legal expert provides details on some of the ways insurers take advantage of life insurance policyholders and life insurance beneficiaries regarding purchasing annuities, ruling a death accidental, pressuring insureds or beneficiaries into settling claims and temporary insurance.

Attorney Bob Scott Talks About Life Insurance Bad Faith

Bob Scott, a California attorney and partner with the Advocate Law Group, provided the following details:

  • Annuities. Life insurance company agents often try to sell elderly clients annuities which are not suitable for them or sell them more life insurance than they would ever need at their age. I’ve seen cases where people in their 70’s have been persuaded to buy annuities that don’t start for five years. It’s simply unbelievable behavior on the part of insurers – and can border on criminal conduct.
  • Accidental death. You always have issues of whether a death was accidental or not with life insurance policies because in many cases the policy is all accidental death or has a life component where the two year contestable provision has passed and the insurer has to pay the base amount. However, if there’s an additional accidental death component associated with the policy, they may not pay it. tt

    In fact, I recently saw a case just like that. An elderly woman lived alone in the northern part of the United States. During the winter, she fell in her kitchen, couldn’t get up to turn the heat on and literally froze to death. Believe it or not, the insurance company took the position that the death was not accidental!

  • Insurers take advantage by settlement. Life insurance companies often try to take advantage of policyholders and beneficiaries by trying to settle a $100,000 incontestable policy for $50,000! If the policy is incontestable, they simply can’t do that. It’s almost as bad as denying the claim altogether. Their taking advantage of the person and the situation and it’s just outrageous. I’ve even seen them do it with smaller policies in the $10,000 to $15,000 range as they don’t seem to care where they make the money.
  • Temporary insurance. Another issue involves temporary life insurance when you fill out an application, pay the premium right up front and the policy is delivered to you in a couple months after it goes through underwriting. However, during that time, the person’s health may change. They get diagnosed with cancer, there’s some other issue about their condition or something bad happens during the contestable period. Life insurance companies try to take advantage of policyholders in these types of situations as well.

You Can Fight Bad Faith Life Insurance Practices

If your life insurance company has treated you in bad faith, it’s important to understand that you can fight back by contacting an experienced bad faith insurance lawyer who knows how the insurance industry works and the bad faith tactics often employed simply to increase profits – at the expense of policyholders.

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