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Life Insurance Horror Stories

hsi-4While the insurance industry is full of happy stories about families receiving funds from policies when they needed them most, many life insurance horror stories also exist. However, most of these negative experiences are wholly preventable as the following examples illustrate.

Amber was in her mid-twenties when her parents were killed in an auto accident only a few miles from their home. When she was growing up, she knew her parents were covered by life insurance policies so she assumed the funds from those policies would cover the funeral costs and other bills her parents left behind.

What she did not know was that her parents’ life insurance had been a benefit provided through her father’s employer. When he switched jobs five years earlier, he had lost that insurance coverage and so had his wife. Amber had to scrap together the money for the funeral.

Amber’s experience illustrates a common situation many families face. They rely on life insurance provided through their employer instead of purchasing a separate policy. Employer-provided coverage is typically cheap and does provide peace of mind but does not transfer when a person changes jobs, loses a job, or retires. Having a separate policy can provide stable coverage that doesn’t go away when an employer does.

Jeff experienced a similar issue when his stepfather died at the age of 69 following a prolonged illness. His stepfather had spent months in the hospital before finally passing away. When Jeff went to make funeral arrangements, the funeral director asked him about life insurance coverage so Jeff searched through his stepfather’s belongings and found a term life policy valued at $50,000.

But when Jeff filed the claim, he found out the policy had been terminated for non-payment. His stepfather had been making regular monthly payments on the policy until he started getting sick and ended up hospitalized. When the payments stopped, the coverage stopped. Jeff was left to cover all of the expenses out-of-pocket.

On the positive side, Jeff did learn from his experience. He set up automatic payments for his life insurance premiums so the money would be withdrawn from his bank account each month. So if he was ever unable to physically make the payment, his coverage wouldn’t lapse and leave his loved ones without financial protection.

No one wants to experience these life insurance horror stories or ones like it for themselves. Taking precautions, such as automated premium payments and non-employer provided policies, can ensure the coverage is available when it is needed.

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