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Court case highlights issues surrounding life insurance and elderly

By Maryalene LaPonsie on August 7th, 2013

Even if an individual suffers from diagnosed memory loss, life insurance premiums must be paid to keep a policy in effect. That's the lesson from a court case reported upon by industry website LifeHealthPro.

The case involved a policyholder with dementia who failed to make a final premium payment before his death. His widow argued unsuccessfully to receive the policy's death benefit in a situation that could happen to anyone who has an elderly relative.

No premium paid equals no life insurance

According to LifeHealthPro, Jackson National Life Insurance Co. was sued for failing to pay the death benefit of a man who had paid premiums on his policy for 19 years. However, in early 2010, the policyholder was diagnosed with mild dementia and missed his January quarterly premium payment.

In June 2010, his wife contacted Jackson National to inquire into whether premium payments had been made. She was informed the last payment was received in October 2009 and the policy had since been cancelled.

The policyholder died that same month, and the life insurance company declined to pay the death benefit. In response, the decedent's wife filed suit against Jackson National citing, among other charges, bad faith and breach of the duty of good faith and fair dealing.

However, the court ruled in favor of the insurer and noted Jackson National had properly notified the policyholder of the missed payment and provided a grace period in which the policy could be brought current.

Life insurance and the elderly

For those with elderly relatives, this case serves as a reminder to talk about financial matters before an individual becomes too ill to manage bills on their own.

Adult children may find it awkward or uncomfortable to discuss finances with their parents, but these conversations can be critical. Rather than asking for information that includes specific dollar amounts, children may find it easier to ask where they can find important documents in the case of an emergency. Older individuals should also be asked to designate a power of attorney to make decisions on their behalf should they become injured or ill.

In addition, families may want to consider setting up automatic payments for life insurance premiums and other recurring bills. Automatic withdraws can provide peace of mind for families who may be busy with caretaking or other duties.

Finally, individuals may want to check the specifics of their life insurance policy. Whole life plans build cash value over time. Some policies may allow that cash value to be used to cover premiums in the event of a missed payment.

While there are many ways to approach this issue, as this court case demonstrates, all families should have a plan to ensure life insurance remains in-force as their loved ones age.

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