What You Should Know About Life Insurance Checkbook Cases

Most people who purchase life insurance expect that their insurance company will make a profit off of premiums paid for the life insurance coverage. But, most people don’t expect that the insurance company will try to make a profit off of the death benefit proceeds when it comes time to pay on a life insurance policy. That is exactly what most life insurance companies do.

When it comes time for the life insurance company to pay a death benefit, you might expect that you will receive a check in the mail. However, most life insurance companies will send you a “checkbook” instead of a check. You will be told that your money – and it is your money – is earning a “competitive” interest rate, that it is safe, and that it is sitting in an “account” just waiting for you to withdraw using one of the convenient checks you just received. All of this – you are told – was set up just so that you don’t have to deal with these financial issues while dealing with the loss of a loved one. You might even be told that your money is in a “money market” account. It’s not.

Life insurance companies set up these “checkbook” accounts to hold onto your money for just a little while longer. This stops the flow of money “out the back door” of the insurance company.

There are many legal problems with the insurance company handling your money this way but, most important –

• the insurance company is profiting off of your money without telling you
• the insurance company hasn’t yet paid your death benefit, because the  money is still sitting in the insurance company’s account
• your money is not in a “money market” account as you might be told
• your money is not FDIC insured

There have been a number of recent stories in the media which call into question the use of “checkbooks” by life insurance companies:

Fallen Soldiers' Families Denied Cash as Insurers Profit
U.S. Insurance Regulators Issue Consumer Alert on Death Benefits
Kentucky Prohibits Insurers From Retaining Survivors' Cash Without Consent
Obama Cabinet No-Shows for Veterans Panel Spring to Life on Death Benefit
Congressional Panel Investigates Veterans Insurance
Lawmakers Question Value of Insurer Safety Net to Beneficiaries

The life insurance industry has geared-up recently to defend the use of these “checkbooks.”  In fact, the American Council of Life Insurers recently issued “Talking Points” to correct what it considers “misinformation and sensationalist reporting” on the issue.  Click here to read these “Talking Points” compared to what every beneficiary should know about “checkbooks.”

Long before this practice was an issue in the media, the life insurance lawyers of Parry, Deering, Futscher & Sparks, PSC filed several lawsuits challenging this practice.

Trust Us To Help

If you or a loved one has been the victim of a deceptive scheme by a company, do not hesitate to contact Parry, Deering, Futscher & Sparks, PSC online or in Kentucky at (859)291-9000. Our nationwide consumer lawyers also serve as valuable co-counsel to referring attorneys.