Life Insurance only paid partial amount?

[LizardsandLemons]

Hello There,

I am wondering if anyone knows of any reason why a life insurance company would not pay out the full amount to a beneficiary?

My father tragically passed in October 2018. He had a stroke out of nowhere 11 months prior and rapidly declined. We were shocked to find out that he had a term life insurance policy of 1,000,000 dollars. He paid yearly, so the policy was fully paid up until February 2019 when the next bill was scheduled to come in the mail.

On the forms that we have, the most recent dated from July, it clearly states that my brother receives 33 percent, myself 33 percent, and my aunt 34 percent. It says "natural causes" on his death certificate. He was sent a yearly summary of his policy back in December 2017 that shows the same breakdown and states the value of the policy to be 1,000,000 dollars. He could not have changed the policy since then because he was so terribly compromised from the stroke that he physically could not have done it: he was hospitalized at the time, hallucinating and unable to care for himself in the most basic ways.

We sent in the death certificates and the paperwork. My brother received a check in the mail this morning for 200,000 instead of 333,000 and we are completely baffled as to why. We are going to try again tomorrow but so far the company has been giving us the run around.

It probably sounds like we are being greedy but the cost of his care has been astronomical. We have personally accrued debt in the last year. It's been such a horrible process for us: his insurance did not cover the cost of his care: we had to liquidate his assets to get him on medicaid, but could not do that for a prolonged period of time because we needed to file for legal guardianship. We had to hire a lawyer and a medicaid advocate, and my brother and I both live out of state. We also have come to find that he had quite a bit of debt that he was fighting: some from the IRS and some from worker's comp. He was only 63. He made no preparations, he never thought he would die so young. he would have been horrified to know that his house, his entire bank account, went to his medical bills. He always thought his insurance would cover any illness he might have. His will states very plainly that he would like my brother and I to receive all of his assets, his house that he built that he was so proud of, everything. We never told him there was nothing left. It upsets me to think that yet another thing he tried to do for us isn't going to work out the way that he planned.

Is there any reason that 40 percent of a pay out would be withheld without any notice or explanation?

Hopefully they will give us some kind of answer soon!

 

[cbg]

When did he initially purchase the policy?

 

[LizardsandLemons]

Thanks for replying! He purchased the policy in July of 2002 and has paid on-time ever since.

 

[cbg]

Okay, I had a thought about it but if he's had the policy for that long it's not what I was thinking. Do you have a copy of the policy? The full policy?

 

[cbg]

Also, is this privately purchased or through his employer?

 

[adjusterjack]

Condolences.

Is there any reason that 40 percent of a pay out would be withheld without any notice or explanation?

Have you called the claims department to ask why? You're a beneficiary listed on the policy. Somebody there will talk to you.

By the way, life insurance proceeds go to the beneficiaries outside of the estate. The proceeds do not have to be used to pay your father's debts.

 

[LizardsandLemons]

Also, is this privately purchased or through his employer?

It was a private policy as far as we can tell. You will have to forgive my general ignorance, apologies in advance!

We do not have a copy of the original policy, unfortunately.

What we have is a tall stack of statements and things. I'm going to try to figure out how to attach an image to show you: it basically lists the 3 beneficiaries, the face amount of 1,000,000 and the premium. We also have a longer statement with a breakdown of how the payments would change after the 20 year period.

Thank you for trying to help!

 

[LizardsandLemons]

Condolences.



Have you called the claims department to ask why? You're a beneficiary listed on the policy. Somebody there will talk to you.

By the way, life insurance proceeds go to the beneficiaries outside of the estate. The proceeds do not have to be used to pay your father's debts.

Ah that is good to know! We we're so focused on the guardianship and medicaid that we we're completely unprepared to deal with the life insurance... As fate would have it, the courts finally granted us guardianship 3 days before he passed.

 

[cbg]

My other thought would only have been applicable if it were employer based. When an employee pays for part of their insurance and they pay pre-tax, the benefits are taxable; if they pay after-tax, the benefits are not taxable. However, if it was a private policy, he's almost certainly paying with after-tax dollars so it's probably not taxes. And my first thought was that some policies provide for a limited payout, or even no payout, in the first two years. But it doesn't appear either of those are the case.

I think the only way you're going to find out is to ask. You can come back and run the answer through us if it doesn't sound right to you.

 

[PayrollHRGuy]

Another thought. Is it possible that there were multiple beneficiaries? In other words, did someone or multiple someones get the remaining proceeds?

But I agree with @adjusterjack contact the claims department of the carrier.

 

[LizardsandLemons]

Another thought. Is it possible that there were multiple beneficiaries? In other words, did someone or multiple someones get the remaining proceeds?

But I agree with @adjusterjack contact the claims department of the carrier.

Thank you for these suggestions, it is so frustrating!

So we tried contacting them again and this is what they are telling my brother: they say that he has no right to see a copy of the policy or get any informatiom unless he is named executor. This is despite the fact that he was the financial guardian/POA. He also IS named executor in the will, but he has not been named by the courts yet- we are ironically delayed by the guardianship: we need to file a final report and it must be reviewed and approved by the court.

What they ARE telling him is only that "this is your share." They will not explicitly confirm the value of the policy but they say that they are not contesting the face value, just the percentages. When he says that we have a huge stack of statements going back years that clearly break down the distribution evenly between the same 3 people, including the most recent statement in July, she says it must be "an error."

She says she "cannot speak to that" when he asked whether cashing the check would mean surrending ability to contest the payout, or how long we have to contest. She only says that the check expires in 6 months.

What information are we actually entitled to?

 

[PayrollHRGuy]

The POA died with your father. When probate is started and he is named executor the insurance company will talk to him and they told you that.

Did the billing really name the beneficiaries, I've never seen that on a Life Insurance bill.

You shouldn't take legal advice from a claims rep at an insurance agent anyway.

 

[adjusterjack]

Each beneficiary is entitled to know how much (dollar amount) he or she is getting. That's it.

For further information, your brother (who was nominated as executor in the will) is going to have to get his probate court papers that will authorize him to act on behalf of the estate.

Guardianship and POA have no meaning after a person dies.

An appointment as representative of the estate is what is required. Without that you are likely to find that other entities (banks, lenders, etc) won't talk to you either.

By the way, with a career in the insurance industry behind me, I couldn't even begin to speculate why the life insurance company paid out the way it did.

 

[LizardsandLemons]

Hahah, you are right we shouldn't! And it makes sense that he wouldn't be POA anymore, just frustrating- honestly because we are already frustrated from the past year.

For the medicaid application we had to request statements from the life insurance policy to confirm that the policy had no cash surrender value. So they sent us that information. It names the 3 beneficiaries with the percentages next to their names, and it lists the beneficiaries of the policy along with his name, address, category (male nonsmoker) etc. It is brief, and of course not legally binding.

 

[LizardsandLemons]

Each beneficiary is entitled to know how much (dollar amount) he or she is getting. That's it.

For further information, your brother (who was nominated as executor in the will) is going to have to get his probate court papers that will authorize him to act on behalf of the estate.

Guardianship and POA have no meaning after a person dies.

An appointment as representative of the estate is what is required. Without that you are likely to find that other entities (banks, lenders, etc) won't talk to you either.

By the way, with a career in the insurance industry behind me, I couldn't even begin to speculate why the life insurance company paid out the way it did.

That all makes sense, thank you for taking the time to read this!

It sounds like we just have to wait. The court lost some of our paperwork from the temporary guardianship report that was sent (we have all of the proof that it was sent and multiple copies mailed to multiple places, so they are not contesting that the error was theirs), so we cannot even attempt to file a final guardianship report until January, as this has bumped everything back in the process. From what I understand- although I am in the process of verifying this- is that we cannot proceed with the estate until the final guardianship report is filed and approved. Because we are both guardians and beneficiaries, our guardianship must be reviewed before anything else is settled.

If we deposit the check now, and it turns out that they are in error once we have policy in hand months later, can we still go back and contest the error? Should we ask our lawyer before we do anything (who has not been very helpful in the past I am afraid, she is very sweet but it takes her sometimes weeks to get back to us)? Or is this situation actually very straight forward: we deposit the checks and then if there turns out to be an error we simply go back to them with proof in hand?

It's honestly just very disconcerting because all of hi documents that he has either split up things evenly between me, my aunt and my brother or me and my brother. That is it. It is very very clear. He would never give one of us more than another or leave something to a random person. The rep did say that the policy had not been changed since 2002 when he originally purchased it. He has similar documents drafted during that time that follow the same logic as everything else. He wouldn't have divided it any other way, we knew him.

I know that everyone says this, right?

It sounds like based on the limited information I have that you have all told me all that can be speculated- I wont waste your time anymore! I just can't shake that feeling that they are making a mistake and that there is nothing we can do about it- and that once we know the truth it will be too late. But it seems that this is just the nature of the situation and we should probably check in with the lawyer who helped us with the medicaid and guardianship- and wait.

Thank you all, I deeply appreciate the advice and insight!