Life Insurance Contract Error

[mlycan]

What is the name of your state?VA

A life insurance contract was issued to me in 1998, and has been in force every since. It is a 20 year guaranteed term. The company recently discovered after my agent made an inquiry about the policy that they mistakenly issued the policy as FEMALE when I am a male. The agent mistakenly checked the FEMALE box on application, but the company processed my wife's application simultaneously and we were both listed as husband and wife for each other, so they really should have caught it. Now that they realized it, they said they must reissue the policy. The GRACIOUSLY said i don't have to pay back premiums but must pay new premiums from here forward. Under the terms of contract law, I believe I have no obligation to sign anything ammending the original contract and that there is nothing they can do to change my premium under the original contract they issued and i accepted. ANY ADVISE FROM ANYONE???

 

[ALawyer]

It is essential to read the exact language in the policy.

Rates are significantly lower on life insurance for females than males (except in states mandating "uni-sex rates" and on some employer-sponsored/provided plans). That's because, in general, insurance companies follow actuarial tables and the data shows women live longer than men.

Almost all companies' policies have provisions that provide for a scale down of the death benefit payable if there was a misstaement of age. Some have a similar provision if there is a misstatement of sex. The language of these clauses differs, and I can't hazard a guess on what your policy says, if anything.

All policies also have provisions that make them "incontestable" after 2 years -- so that the death benefit must be paid even if the insured made an intentional misstatement as to his health, which is really designed to prevent unscrupulous insurance companies from looking for a reason to deny a claim if the death occurs after enough time has passed.

As to what you "have to do" I really do not have the answer for you as it would depend on the contractual wording (if any) AND on the way the statutes and court rulings in your state have defined the law of "mistake".

As a matter of equity the insurance company should be paid going forward for the greater risk it is taking insuring you as a male, just as your electric utility should be paid more on future bills if it found out it had made an error in wiring your meter and its meter was slowing less usage than actual usage. Of course if you took the policy as its rates were lower than those of another company offering the same thing at the same time, then you have some equitable claim. On the other hand if you just can't pay the premium to cover the amount of coverage the company would readily scale back the face amount so you'd continue to pay the same thing but just get less coverage.

One more thing -- depending on the kind of policy you bought and when you bought it and your current health status and age, it may make sense to shop for a NEW policy. Rates on many policies have dropped. If, for example the policy is Term Life and 8 years have elapsed, you probably could get more coverage for less money by being re-underwritten today and buying a new policy if you qualify for one of the preferred rating classes many companies have. You may specifically want to consider a 10 or 20 or even 30 year Term Life Policy to replace the death benefit you seem about to lose.



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