There are lots of great deals on the market currently if you are looking for term life insurance and critical illness cover. Term life insurance is cheaper than whole life insurance because it only covers you for an agreed term, whereas whole life insurance provides coverage for life. Plus, you do not get any return on investment with term life – but can reap good dividends with whole life coverage.

Critical Illness Cover is a Welcome Boost to a Life Insurance Policy

Term life insurance can be boosted by adding on critical illness cover to it and many life insurers can offer this benefit at a very cost effective rate. Critical illness insurance means you are insured against the main critical medical conditions and illnesses including cancer, heart attacks and kidney failure – insurers will publish a comprehensive list of illnesses they cover.

Make sure to carefully check out exactly what is covered, since you could get a nasty shock if it later turns out that e.g. the loss of one limb is not considered ‘critical’ by the insurer, whereas losing two e.g. legs is. Similarly, some insurance companies will only cover you for certain types of cancers – so check the terms very carefully. And speak to an advisor before taking out critical illness protection.

Take the time to Check Terms and Conditions of Life Policies

Many of the term life insurance policies being offered seem like really good deals – the policy premiums often look like excellent value as far as the policy cover amount. For example, a 40 year old non-smoker could arrange a $1 million dollar term policy to run over 30 years, and only pay around $2,500 per annum for it.

Use a top Rated Company

But –make sure you are buying a policy from a trusted and known source. If you don’t you run the risk of being shortchanged in the event of a claim. The best way to check out which life companies are reliable is via a broker or the internet.  Make sure you check out whether the life insurer is financially stable, too by looking up its rating on Standard & Poor’s or AM Best – and go with an insurer that has an A rating or better.

Use ‘Execution Only’ Brokers for Cheaper Life Insurance Deals

Also it’s worth noting that life insurance prices change on a daily basis – so it’s a case of ‘best buy brokers’ rather than ‘best buy insurers.’ Brokers take on the job of finding the lowest priced insurance companies – but – some brokers receive extremely large commissions from the insurance providers and this can have a big impact on how much you end up paying. The best way of getting round this is to utilize ‘execution only’ brokers – they give you the commission, and charge a small fee in return.

Other things to check are that life premiums are ‘guaranteed’ rather than ‘reviewable’ so that know exactly where you are when it comes to monthly payments. The most important thing to remember when you are trying to get the cheapest life insurance and critical illness deals is that it pays to get advice.

Source: Amy Perry, Allvoices.com Jan 2011, and MoneySavingExpert.com Oct 2010

photo credit: allaboutgeorge

Regulators are hot on the trail of insurance agents who dealt in ‘stranger-originated’ life insurance policies (known as STOLIs or Life Settlement plans) whereby seniors, often people in their 70′s, were encouraged to take out life insurance policies which were then sold on to investment companies; the investors took over the premiums, and would receive the lump sum paid out on the original policyholders death. Cash-strapped elderly clients were often attracted by the promise of an early payout from the sale of the policies.

Dubious Ethics Not an Issue for Insurance Agents or Investors

Regulators were startled by the huge rise in the number of ‘stranger-originated’ policies being sold in this way – between the years of 2004 and 2008 it became a billion-dollar industry. Although the agents often set up the deals at huge financial gain to themselves, it has to be noted that investors were happy to climb on the bandwagon.

Despite only narrowly skirting the “insurable interest law” which prohibits a third party owning an insurance policy when they could have no conceivable interest in the well-being of the person holding it – (far from it in fact), the practice was legal across quite a few states until recently.

A bar graph showing the growth in life settlement policies.

Insurers File Civil Actions against Agents for Life Settlement Policies

Insurance companies claim insurance agents misrepresented their clients’ assets when looking to purchase life insurance policies for them, with many committing acts of outright fraud when filling in the application forms. According to them, in an attempt to secure policies, over eager agents, fueled by greed, inflated the estimated wealth of their clients and fraudulently answered ‘no’ when asked if they had any plans to sell the policies on.

For this reason insurers such as AXA have voided many of these insurance policies, leaving investors with now-worthless investments – unsurprisingly they are also suing the brokers for compensation.

Wealthy Insurance Agent in Trouble for Life Plan Fraud

One insurance agent being pursued in a high profile case, is Steven M Brasner, accused of committing grand theft and fraud when acting as the middleman in securing $78 million worth of insurance policies, netting him over $2 million in commission.

An illustration of the life insurance securitization process, which is complicated and similar to mortgage securitization.

He is charged with lying on his clients’ application forms in order to secure life insurance policies for them.  As well as facing state prosecution Mr Brasner is also being pursued through the civil courts by the insurance companies and investors he dealt with.  Mr Brasner is believed to have inflated his client’s net worth sometimes by up to six times in order to secure business. Steven Brasner is just one among many agents who are being pursued – there are over 200 civil lawsuits pending, filed by insurers. Judge John Meyer noted that the level of fraud was ‘astounding.’

Mr Brasner has declared himself innocent of all charges. He is quoted as saying that the companies he dealt with such as the investment group G111 Accumulation Trust (part of Deutsche Bank) were culpable and ‘had the expertise’ to ‘conduct due diligence’ prior to buying ownership risks.

More Information

See the New York Times article on Life Settlement Securitization here

photo credit: VoisineN