OK, in no particular order.
The wild life of Reseda is the name of a mythical insurance company. Life insurance companies have more money than OG. Their assets can easily run into the billions of dollars. So the WLofR having assets of $1.75 isn’t much. (buck is slang for one dollar) The point here is that a small policy with a large company won’t attract near the attention that a large policy will, or what a large policy with a small company will.
Adjusting the payout. In a life insurance contract there is a clause called miss-statement of age/sex. Basically if you tell the insurance company you were born in 1955, and when you die your death cert reveals that you were born in 1954, the contract will not be void. What will happen is the payout is adjusted for the premium paid would have purchased if you have given the correct info in the first place.
In this case, let’s say that $100,000 costs $50/month for a non smoker, and $100/month for a smoker. You tell your insurance company that you don’t smoke, when if fact you do. You die in the contestable period of a smoking related cause and an investigation revels that you smoked like a fricken chimney. Rather than voiding the policy, the company might offer to rewrite the policy for what $50 would have bought at the time ($50,000) cut a check to the beneficiaries and be done with it. While this might make them seem magnanimous it is actually a smart move if it keeps them out of court. Voiding the policy will almost assuredly bring a court case, and the costs associated with that.
Incontestable means just what it says. If I won the lotto tomorrow, and took up SCUBA diving, auto racing, and bought an airplane, the insurance company cannot change my rate.* Hell, I could take my winnings to Vegas and use it all on cheap hookers and blow, and the company would not care. As long as the premiums are paid, the insurance stays in force. This is a fairly common misconception that the life insurance company cares about what you do. They don’t. They don’t care about any one individual; they only care about what large groups of similar people do. If you are looking at a large enough group, if one of them moves to Vegas and goes the hooker and blow route, another member is entering the monastery.
So how would they find out? The death certificate would be the starting place. If that reveled something that looked odd (say lung cancer) and they wished to contest it, they would look at your medical records. You sign a medical release when you buy life insurance that gives them access to your medical records. If you medical records show that you are a long time smoker… well let’s say they now have the smoking gun, if you get my drift.
It was the late 70’s I was working as an agent for a large insurance company. I was in the office one day doing desk duty (assigned to assist anyone that called in or walked in). I got a call that Mr. Smith had died. It was his wife (beneficiary) that called. Mr. Smith had just applied for a $10,000 policy. The agent that sold the policy had been on disability for about 6 months.** If fact the policy had been issued and was sitting in our office waiting for the agent that wrote it to deliver it. Now the deal is that if a premium is paid with the application, the insurance is in force from that moment.*** I checked and the agent had deposited the premium payment with the application. Cool, the insurance is in force.
So far all of this is completely normal. I must admit first year claims are very rare, and claims before the policy is delivered are very very rare, but they happen.
So I make an appointment to fill out the paperwork. It turns out that Mr. Smith was driving home, and someone in another car gave him lead poisoning via a 9mm. I filled out the paper work, got a copy of the death cert and the police report. I asked for the receipt from the application (which is the temporary policy). Mrs. Smith came back with a disability income receipt. WTF? Did Mr. Smith apply for more than one policy? No just life insurance. The receipt is attached to the application, so if the agent had an app they had a receipt to give out.
At this point my spider sense is starting to tingle. So I casually mention, agent Jones is a very nice person, I like her a lot and hope she comes back off disability soon. “Oh yes, I have known her for years, and she is a wonderful lady.”
:eek: At this point my spider sense is on high alert, and the robot is screaming “Danger Will Robinson, Danger, Danger!” So I make nice and leave.
I get back to the office and read the police report, and death cert. I start looking at dates. The more I look, the more I go :dubious: . The app was signed on Friday, Smith was killed on Saturday evening, and the app was turned in on Monday. The deposit was paid in cash. (a little unusual)
Anyway I send in the claim that day, and composed a 7 page letter covering my concerns about this case. Since it appeared that the agent was involved, I had it typed by a friend that worked for another firm.**** I sent it off to the head of claims. The next day, I got the check for $10,000 from the claims dept. I held off delivering it, and the next day the head of claims called me.
We chatted for a while, and he complemented me on a good catch. He agreed with my points and asked that I not deliver the check.
Any an investigator from the NY home office shows up a few days later to interview me and several other people in the office about this. This guy looked like an ex-NY cop. Think Stacy Ketch as Mike Hammer.
Anyway when it was all said and done, the money was not paid out, and the premium was refunded.
The bummer of the deal is that the Banacek really is fiction.
*There may be some term policies that require you to re-qualify from time to time. The company may be able to re-rate you at those times. It has been over 25 years since I was in the business, and there have been many changes since then.
** Agents were allowed to write policies while on disability if they wished. Not uncommon.
*** For accidental death, for other causes (medical) it would be in force after the insured passed a physical. Since this size policy did not require a physical, it was in force from when the app was signed.
****It’s not paranoia if they really are out to get you.