My father recently passed away, and I talked to my mother about their life insurance policy. She kept saying the payout was between $100,000 and $150,000. She showed me a folder from “American Income Life Insurance,” so I contacted them. They told my mother over the phone that the payout was only about $7,000.
My parents have been paying into this policy for around 23 years at roughly $70 a month. They opened it when they were in their late 40s. I’m really confused. Did they get tricked? My mom was certain the payout would be over $100,000. How can it be so low?
It’s whole life insurance, which I’ve read can be a scam. Is my mom out of luck? I hope I’m missing something maybe the policy was transferred or something? She wants to use it to help pay for part of the funeral, and when the person on the phone told her the payout amount, she broke down in tears.
This sounds like a decreasing term policy. The premiums remain the same each year, but the coverage starts at $100,000 and decreases over time until a certain age.
There’s no way a $70 monthly premium for a policy taken out in someone’s late 40s could support a $150,000 permanent death benefit. They probably purchased a different type of policy, such as a decreasing term policy.
Many types of non-term life insurance include provisions that gradually reduce, and eventually eliminate, the death benefit as the insured ages into their 80s. They would have received annual reports from the insurance company detailing these changes.
Please take a look at the policy documents yourself. It seems like your parents might not have kept them for some reason, but the insurance company should be happy to email you a copy if you ask.
Whole life insurance itself isn’t a scam, but American Income Life (AIL) often doesn’t provide the best options. Typically, I see policies that include a larger term and a small whole life policy, which usually doesn’t meet the needed coverage, especially for people with underage kids, and they often cost too much.
I’m sorry you’re going through this. I recommend asking the company for the original contracts.
If it’s a whole life policy, it’s possible your father took out one or more loans against it over time. Any outstanding loans would be deducted from the death benefit if they weren’t repaid while he was alive.
What’s really shitty is that a lot of agents disguise massive (100k+) term policies as whole life policies to get the PI thinking they are guaranteed to leave the family six figures. But it’s hidden in the fine print that over time, the TERM policy reduces the face amount.
People are sort of blinded by the low premiums of a six figure policy, they jump on it and sign their name without reading all the fine print.
It’s horrible this happened to you, but I feel like that’s the case. The agent told your parents it’s 100k+, but didn’t go into detail on how the face amount reduces over time.
Sorry to hear about your father. As a former agent I can tell you 9/10 times people don’t know what they have. They always think it’s more. ail designs their policies with small whole life with larger 10 year term or decreasing term. So it’s likely the 7k had another term policy attached to it that may have ended. Some end at 65 or 70 or get cancelled due to price increase.
Term insurance provides temporary coverage for a specified period, and most people outlive their term policies. Whole life, on the other hand, offers permanent coverage. If your parents had both types of policies, they likely contributed more money for the whole life policy, which gave them larger coverage during the term. I’m guessing they had $7,000 in whole life coverage, while the larger amount was likely from a term policy that ended at age 65 or 70. Unfortunately, without seeing the actual policies, I can only speculate about what they purchased.