An insurance policy was bought. Problem was, on the 2nd year a loan was made on this policy NOT by policyhold

Question

er(PH). No complaint was made by PH. Instead just continued paying premiums for 10 years then stopped at/from the 11th year and so on. What happens now? What action should PH have done? Please advice. Thanks!

Answer 1

Policyholder - does that mean policy OWNER? The OWNER is the only person who can make a loan against the cash value. The weird part is, by the 2nd year, there isn't usually enough cash value in the policy to HAVE a loan.

So. The owner needs to find out who was impersonating them, and press charges against them. If there are no charges filed (like it was a spouse?) then they are presumed to have acted with the permission of the owner. After ten years, I think it's too late!

Please don't confuse the policy owner with the insured. They are sometimes, but not always, the same person. Policyholder is a property/casualty term, NOT a life insurance term.

Answer 2

I would recommend calling the customer service number and ask to speak to someone in the remittance dept. Depending upon the size of the policy, accumulation fund, and/or surrender value some money could have been available. Most likely what happened is that an APL, automatic premium loan, was made from either the cash value or accumulation fund to pay for some missed premium payments. Call ASAP, the loan will continue to grow (% will compound) and begin to eat the policy in later years if not taken care of now.

Answer 3

At this time, there is insufficient data to correctly answer this question. Who took out the loan? Is the policy still in force at this time.
What was the loan used for i.e. paid up insurance, policy riders?

The PH should have contacted the insurance company at the time to inquire about the loan, who made it, what for, etc., as this loan if not paid back would decrease the death benefit available to the beneficiary.
An inquiry should still be made.

Answer 4

Something is very wrong here. How could a loan be made without the consent of the policy holder? This doesn't add up. If you have the facts correct, then see an attorney - the insurance co. made a big mistake.