Finding mother’s insurance company?

Dear Dave,

My mother-in-law purchased a single-premium insurance policy back in 1977 for $21,000. She passed away last year and I just found this in a drawer. I tried to contact the insurance company in Philadelphia, Penn. by calling the phone number listed on the policy, but the phone number is for a different company. How do I find current contact information for this company?

I tried calling the Pennsylvania Department of Insurance, but was put on hold for so long I finally just hung up.

Grand Rapids, Mich.

Dear Sue,

That would be the correct place to call and get their contact information. Insurance is regulated state-by-state. In order to sell insurance in a particular state, the insurance company must register with that state. So, the Pennsylvania state insurance commissioner will have a record of what has happened to this company – including if they changed names, merged with another company, moved or simply went out of business. You may also write to American Counsel of Life Insurance, Attn: Missing Policy Service, P O Box 615, Riva, MD 21140 and, for a small fee, they will contact the top 100 insurance companies to find out which one issued the policy.

Just as a side note, if the company has gone out of business, you will probably still be able to collect on the insurance. Each state manages a risk pool into which all of the insurance companies in that state pay. If a company goes out of business, then the claims are paid out from that risk pool.


Why does Dave not like whole life insurance?

Dear Dave,

I’ve been an advocate of whole life insurance policies and have had one for several years, but I’ve read that you think these are a bad deal compared to term insurance.

I’ve been viewing my whole life policy as death insurance and a savings plan all rolled into one product. I’ve borrowed money from it in the past at a low interest rate. I just don’t feel as if I’m throwing my money away. I’ve got about $3,000 cash value in it right now and my beneficiary would get $50,000 if I die. With a term insurance policy, I don’t have the option of borrowing against it and there is no return on my money except when I die.

Reggie I
Flint, Mich.

Dear Reggie,

Have you noticed that your car insurance doesn’t have a savings plan built into it? You get no money from that insurance unless you wreck your car. Your health insurance doesn’t have cash value plan in it either. You get no money from that insurance policy unless you get sick.

Insurance, in its purest form, is transferring to someone else the risk that you cannot afford to take. I cannot afford to take the risk that I’ll need a triple bypass surgery that will cost $50,000-$100,000. Therefore, I carry health insurance and the risk of incurring those costs is transferred to the health insurer. Whole life policies, as you said, combine an insurance policy with a savings program.

You and I know that insurance companies, no matter what kind of insurance they provide, are in business to make money. If they’re offering you both a death policy and a savings program, you’re paying a fee for both products.

Recently, we conducted a study that I’ll use as an example. We asked eight of the top insurance companies for their best whole life rates. If a 30-year-old pays $100 a month in whole life insurance policy premiums, he could buy a policy worth about $125,000, on average. Some of the $100 goes toward the insurance policy and some of it funds a savings account. Then we looked at how much that same 30-year-old could buy if he got a 20-year level term insurance policy worth $125,000. The cost is about $8 a month. So, $92 a month funds the savings plan in the whole life policy. Studies tell us that whole life policies pay between 1.2% and 2.3% interest on the savings after a couple of years. The first year or two they actually pay no interest. Keep in mind, inflation averages 4%, so you’re losing money every year if you only average 2% interest.

There’s another problem with whole life insurance, in addition to paying ten times more for it than term insurance. You’ve got $3,000 cash value in the savings portion of your policy. If you die tomorrow, they’ll pay your beneficiary the insured amount, but the insurance company gets to keep your $3,000 savings.

So, your investment program for your $92 a month is zero return for the first few years, 1%-2% return after that – which doesn’t keep up with inflation – and when you die, they keep your money. You could invest that $92 a month in a good mutual fund and average a 12% return – which is what the insurance company is doing. They give you 1%-2% and keep the other 10%.

There is a valid concern with term insurance – that it will get more expensive as you age. If your 20-year level term policy comes up for renewal when you’re 50, it’s going to be pretty expensive. That is why I also push people to get out of debt and invest in a good Roth IRA. If you follow that plan, you can have $750,000 saved up in your Roth IRA by the time your term renewal comes up. With that much money set aside, zero debt and a paid-for house, your family is secure because you’ve become self-insured.


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