Lake Charles, LA (KPLC) – Legal Corner answers viewer’s questions regarding civil matters.
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QUESTION: When our term life insurance came to an end, our company offered us a new term policy which we accepted. We noticed that our first bank drafts for the new premiums were $80.00 more a month than what was quoted. Our company is telling us that the original quote (that we accepted) was only an estimate and the higher premium will stand. Can they do that?
ANSWER: It can be frustrating to find out your life insurance policy premiums are higher than initially quoted. Life insurance companies often use what are termed “illustrations” when providing quotes to consumers. Whether specific terms in the illustration are guaranteed depends on how they are described. Make sure to check the fine print, as most illustrations will say that “actual results may be more or less favorable than those shown.” Regardless of what the initial illustration says, if a policy is issued other than as applied for, you should receive a revised basic illustration with a copy of your policy.
The premium or benefits quoted in the illustration can change for several reasons. It is possible that you have aged out of your current policy and are now of an age that makes the policy more expensive. The premiums are higher because the older you are, the more likely it is that the insurance company will have to pay out a death benefit. It is also possible that your health or hobbies changed in a way that makes the policy more of a risk for the insurance company. They will factor that risk into the premiums. This happened to me when I was applying for life insurance. After my application went through underwriting, my quoted premium increased $100 per year because I ride horses and scuba dive and the insurance company considers those risky activities.
So how can you protect yourself and what can you do next?
- Consider getting a local agent. That can be a valuable point of contact between you and the insurance company and can help you navigate policy terms.
- If the premium increase is more than you can handle, consider shopping around for other life insurance. You can always cancel your current policy if you find a better deal. As long as you keep paying the premium on the current policy, you can remain covered while you shop.
- If you believe that your insurance company has taken advantage of you or not complied with applicable laws, you can contact the Louisiana Department of Insurance (https://www.ldi.la.gov/consumers/resources-publications/consumer-services). They have an Office of Consumer Services that can assist you with questions or concerns regarding your policy (1-800-259-5300). They also have an online form to submit complaints.
QUESTION: My ex-husband and I agreed on how to divide his 401K. My ex is now telling me that I cannot get my share of the 401K money until I submit a Q.D.R.O. to his company. Why do I have to do this? Why can’t my ex-husband simply give me the money directly?”
ANSWER: When spouses are divorcing, they usually go through a process of property and debt division. During this process, the parties will sometimes come to an agreement on how certain assets and debts should be divided. If one of these assets is a certain type of retirement account, like a 401(k) or private pension plan, a Qualified Domestic Relations Order (QDRO) is required.
A QDRO is a legal order that requires a portion of a spouse’s retirement plan to be paid to an “alternate payee” who is usually the other spouse. A QDRO is required
because federal law does not allow the retirement plan administrator to automatically split up funds in certain types of retirement plans. A QDRO must comply with the Employee Retirement Income Security Act (ERISA), which was established by Congress to provide protections for beneficiaries and participants in retirement plans.
In some cases, your ex-spouse may be able to provide you with the amount you would have received from his or her retirement plan from another source (such as a savings account) and a QDRO can be avoided. However, you may wish to consult an accountant before electing that option. The beneficiary of a QDRO can usually elect to transfer or rollover their portion into another retirement account, which could provide valuable tax savings.
Typically, beneficiary spouses will contact their attorney to draft a QDRO document to have the funds transferred. Some retirement plans also have standardized QDRO forms. Once drafted, the QDRO is submitted to the retirement plan administrator for approval. After the plan administrator accepts it, the QDRO is submitted to the court and the transfer is finalized.
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