Beware the haunted life insurance policies!

With pumpkin spice lattes everywhere and overflowing grocery store candy aisles, it’s the perfect time to uncover the chilling truths lurking in the depths of some clients’ life insurance policies. Just like a haunted house, these policies can hide unwanted surprises that might come back to haunt you or your clients. Let’s explore some frightfully common problems that could turn your clients’ life insurance dreams into nightmares.

1. Phantom beneficiaries

Imagine this: clients purchase a life insurance policy to protect their spouse, children or business, but when the time comes to collect, the payout goes to an ex-spouse, a former business partner or a distant relative they haven’t spoken to in years. This ghastly scenario happens more often than you think. Proactively conducting annual reviews is not only important; reviews are critical to help ensure clients’ beneficiary designations are current and avoid spooky surprises, putting you in control of the situation and empowering you to protect your clients.

2. Vanishing coverage

Help clients avoid the terrifying moment of discovering their life insurance coverage has vanished due to missed payments or policy lapses by helping them set up automatic payments. Regularly reviewing policies and coverage needs is critical here as well.

3. Undead policies

Avoid zombie policies — or those that look alive but are essentially dead because they are no longer meeting clients’ needs or providing adequate coverage. Once again, annual client reviews are the solution to ensure policies align with current life situations and goals.

4. Mysterious fine print

The fine print in some life insurance policies can be as cryptic as ancient runes. Hidden clauses and exclusions can lead to denied claims, leaving clients’ beneficiaries in a bind. Always read the fine print carefully and explain any confusing terms to your clients so you and they understand what they have purchased, why they have purchased it and how it works.

5. Ghostly misrepresentation

Lying or omitting information on life insurance applications can haunt you and your clients. If an insurer discovers discrepancies, they can deny the claims, leaving loved ones without the intended financial support. Advise your clients to be honest when filling out applications to avoid this ghostly fate. As an example, clients may think that omitting occasional recreational drug use is the right course of action to get the large coverage amount they are looking for but having a policy claim denied for their family years down the road would be a heart-breaking and undesired outcome.

6. Curse of the wrong coverage

Choosing the wrong type of coverage can be a curse that haunts clients for years. Whether it’s term life when they needed whole life, insufficient coverage amounts, ignoring coverage for both spouses, or leaving ancillary products such as disability income or long-term care insurance out of the discussions, these mistakes can leave clients’ families financially vulnerable. This is where your value as a knowledgeable insurance professional is essential.

7. Poltergeists of policy loans

Taking out a loan against a life insurance policy can often be a good idea. Still, it can become a financial poltergeist if clients don’t fully understand the consequences and processes. Review the processes thoroughly so clients understand the impact of making or not making loan payments to death benefits and what lapsing means.

8. Specter of fraud

Fraudulent activities - such as forging a signature, fudging dates or lying about health conditions - can lead to denied claims and legal problems. These actions jeopardize policy benefits and tarnish both your clients’ and your reputation as a financial professional. Stay honest and transparent in your role and advise your clients to do the same.

9. Creepy cost increases

Certain policy types are designed to have premium costs creep up over time. Communicate these expected changes and policy terms clearly with your clients during the sales process and your annual reviews, making sure to discuss whether clients can continue to afford the coverage they have and what they need.

10. Eerie lack of communication

Clients’ failing to communicate life insurance plans with their beneficiaries can lead to confusion and disputes after they are gone. Guide them to ensure their loved ones know about the policies, where to find them, what steps to take to claim the benefits and how to contact you. Bridging the gap to the next generation can prevent eerie misunderstandings and create new client relationships and sales opportunities.

Addressing these common problems in advance and throughout the annual review process will ensure your clients find life insurance as a source of comfort rather than fear. And what better time than Halloween to look to minimize the spooky surprises?

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Marc Barnes is a sales director at Mutual Trust Life Insurance Solutions, the U.S. life insurance division for Pan-American Life Insurance Group. Contact him at [email protected].