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Life Health > Life Insurance > Term Insurance

When Insurance Agents Lie to Your Clients: A Morality Tale

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There are a few things that really raise my ire. One of those is lying. Especially, if it's to one of my clients! Last week an interesting thing happened and I learned a valuable lesson in the process. Here's the story.

A few months ago I wrote an application for a term life insurance policy on a client. When the policy arrived it was at a higher premium than was expected. In fact, the savings was only $19 per year. At first blush, I was simply going to return the policy and recommend the client keep their existing coverage.

Earlier that day, the client had a discussion with their agent and was told that their current policy could be converted to a permanent policy 'at any time' and that it would be done 'automatically' in the event of a disability. The agent also said that the premium would be decreasing due to the dividends generated by the policy.

The "automatic" conversion didn't sound right and neither did the "conversion at any time," since the policy listed a final conversion date, well prior to the end of the term. Additionally, I had never heard of dividends on term insurance so I decided I'd better read the policy.

I saw nothing in the policy to substantiate the agent’s claims, but considered that I may have missed it. Therefore, I sought a second opinion. I faxed a copy of the policy to my master general agent (MGA). Within 30 minutes I received a phone call with the MGA’s comments.

The MGA said the policy was a two-year term with a 10 year rate guarantee and assured me that the premium would be increasing soon. The MGA also said the conversion could not happen after the final conversion date under any circumstance. On these points they were confident. On the issue of decreasing premiums, they couldn't be certain.

I spoke with the client and we decided to call the current carrier's home office to verify what the agent had said. The result? The conversion could not occur after the final conversion date under any circumstances (strike one)! Conversion was not automatic in the event of a disability. The client had to request it. (strike two)! The premiums were guaranteed to increase because there were no dividends on the policy, nor did they expect any in the future (strike three)!

I'll leave you with this. Never lie…you will eventually be found out! Always tell the truth and you'll never have to remember what you've said. A good reputation is more valuable than riches!

Have a great week!


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