How to Recover Money from “Junk” Insurance Policies?

Recovering money from “junk” insurance policies can be challenging. Policy owners are often stuck with policies they never want in the first place. Junk insurance is a secondary market life insurance policy purchased at a discounted rate. It is purchased by another individual who ended up dying shortly after, leaving their beneficiaries to deal with the policy’s total cost. Junk insurance is also called “dead peasant life insurance”. When a policy owner dies in debt, it’s referred to as “zombie debt,” according to CNN Money. If you want to explore your knowledge about Loan Protection Insurance check this out.

What exactly is Junk Insurance?

Junk policies are most acquired from retirement planning seminars conducted by central banks and insurance companies. These policies are typically sold to small business owners and self-employed individuals. However, anyone can be targeted for such schemes.

Junk insurance falls into whole life insurance policies. It consists of both a death benefit and savings component that accrues interest over time. This insurance may only have a term lasting several years rather than the typical 30-year time frame with traditional term life plans. Junk policies often carry high annual fees and very high monthly premiums compared to more standard forms of life insurance coverage.

Consumer Credit Insurance:

Junk insurance is also known as credit-based life insurance or consumer credit insurance. The reason is it’s usually sold to people who have a low credit score. Because of this, it can be considered a type of predatory lending and should be avoided at all costs.

Guaranteed Asset Protection:

Another form of junk insurance is a guaranteed asset protection plan. Banks and major retail stores sell this type of plan. This type of policy typically only pays the policy owner a percentage of money lost from certain types of theft, such as home invasion or robbery.

Limited-Pay Life Insurance:

Limited pay life insurance policies are another common form of junk insurance. This type of policy pays out a benefit that’s only available to the insured for a limited time. The time is for 5 or 10 years, meaning that there is no death benefit left once it has expired.

How Can You Tell If You Paid For Junk Insurance?

If you find yourself questioning whether the life insurance policy you own is junk, there are a few things to consider. First and foremost, do you feel you were manipulated into buying the policy, either by high-pressure sales tactics or by deceptive advertising? If so, your policy might very well be considered junk.

 

What Can You Do If You Believe Your Life Insurance Policy Is Junk?

If you believe your life insurance policy might be junk, there are several steps you can take to protect yourself and others who might be affected.

  • First, contact the Better Business Bureau (BBB) in your area and ask for help resolving your complaint. Most insurance companies will not acknowledge that they sell junk policies. It’s essential to get an outside perspective when trying to resolve the situation.
  • Another option is to hire a consumer advocacy law firm or attorney. If you cannot afford an attorney, consider contacting your state’s insurance department for assistance.
  • You should also file complaints with the Consumer Financial Protection Bureau (CFPB), the Office of Insurance Regulation, and any other appropriate agencies to get the word out about these types of policies.

Finally, contact your local media to spread awareness about junk insurance practices.