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Life Insurance -
New conditions for senior life insurance |
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A new law has been passed in Ohio with will add even more barriers for those involved with senior life insurance policies when it comes to making a profit as a result of older individuals deaths.
The governor signed a legislation on Wednesday which will make it far more difficult to claim life insurance on an older person you are a stranger. Stranger originated life insurance is generally a situation whereby investors convince seniors as well as those with lower life expectancies to buy life insurance policies, the result of course being, that when that individual passes away, the investor can then collect whatever money is owed.
"It's a pretty grisly type of transaction where they are literally betting against a human's life," said Jay Hottinger, R-Newark, a state representative who has helped with the evolvement of the legislation in question.
Hottinger also mentioned that investors are more than likely to package policies and sell them to any third parties they can convince.
The director of communications for the Ohio Department of Insurance, Carly Glick , told of how the department has actually only received a single complaint but believes many more will follow it unless this legislation is put into action.
"This is a pre-emptive strike. We are not yet seeing the problem," Glick said. "It may be ... people may not know what they've gotten into just yet."
The problem was first noticed in the 1980s where investors would seek out individuals who had been diagnosed with the AIDS virus and would then convince them to get life insurance, but it was not properly dealt with.
The negative effects of these agreements do not bode well for seniors on any level. When you allow another person to buy a costly life insurance policy, you run the risk of maxing out the amount you are allocated anyway, meaning you may not be able to afford life insurance at a later date.
The elderly individuals involved in such scams are generally offered gifts or special deals to seal the deal of allowing a third party to purchase life insurance under their names, but such gifts can lead to the sudden appearance of tax.
The new legislation firstly describes exactly what a stranger-originated policy is, meaning there is no longer any grey area where things are not fully explained, making sure pensioners know exactly what they are binding themselves to. It also allows for 60 days worth of possible dismissal of the contract altogether as well as giving the Department of Insurance and the insurance commissioner more control and ability to keep track of the whole situation.
All these rules however do not prohibit individuals from selling their life insurance plans if they want to.
“The key difference is where is the money coming from," Hottinger said. "You can sell your policy to somebody but (these policies are) purchased without your money."
According to Hottinger worries on the subject were brought to light by the National Conference of Insurance Legislators and as a result around 20 states have now decided they need to take the same kind of actions themselves. Ohio's legislation may well be a plan of action which other states can now base themselves on to achieve the same level of fairness for their elderly and sick.
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