Pay attention to your premium notices

Do Insurance Companies have an obligation to send premium notices? According to some insurance companies, premium notices are considered a courtesy rather than a contractual requirement. This was the subject of a recent Federal District Court Case in South Carolina (Wactor v. Jackson National Life Ins. Co., No. 8:11–3167–TMC (D.S.C. July 10, 2013).

The facts of the case and the court decision were discussed in depth in an article titled: “Court: Lapsed life insurance is no life insurance” – which can be found by clicking here on the website. The major thing to note is that the court ruled that there was no notice provision in the life insurance policy, and it added that there were no statutory requirements in South Carolina regarding notice prior to the cancellation of a life insurance policy. 

In addition, the court found that Jackson National’s previous grant of a grace period to the Decedent did not mean that it had forfeited its right to cancel the life insurance policy for non-payment of future premiums. In particular, the court said that even if Jackson National had accepted late payments 22 times from the Decedent over the 19–year period of the policy, it was “undisputed that on those occasions, the Decedent paid the late premiums during the grace period” and that Jackson National had never allowed the Decedent to pay premiums after the grace period had lapsed.

Thus, the insurer had done “nothing that would have created a reasonable expectation of insurance coverage past the expiration of the grace periods,” and Jackson National’s prior conduct of accepting late premiums during a grace period could not “in any way” be construed as a waiver or forfeiture by Jackson National from canceling the policy for non-payment of premiums after a subsequent grace period had lapsed. 

The court next ruled against Ms. Wactor’s bad faith claim, finding nothing to suggest that Jackson National had acted in an unreasonable manner in denying coverage. According to the court, based on the non-payment of the premiums and the lapse of the policy, Jackson National “had reasonable grounds for denying this claim.” 

Finally, the court found nothing in the record to suggest that Jackson National had acted in an unreasonable manner in denying coverage or in its handling of this claim, observing that it was “undisputed” that the premiums had not been paid and the policy had lapsed for nonpayment of the premiums. “Jackson National had a reasonable ground for its actions,” the court concluded, and “no rational trier of fact could find that Jackson National acted unreasonably in its handling of this claim.”

The bottom line is that premium payments need to paid on time whether or not a premium notice is received. It is a good idea to have your estate planning set up so that in the event you are unable to manage your affairs, that whoever steps in to manage your affairs is aware of your insurance policies and can make your premium payments.

To find out more about estate planning visit the American Bar Association’s- Estate Planning Frequently Questions (FAQ’s) (click here)- – the American Bar Association also has a Consumers’ Guide to Legal Help (click here) where you can find resources for finding an attorney.

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