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Is your spouse secretly taking you off a life insurance policy?
It's not unusual for Virginia insurance agent Michelle Oliver to receive a phone call from a life insurance policyholder who wants to change beneficiaries, removing the name of a spouse, child or another close relative from their policy. Although Oliver counsels her clients to think carefully before making beneficiary changes, most people have already made up their minds by the time she receives a call.
"People do it all the time," she observes.
Often beneficiaries who are taken off policies are never told about the change, she says. When an insured person dies, the deceased's husband, wife or children often are shocked to learn that they will receive no life insurance money.
Eric L. Abramson, a financial advisor and insurance professional in Paramus, N.J., says a policy owner has the right to change beneficiaries at will, without notifying anyone.
Yes, send me the beneficiary form
"The owner usually is the insured," Abramson explains. "As the owner, you get to control the policy. You get to pay the premium. One of the very powerful things that you can do is -- with no permission from anyone else -- change the beneficiary."
As long as you have not designated any irrevocable beneficiaries or assigned an interest in your life insurance policy to someone else, you are allowed to change your beneficiary, says Abramson.
"If you are not happy with your spouse and think the long-term health and stability of your marriage isn't good, anytime you want to you can call up your agent and say, 'Please send me a ‘change of beneficiary’ form. That change will be made with no questions asked, no notification to anyone. It has led to some surprises for people."
No, I’m not going to return the form
Gregory J. Kurinec, an insurance agent in Naperville, Ill. says people often seek “change of beneficiary” forms from life insurance companies following disagreements with loved ones. Sometimes they change their minds after they’ve had time to think it over.
Because an agent has fiduciary responsibility, “you have to find out as much as you can without prying," he says. "You don't want anybody doing anything in the heat of the moment. By the time they get the form back from me they have had time to cool down. A lot of times I will not receive them back. I have seen a lot of forms unreturned."
Sometimes the insured bypasses the agent and goes directly to the insurance company’s website to request the proper form without consulting anyone.
"A person can find the form online fairly easily," says Kurinec.
If you receive life insurance through your job, it is also very easy to make a change in beneficiaries without your spouse or other family members ever finding out, he says.
Wait, I will return the form
There are many reasons why life insurance policies are changed. The insured may feel that he or she already has provided a significant amount of support to one of their children and that another child should be the sole beneficiary. Perhaps a marriage is going badly and the insured wants to make sure his or her children receive their full life insurance benefits.
"While I have had parents remove children as beneficiaries from life insurance policies without the child's knowledge, our practice more commonly sees this sort of thing happening when couples are going through a divorce," says Deborah Becker, an agent in Eau Claire, Wis. "While it's a sad situation, the owner of the policy has the right to make that sort of change without notifying anyone."
Life insurance companies keep policy details hush-hush
Everyone has their own motives for selecting life insurance beneficiaries. Sometimes the choices seem logical. Other times they leave agents bewildered.
Holmes R. Osborne III, a private money manager in Santa Monica, Calif., recalls that once a man walked into his office and said he wanted a policy that named his newborn great-nephew as a beneficiary. The man told Osborne that he had decided to buy the policy because the child had been named after him. The only unusual thing about his request was that the nephew was part of a set of triplets. The man said he wanted to make sure that the two other nephews would not receive any benefits. The life insurance was "just for the one child who was named after him and not the other two kids," says Osborne. "Can you believe that?"
You can be too secretive
There are many good reasons to keep your life insurance information confidential. However, some clients are so secretive that Fort Lauderdale, Fla., agent Michael Hartmann worries that some beneficiaries may never find out about the policies after the insured person dies. Life insurance companies might not be contacted after a death – because no one knows there’s a policy.
"If the insured person passes away and the beneficiary does not know they are the beneficiary, no one will tell the insurance company," he says. "I always have to remind the insured person of this possibility. However, they say they will tell the beneficiary before they pass. If they pass away [suddenly] in an accident, this will never happen.”