In: Finance
Opal, age 75, has a $60,000 ordinary life insurance policy that
has a cash value of...
- Opal, age 75, has a $60,000 ordinary life insurance policy that
has a cash value of $35,000. Opal is concerned about the cost of
long-term care in a nursing home. A new agent of a national life
insurer persuaded her to transfer the $35,000 into a deferred
annuity. The agent told Opal that the annuity pays lifetime income
benefits and also allows her to withdraw the $35,000 without
penalty if she should enter a nursing home.
After the policy was issued, Opal had
10 days to change her mind. During the free-look period, a friend
of Opal examined the policy. Analysis of the policy showed
that:
- Only 10 percent of the cash value could be withdrawn each year
without penalty
- A 7 percent surrender charge would apply to any excess amounts
withdrawn
- The income payments were scheduled to start in 10 years when
Opal attained age 85
As a result, Opal filed a complaint
against the agent with the state insurance department. An
investigation revealed that the agent had made similar
misrepresentations to other clients.( Pertains to Nebraska)
- Based on the above facts, identify the illegal practice in
which the agent engaged.
- What action can the state insurance department take against the
dishonest agent?
- What action can the state insurance department take against the
life insurer?