Life insurance is a very important part of many people’s long-term plans because it provides a way for families to ensure the financial well-being of their loved ones after they’re gone. However, life insurance is a highly competitive market, and what you’re getting (and what you’re paying for) is not always clear. Therefore, it is essential to understand any changes in your cost of insurance.
If you believe that your COI increase is not only unlawful but also a result of bad faith practices by your insurance company, you should consider speaking with an attorney to address the situation. An attorney can help you report the issue to your state's insurance regulatory authority, detailing the unlawful COI increase and bad faith behavior. Regulatory authorities have the power to investigate such cases and take appropriate action. If your attorney determines you have a strong case, you may file a lawsuit against the insurance company. This legal action can seek damages for the financial harm caused by the COI increase and bad faith practices. If many policyholders have been affected similarly, your COI attorney may suggest joining or initiating a class action lawsuit against the insurance company to address the issue collectively.
What Is “Cost of Insurance”?
For term life insurance policies, the “cost of insurance” is the amount that policyholders pay to maintain their life insurance coverage. Several factors go into the cost of insurance, such as mortality charges, administrative costs, and other fees associated with providing insurance protection. A COI increase means the insurance company is raising the amount policyholders must pay to keep their life insurance policy in force. This can result in higher premium payments.
COI increase letters can have adverse financial and practical consequences for policyholders. Attorneys specializing in insurance law can assist policyholders in understanding their rights, evaluating the legality of COI increases, and pursuing legal remedies or negotiations with insurance companies to protect their interests and financial well-being.
What is a COI Rate Increase Letter?
A COI rate increase letter is a written communication sent by an insurance company to its policyholders, notifying them of an impending rise in the cost of maintaining their life insurance policies. These letters typically outline the following:
● Reasons behind the increase;
● The date the increase will become effective; and
● The impact it will have on policyholders' premium payments.
Policyholders receiving COI increase letters should carefully review the information provided and consider their options. Not all COI increase letters are valid, and policyholders may be able to challenge a COI increase letter.
Policyholders Receive COI Letter from PHL Variable Insurance Company “Phoenix”
Policyholders who have life insurance coverage with Phoenix Life Insurance Company recently filed a class action alleging that Phoenix policyholders are currently facing an unjust and excessive increase in the cost of insurance. They allege that this increase directly violates the terms outlined in their insurance policies.
Policyholders contend that the COI hike marks Phoenix's latest attempt to impose financial burdens on its policyholders and incentivize policy lapses. Phoenix and its affiliated company initially introduced a COI increase in 2010, affecting a subset of Phoenix Accumulator Universal Life ("PAUL") policies. Regulatory bodies such as the California Department of Insurance, the Wisconsin Office of the Commissioner of Insurance, and various courts found this 2010 increase unlawful.
Undeterred by these legal setbacks, Phoenix and Phoenix, NY, announced a second COI increase in 2011, targeting another subset of PAUL policies. Eventually, Phoenix and Phoenix, NY, settled for more than $130 million. One crucial aspect of the settlement was the agreement to freeze any further increases in the COI rate schedule, ensuring that class members would not be subjected to additional COI rate adjustments through December 31, 2020. Notably, the settlement explicitly excluded any future COI rate adjustments made by Phoenix, emphasizing that such adjustments were not part of the agreement. Plaintiffs seek the court's approval for compensatory damages, consequential damages, restitution, disgorgement, and other available legal or equitable remedies.
What Does Getting a COI Rate Increase Letter Mean for Policyholders?
COI letters can be overwhelming and include a significant amount of jargon. However, the most critical aspect of an increase is that it means policyholders will incur higher premium payments, potentially affecting the affordability of their policies. COI letters can have significant financial and practical implications for policyholders. If you receive a COI letter, you should speak with a COI rate increase letter attorney to assess the validity of the increase and review your legal options.
Steps to Take after Receiving a COI Letter
Policyholders receiving COI increase letters should carefully review the information provided and consider their options, including continuing with higher premium payments, adjusting their coverage, or exploring alternative insurance solutions. If policyholders believe the increase is unjustified or unlawful, they should speak with a COI rate increase lawyer to address their concerns.
Review the Letter Thoroughly
You should carefully read the COI increase letter to understand the specifics of the increase, including the new premium amount, effective date, and any reasons or justifications provided by the insurance company.
Assess Your Budget
Evaluate your financial situation to determine how the COI increase will impact your budget. Consider whether the higher premiums are affordable and if paying them aligns with your financial goals.
Understand Your Policy
Review your insurance policy contract to understand the terms and conditions related to COI increases. Check whether the insurance company has the right to make such adjustments and under what circumstances.
Contact Your Insurance Agent or Company
Contact your insurance agent or the insurance company's customer service department and ask for a detailed explanation of the reasons behind the increase. It is important that you do not agree to any terms without speaking to an attorney. You should also document your communications with the insurance company, either by saving emails or letters or by taking detailed notes immediately after the call.
Explore Alternatives
Consider alternative insurance solutions that better suit your needs and budget. This could involve adjusting the coverage amount, exploring different policy options, or comparing quotes from other insurers.
Seek Legal Advice
If you believe the COI increase is unjustified, consult with an attorney who specializes in insurance law to explore your legal rights and options. They can advise you on whether the increase complies with the terms of your policy and applicable regulations.
Document All Communications
Keep records of all communications with the insurance company, including dates, representatives' names, and discussion details. This documentation can be valuable if you need to dispute the increase.
Stay Informed
Stay informed about any developments related to the COI increase, including legal actions, class action lawsuits, or regulatory changes that may affect your situation.
Remember that every policyholder's situation is unique, so the appropriate steps to take may vary depending on your unique situation as well as the specifics of the COI rate increase. When responding to a COI increase letter, it's essential to make informed decisions based on your circumstances and financial goals.
Will I Still Be Covered if I Don’t Agree to my Insurance Company’s COI?
Ultimately, whether you will still be covered if you don't agree to the COI increase depends on your specific policy, its terms, and the actions you take in response to the increase. If you choose not to agree to the COI increase and stop paying the higher premiums, there is a risk that your policy may lapse. A policy lapse means that your coverage will no longer be in force, and you will lose the benefits and protection the insurance policy provides.
What Happens If I Can't Afford My New Premium After a COI Rate Increase?
You may explore alternative insurance solutions, including increased premiums that are unaffordable. This could involve seeking a different policy with lower premiums or comparing quotes from other insurance companies to find more affordable coverage.
