Why would anyone purchase Insurance that involved twisting and turning? Insurance, like any other thing else, is a form of transaction. To make the transaction satisfactory, insurance companies will offer discounts, special offers, and other incentives. For the insured, the following information may help in understanding just what some of these incentives are.
The essential incentive provided by twisting Insurance is the cash value. The insured pays tax-free lump sums for the purchase of a term or whole life policy. Once the individual insured buys the procedure, the insurance company owns the policy's cash value and is free to do with it as they see fit. What this means for the insured is a far lower cost for obtaining a new life policy. This alone makes a whole lot of sense.
The other incentive provided by twisting Insurance is that the insured can change companies more often. This makes sense only if the client keeps coverage until it is paid off. If the policyholder were to give up coverage suddenly, say because he was laid off, then he would have to surrender his cash value and would forfeit his right to obtain coverage from another company at all. This very scenario spurs the twisting of the policy to provide an incentive to the client to keep his range. Therefore, if you get a new policy after you lose your previous one, you will not need to worry about paying for coverage.
One more incentive provided by twisting Insurance is that the insured does not have to pay taxes on the policy's cash value. When the insured sells a policy, tax is paid on the sale. However, when he purchases a new one, no tax is paid on the payment. This creates a windfall for the policyholder, a situation designed to entice people to remain with their existing insurance company.
Some companies provide their policyholders with the option of getting a two-year renewable term life insurance policy that allows them to renew the coverage either yearly or annually for an additional two years. This means that they pay basically nothing in premiums during the first year and can even save money. The best part is that this is not limited to people who are younger than 65 years old. Seniors can also take advantage of this twisting Insurance, which may make sense if they have a condition requiring frequent checkups or want to ensure that they are still eligible for benefits in the future.
Another reason for this unfair trade practice is that many people do not understand the difference between a refundable and non-refundable policy. A refundable policy gives the insured a rebate, while non-refundable policies provide no benefit whatsoever. A customer purchasing a non-refundable policy must wait until the policy has expired to claim the refund. On the other hand, the insured can claim the rebate if he buys a refundable policy but fails to purchase one before the policy expires.
Insurance agents should be aware of these unfair practices. Customers should ask their agent whether the rebate is provided because the customer specifically requested it and has a valid reason. For example, the customer may have purchased a policy with a refund but has not paid the premium on time. Such transactions cannot be considered "wet nursing" because the customer has not sustained any harm. Yet, the insurance agent continues to tout the policy as having benefits that it doesn't. A customer must bring this issue up with their agent, so they must either remove the inaccurate information or explain why they are not entitled to a rebate.
When this happens, the insurance agent has a double duty to the policyholder. First, the agent must convince the policyholder that continuing to maintain the non-refundable policy will harm the insured. Secondly, the agent must convince the policyholder that continuing to support the non-refundable policy will cause damage to the insured. The insurance agent must then notify the customer that continuing to pay the rebate does not alter the fact that the insured is still legally responsible for paying the original premiums. In short, if a policyholder continues to pay the premiums, the agent must convince the policyholder that the policy is worth keeping instead of continuing to pay the commission.
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