Does an FE policy pay “interest” upon death payout?

[PrivClientSG]

When my wife passed earlier this year, I waited some time before making the life insurance claims. Every company, including FE and FU paid the claim with interest from date submission. Interest rates were all between 7% - 8%. Several lessons learned about life insurance and estate planning that not even 40 years in the field taught me this past year.

I am sorry for your loss. You are so right, we are in an industry that you constantly and consistently learn something new. Having been in the life and estate planning field for 35 years -- I won't be catching up to you, LOL -- the most valuable lesson I learned is never stop asking questions! LOL. Whenever I get notified of a death, I immediately call the company, speak with my claims specialist (if I have one at the particular company), and ask a series of questions -- do they pay interest, from when, how much is it, and so on. I also have them send me all the detailed documentation on settlement options, those interest rates, the terms and conditions, etc.

On death claims I paid this year, every policy paid interest from the date of death -- some were required by State law, others were simply company policy, and the rates (I am going on memory here) were anywhere between 4.5% and 6.5%. There may have been some fine print terms and conditions as well. I just got notified of a death where I have close to $25mm inforce, across four different companies, different products, and very different issue dates.

In addition, absent of State law, some companies have different rules for different blocks of business. One policy from Company A may pay interest from the date of death, and another policy from the same company may not; and sometimes the policies may pay different interest rates. Ask questions! LOL.

 

[PrivClientSG]

Great question. Actually, I believe it's the only question.

State of residence at death was NJ. Residency at death seemed to be the only thing that mattered.

Even though it hasn't been mentioned in this thread, return of unearned premium should not be overlooked.



Thanks Lee. It's getting better.

Glad to hear it's getting better.

I don't know that it's state of residency exclusively. Some companies look to the state of issue as, remember, the contract language will govern. In addition to the death benefit -- yes, the unearned premium, and other components (if applicable) will also be included in the death claim proceeds. I don't know if all of this will apply to FEX policies, but again, they are life policies. Their contract language may be entirely different, but they are still life policies.

 

[PrivClientSG]

FYI...I don't know if this is most recent, current, etc.:

[EXTERNAL LINK] - Bulletin 01-19

 

[Newby]

Probably getting too deep in the weeds here but every state has different wording. For instance, NY is date of death. That being said, I can 100% see a carrier not doing that and it never being questioned.

I looked up KY and their wording is different. The statute says proof of claim but then adds "in the substance and form required by the terms of the policy" which I'm guessing gives them some wiggle room with contestible claims.

I've never seen a recision be credited interest although I've only had a few of those.

Up until very recent years Kentucky took way over 30-days to supply death certificates on most every death.