MICHAEL PAPUC | Attorney at Law San Francisco


Waiver of Life Insurance Premiums under Disability Policies

by Michael Papuc
Attorney at Law
44 Montgomery Street, Suite 2405
San Francisco, California 94104

San Francisco attorney Michael Papuc represents policy holders (“insureds” in cases against insurance companies for coverage and bad faith.

Life Insurance policies, such as whole life, typically have premiums of $1000 or more per month. Many professionals purchase these policies for protection. The premiums paid build up cash value over the course of time, making the policies and asset which can be sold. After 10 to 12 years, the premiums paid develop enough cash value such that the interest on the cash value pays future premiums for the remainder of the time required to pay premiums under the policy. This is why whole life policies are sometimes termed “permanent insurance.” Term life policies, which are issued for terms of between 10 and 30 years, do not generate cash value, and become prohibitively expensive as the insured ages.

Disability policies are often sold with life insurance policies to protect the insureds stream of income in the event of disability. Private disability insurance will typically pay the policy holder a fixed sum each month if the insured is disabled from performing the regular duties of her job. The amount payable under the disability policy is typically reduced by the amount of social security disability paid to the insured. Social Security disability pay when the insured is disabled from performing the duties of any job.

If a person insured under a disability and whole life policy becomes disabled, the disability policy will typically state that the premiums under the whole life policy are waived during the term of disability. Many life insurance companies do not notify their disabled insureds of this provision, and continue to collect life insurance premiums, even though the insurance companies are required under California law to notify the insured of all coverages that apply to a claim that is made. This is an even more difficult circumstance, when the insured is mentally disabled, or is so disabled that she cannot deal with her personal matters.

These cases lead themselves to punitive damages, because the insurance companies often have a pattern and practice of not notifying the disabled insured of the waiver of premium benefit, even though the carriers are required to do so by insurance regulations in California. This could lead to tens of millions of dollars in profit to the insurance carriers each year. These cases also lend themselves to class actions. Policy holders need to contact an attorney experienced in disability and life insurance.


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