In your quest to learn more about life insurance, you may or may not have run into the term ‘orphaned policy’. This is what can happen when a life insurance policy you’ve purchased from a particular agent is no longer being overseen by that agent. When this happens, your policy is flagged as having been ‘orphaned’.
An orphaned life insurance policy means that there is no longer a familiar face with whom you can deal with regarding your life insurance policy. It can also mean that your coverage lapses if there is no replacement agent assigned to your account and you don’t contact your insurance company.
The Number of Orphaned Life Insurance Policies is Rising
There are many factors which are contributing to a rise in orphaned policies. One of these is the simple fact that the employment landscape has changed; no longer will an insurance agent stay at one company for the duration of their career. As well, those who leave one company for another must leave their contact lists with their former employer.
The age of life insurance agents is also increasing, as well as the types of life insurance employers. Fewer new insurance agents are coming into the industry to replace their aging counterparts. And in the past, an insurance agent would work for an agency. But time has seen many changes to the industry. These days, you’ll find that many banks and other financial firms employ advisers who sell life insurance policies.
Should the status quo continue, one can expect only more orphaned policies and possibly more policy lapses in the future.
Laws in Place to Prevent Orphaned Policies
Laws are now in place so that the number of orphaned policies can be lowered. One such law is that life insurance companies must assign any orphaned policy to a single active agent. Called allotee agents, these individuals must be able to service any accounts they receive effectively.
Insurance companies are responsible for assessing whether or not an agent’s track record of registered complaints renders them eligible to service an account or accounts. As well, companies must ensure that no single agent receives allotment of orphaned policies exceeding twenty percent of the policies they are currently dealing with.
What to Do If Your Policy Has Been Flagged As Orphaned
The steps to take for orphaned policies will depend on why the policy became orphaned in the first place, which can be for a couple of reasons.
Your agent’s bank may have decided to sever its ties with your insurance company for whatever reason . In this case, finding reliable policy representation may be difficult, as the bank can cite the non-existence of your insurance agency as a valid reason for not overseeing your account. If this has occurred, check with your company’s web site or give them a call to see whether there is a call center which can deal with this specific occurrence.
If your insurance agent has decided to move on from your company, it may be time to contact your company to see how they plan to handle it. While there are laws in place that require companies to ensure all policies are being serviced by an agent, this task may have been designated to a team instead of an individual, which may be of some significance to you.
However, you may still be in luck if your agent has decided to leave their employer. The agent may be allowed to retain their right to commissions if they have been servicing life insurance policies for five years or longer.