Zero Premium Life Insurance - Hot or Scam?

There's a hot new product being promoted to life insurance agents, called zero premium life! Trusted MD has posted a cautionary article in the "looks to good to be true" category. The idea behind this product is that a group of investors will pay the insurance premium for senior between the ages of 65 and 85. The face value of the policy would be $50,000, and when the senior dies, their beneficiaries would get $15,000. The investor, who paid the premium, would collect $35,000.

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This sounds like a win-win situations for seniors, especially those on lower incomes. They have enough life insurance to pay for final expenses like debt settlement and funerals, and they don't have to burden their kids with problems after they pass away.

However, the big problem with this whole plan is a central concept to legally selling life insurance, and that is INSURABLE INTEREST. This means that the beneficiary of a life insurance policy must have something to lose if the insured passes away. A business partner might lose an essential person in their company, a child or spouse may have to settle debts and plan a funeral, etc. Typically, beneficiaries to life insurance policies are spouses, siblings, children, or business partners of the insured. These types of relationships are usually considered legitimate. And in fact, the relationship of each beneficiary must be specified on every life insurance application.

Now, consider a life insurance policy where the beneficiary does not have an insurable interest. Wouldn't this give that beneficiary an incentive to hasten the insured's passing of the mortal coil. They have nothing to lose if the insured dies, and everything to gain.

Now, I'm not saying that the investors behind zero premium life insurance are planning mass murder. I'm just saying that the test of Insurable Interest has a Very GOOD REASON for existing. Anyway, so far it doesn't look like any state insurance commmissions have actually approved zero premium life. Find State Insurance Departments for The US.

If you are a consumer and have been approached about a product like this, do not sign anything until you check with your state insurance department! If you are an agent, you should know enough to do this anyway - but insurance agents are human too.

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