Help Solve a Two-Sided Money Problem

Physician's Money DigestOctober31 2003
Volume 10
Issue 20

Two problems have frustrated my financiallife lately, and I am curious as to whetherthese are isolated events or if they are commonoccurrences. The first deals with problemsencountered when you try to move money from1 institution, such as a mutual fund or annuity company,to another institution's control. The seconddeals with the sudden and drastic rise of the "cost ofinsurance" in a life insurance policy, which drains thecash value you have built up over the years.

Moving Funds

Both my mother and I tried to liquidate largeamounts from a mutual fund company and movethem to 1 of the guaranteed annuities. The processwas a nightmare, and in my mother's case, it tookalmost 4 months for the money to actually bedeposited in the new annuity account. In my case, ittook almost 2 months.

In both our cases, the first excuse for a delay wasan admission by the mutual fund company that ithad sent the money to the wrong address. The secondexcuse was the assertion that the money wasmistakenly "deposited" into our bank accountsrather than being transferred to the new company.

This was retirement money, and it needed to betransferred from trustee to trustee. Because they madea mistake, both transferring companies "retrieved"the money from our bank.

Just between the 2 of us, there was a loss ofalmost $10,000 in interest. In some cases, the companylegally has up to 6 months to transfer themoney. The regulatory agencies say they shouldtransfer it within a "reasonable time." I think theseexcuses were intentional.

Insurance Shrinking

In the second problem, an insurance companyattacked life insurance cash value. You may havebeen sold a life insurance policy with the idea thatyou would build up cash values that would eitherkick in and pay the premiums over the long haul,making your policy a "paid-up policy," or wouldbuild up with tax-free growth and give you a tax-freeincome stream.

Once the funds are sufficiently built up, they willsupport your borrowing a specific amount eachmonth from the policy to give you a tax-free cashflow, but the process is fraught with traps.

For example, an insurance company looks at itsearnings projections, and if it isn't going to make theprojected earnings necessary to keep its stock growing,then it implements a sneaky plan. Each insurancecontract says that the insurance company can adjustthe cost of insurance. Such adjustments are oftenmade, and as long as they are reasonably necessary tokeep the life insurance coverage in place, there shouldn'tbe a complaint by the policy holder.

Trouble in the Mail

However, there are a couple of companies thathave recently sent out letters informing their policyholdersthat the cost of insurance is being raised. Theletters encourage the client to look at the other goodproducts the company has and offer to help replacethe current policy with a better product.

If you dismiss the letter and don't look into exactlywhat is going on, the cash value of your policy willbe quickly drained, and the policy will lapse. If thishas happened to you, you may be in a mess, becauseyou may be uninsurable now.


Legally the insurance company can raise the costof the insurance. ( This is not the same as theinterest they pay on the cash values.) But, any rise inthe cost of insurance must, according to a recent courtcase, reflect a reasonable response to increased mortalitycosts. What is being done now is not a reflectionof rising mortality costs, it is simply a way for theinsurance company to make more money and forcepolicy holders to move their insurance dollars or losethem. Of course, the agents and even the companymake money if you switch policies. It may be a gooddeal for you to switch policies, but it should be yourchoice, not a forced change.

Lee R. Phillips, an attorney of the US SupremeCourt, has taught more than 5000 classes to insurance,accounting, legal, medical, dental, and otherprofessionals, and has written hundreds of articles.He welcomes questions or comments at 800-806-1997 or

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