First time posting so not sure if this is the correct place. I found out that my parents have continued a life insurance policy they bought when I was young. They have also been taking loans against this policy using a power of attorney I was not aware they were doing. I have revoked the power of attorney but the life insurance company is saying that it is my debt and if I surrender the policy I will have to pay them and additional taxes. I really don’t want to owe this debt but I’m not sure how to get out of it. Any advice would be very helpful.
Life Insurance policy loans I didn’t know I am responsible for.
byu/Fedup_05 inInsurance
Posted by Fedup_05
2 Comments
A policy owner can do whatever they want with the policy, including taking loans against the cash value (no POA needed). If you are now the owner and choose to surrender / cancel the policy then you are responsible for paying the taxes on any gains/profits in the policy. If you continue the policy you will owe interest on the outstanding loan balance. Would you rather pay the interest annually and continue the life insurance protection or cancel it and pay the taxes? You should request a thorough review from the agent and weigh the pro’s and con’s of keeping or cancelling the policy, along with your need for life insurance.
How did they get power of attorney? If you are unaware, that would indicate it was likely fraudulently acquired. The loans, now also fraudulently acquired, would not be your responsibility. It would be akin to identity theft, and whomever the money was distributed to would be considered liable/responsible and ultimately open to criminal prosecution.
Open a police report.
Report to the insurer that the loans are fraudulent – do it in writing and keep copies of everything.
Contact your state’s insurance commissioner for additional guidance.