Life Insurance Premium Financing
Life insurance premium financing involves the sale of a high dollar life insurance policy, usually an indexed universal life (IUL) policy, with the premiums for the policy paid through the proceeds of a loan extended by a bank or other financial institution. The premium financing loan may be secured by the cash value of the acquired life insurance policy and/or other collateral.
Life insurance premium financing is a complex and highly controversial strategy that has led to extensive litigation across the United States. Many purchasers of premium financed life insurance policies have alleged that the policies were sold in a deceptive and misleading manner through policy illustrations that made unrealistic projections and failed to convey the substantial risks associated with the premium financing transactions. In some cases, the plaintiffs allege that the financial advisor or insurance agent who recommended the purchase represented that the insurance could be procured at little or no cost, through projections that returns from the insurance policy would be in amounts to pay the annual premiums required to maintain the policy. Such projections can be deceptive and highly misleading if they fail to accurately convey to the various risks presented by life insurance premium financing transactions.
The Complaint Filed on Behalf of Our Client
The Complaint recently filed by Michael J. Betts LLC alleges that the policy at issue – a high dollar IUL policy issued in 2021 by the Life Insurance Company of the Southwest (an affiliate of National Life Group) – was sold to our client in a fraudulent and deceptive manner. The Complaint alleges that the illustrations used by the financial advisors who sold the policy were misleading and deceptive, in ignoring or downplaying the risks of the premium financing strategy that was recommended to our client.
One of the significant risks of the premium financing strategy recommended by the defendants, which the Complaint alleges was not properly disclosed, was interest rate risk – i.e., the risk that if interest rates were to rise after the issuance of the policy, the financing costs associated with the variable interest rate loan arranged by the defendants could rise to unacceptable levels and could require our client to make substantially larger interest payments on the loan and post additional collateral for the loan. According to the Complaint, that is what happened in this case, as rates spiked dramatically shortly after the Life Insurance Company of the Southwest IUL policy was issued to our client in August 2021. The Complaint claims that the illustrations and projections used by the defendants in selling the policy failed to properly disclose the interest rate risk to which our client would be subjected if he proceeded with the transaction, as well as other risks.
Our client’s six-count Complaint asserts various legal claims against the defendants, including violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), common law fraud, negligent misrepresentations and nondisclosures, negligence, negligent supervision and civil conspiracy. The Complaint requests rescission of the transaction and an award of treble damages and attorneys’ fees under the UTPCPL.
Download and review the Complaint, which was filed in the Court of Common Pleas of Allegheny County, Pennsylvania docket number GD-25-010669.