Scam Warning: Betting on Death

There's a life insurance scam going around I want to warn you about. Targeted particularly at seniors, STOLI (stranger-oriented life insurance) arrangements allow strangers to buy insurance on your life, effectively betting that you'll die soon enough for them to collect on their investment.

The problem is right on our doorstep. It has become so pronounced in Ohio that legislators are working to pass a law that would outlaw STOLI arrangements.

"You have no idea who has an insurable interest in your life," explained Ohio Rep. Jay Hottinger, sponsor of the anti-STOLI bill. "I wouldn't feel too comfortable walking around not knowing who's betting on me to die and wanting me to die."

Here's how the scam works: Promising free insurance or quick cash, the offers target seniors aged 65 to 85, particularly wealthier folks who can take out large policies. The investors offer to pay your life insurance premium for two years. If you die during those two years, your designated beneficiaries (usually family) get the money. If you don't die, either you repay the entire two-year premium or the investors take over the policy. They either get the money when you die or can cash in the policy and strip it of its value.

So what's the problem? The deal can leave you with less money than you planned on. You may be saddled with unexpected tax liabilities. It can negatively impact your ability to purchase additional life insurance. There's also concern in the industry that the problem could lead to an overall increase in life insurance rates. But the biggest fear is that it could lead to criminal activity.

"I hear lots of people, including regulators, saying that they could see this as a great new field of business for Tony Soprano," said Faith Williams, legislative counsel for the Association of Ohio Life Insurance Companies.

The national life insurance industry has been petitioning states to put a stop to STOLI transactions and ensure that only family members and business partners can purchase life insurance for an individual. "It's not a very good practice, generally, for strangers to have a substantial financial interest in your death," said Hottinger. "That's certainly not what life insurance was designed to do."

If someone approaches you about life insurance, call me. Don't let yourself be scammed. I'll give you the same honest professional advice I'd give my own parents or siblings. For a quick primer on life insurance basics, click the post title. If you would like more information, or I can help you in any way, please click here to contact me or call me today at 502-742-4979.

Trimming Your Prescription Drug Bill

Prescription drug costs rose a whopping 8.3% to $274.9 billion in 2006 and continue to rise. There are some things you can do to trim your costs and still stay healthy.

• Talk to your doctor. If your doctor knows you need to be careful about drug costs, he can recommend generic or older, less expensive brand drugs. He may also be able to give you several months of free samples. Don't be afraid to ask for samples. Get as many as you can. Be honest about your financial resources before your doctor writes the prescription.
• Buy generic. Ask your doctor if there is a generic drug available and make sure he marks the prescription to allow generics. If no generic is available, ask if another drug that does have a generic can be used. When you take your prescription to the pharmacy, specify that you want the generic drug. Drugs are precise amounts of chemical compounds. There is no medical difference between a generic and brand drug. If you get the brand, you're paying an added price for the drug company's advertising.
• Compare prices. Call local pharmacies including those in groceries and discount stores like Wal-Mart. Compare prices for filling your prescriptions. I recently found a $3 price difference for one of my prescriptions. Make sure you get prices for all of your prescriptions. The pharmacy that offered the lowest price on one of my prescriptions had the highest price on another. Remember to factor in the time and gas cost of visiting more than one store. You can also compare drug prices on the AARP website, click here.
• Buy online. Mail order pharmacies can save you money. They typically ship a 3-month supply for the same co-pay you pay for a one-month supply at your local pharmacy.
• Ask Medicare. If you qualify for the Medicare Part D Extra Help program, you pay minimal prices for drugs and can even receive assistance with premiums and deductibles. If you have limited resources ($11,700 for a single person) and limited income, then call social security and submit an application for extra financial assistance. The worst they can do is tell you you make too much.

We can help you here at AM Warner Insurance Inc. If you live in Kentucky or Indiana and have Medicare, we will help you evaluate your prescription drug plan to help you find the least expensive one for your drugs. We will also give you tips on what to do if you fall into the dreaded coverage gap.