Man chooses the wrong life insurance policy and his family suffers after his passing

What do you do when you thought you were doing the right thing by buying life insurance? You thought your family was going to be taken care of, that they were going to get this large sum of money that you've been paying into for decades. Well, that's not always the case. Today, we're going to go over a story of a woman who shares a warning to make sure you check your parents' life insurance policy and yours, because it may not be what you think it is. Insurance is meant to give people peace of mind that expenses will be taken care of after they But not all life insurance policies are created equal. One NBC10 Responds viewer reached out to us when she says she couldn't believe what was written in her father's policy. My father was a very humble person. Madeline Rodriguez remembers her father, Armando. He was a sweetheart. He had a heart of gold. With great affection. He was just a great soul. And she remembers him telling his four adult children they didn't need to worry about his funeral costs. My father, for many years, told us he had a life insurance policy. It was $35,000. Armando passed in June. In their grief, they discovered something they say they could hardly believe about his life insurance policy. Armando had a decreasing death benefit insurance plan. Armando had purchased the insurance in 1987 for himself and his wife, $9.50 a month, paid through his Sears credit card account. When his wife, Sonia, passed, the insurance paid out $2,600. Welcome back. My name is A.B. Ridgway. I'm the host of Financial Advisors. Say the darndest things of my mom's favorite Christian financial advisor. And today, brothers and sisters, this is a little odd. I don't know why he would pay life insurance with a credit card. That's my first red flag. I mean, I'm not demonizing him for using a credit card, but that's a little odd. Typically, you will want to put that into like a checking account or some cash because you don't want to pay interest on the insurance that you're paying. So technically, if you pay $10,000 in premium, you don't want to pay interest on it if you're carrying a balance on your credit card of 23, 24%. That makes any sense. But let's keep going on with the story. But it's kind of making sense already. As soon as she said decreasing death benefit and he's using his credit card, those two things are the financial advisor. My ears start ringing or sometimes I say I hear my ears start bleeding because it just hurts me so much when I hear those two things together. Or if I hear different variables where I know this is going down a bad road. That was in 1995. Since then, he paid on a new policy at $7.50 a month. My father died believing that he had life insurance that was going to cover his funeral services and we wouldn't have to be burdened with any of his costs of this cost. At the time of his death, his family believes he paid at least $2,200. They couldn't find his policy. But when the insurance company sent it, take a look at the chart of age at death and the amount of benefits. It showed decreasing benefits. And after the age of 70, a flat payout of $800. Armando was 82 when he died. Yes. Yep. Keep this in mind, ladies and gentlemen, he was 82 when he died. He got this policy way back in the 1980s or something around that time. And he she said that he believed he had a $35,000 life insurance policy and she believed him. But she's thinking, well, if he paid in $2,200, why are we not getting at least that back? And I'm going to explain to you why. I want to hear a little bit more information before I start giving you that analysis and then teach you how you can actually protect yourself and why this situation played out the way that it did. So the whole time your father was saying, kids, don't worry. This life insurance policy is going to take care of my funeral expenses. How much for the funeral expenses? It was over $9,000. And how much did the life insurance policy pay out? To the funeral home, it only paid out 200. And for us, it was 600, so $800 altogether. Because the amount of the death benefit decreased as he got older, the benefit is all for the insurance company. Tony Stewart is a life insurance expert. He says there are two keys to buying policies. One, know what your goals are. You know, those are the basic needs is, you know, take care of your domestic partner, to leave money for your kids, to establish an inheritance, to pay for final costs, maybe to take care of a business partner. And two, know exactly how the policy works. There are some very complex insurance products out there. And so if you don't understand how the products are going to work, the money may not be there for you or your family. Madeline wants others to check their policies and the policies of loved ones. Never looked into it. I believed his word. He said he had a policy. Hey, he had a policy. You trusted his word. Unfortunately, ladies and gentlemen, a majority of Americans or even investors don't know how the policy works. So how are they going to explain it to you in truth? Let me say that again. A majority of investors and Americans don't know how their policy works. So how can they tell their loved ones in truth? They can't. So let me explain to you what happened. First of all, I want to expose my own bias. I used to have my insurance license for years. I used to sell annuities and things of that nature. I used to work with life insurance contracts. If somebody would come in variable annuities, fixed annuities, all those kind of fun things, right? I want to explain a couple of things about insurance and let you know that insurance is what I like to call a transfer of risk. So let's say that you have a house that's $500,000. Do you have $500,000 to pay if your house is destroyed in a fire, a flood, a hurricane or something like that? Maybe, maybe not. So what do you do? You say, hmm, if I can pay you $20 a month, $10 a month, or whatever it may be for a certain amount of period. And if something should happen to my house, you will replace it. The insurance company says, sure, I have $500,000. You pay me what they call a premium. And if something should happen to your house, you let me know and I'll pay you the amount that you don't have in cash. That's great. You're transferring that risk. Same thing with life insurance. Life insurance is really a bet on your life. Are you going to die early? And the insurance company is going to give you more than what you paid? Or are you going to outlive the policy? And life insurance is not going to pay a lot. The life insurance wants to win just as much. So she said her dad was 82 years old. So he had what they call a decreasing life insurance benefit. What happens is he got the wrong benefit. I think because he thought it was cheaper. And why do I think that? Because he put it on a credit card. So if he puts it on a credit card, I'm thinking, OK, he may not have the cash to pay the premium. So he's putting it onto a credit card and he is getting some of the cheapest insurance that you can get. He got what they call a term life insurance policy. It didn't say how many years, but a term, a term life insurance policy is just like that for term typically is to cover a depreciating asset or a debt that you are paying off. So, for example, your house, let's say you have a 30 year mortgage. You may get a 30 year decreasing term policy that if you should die in year 10 or year 15, your house will be paid off. But if you live 45 years, then the life insurance doesn't pay out. You paid all your premiums and the life insurance gets all the benefits, just like the guy said. But in this case, it looks like that's what he did. But he did it on life insurance. So he lived all the way to 82 years old. So he outlived the policy. The insurance companies like you're living too long, like we're not going to pay you, you know, $35,000 when you're 82 years old. Now, if you would have died when you were 50 or five years after your wife or something like that, maybe you would have had more benefits. But every year that you live and it's a great thing. This is a great story. He outlived the policy. That's a blessing that he didn't die early, that she got five, six, seven years. But he didn't understand his policy because he went for cheap and he didn't go for what was right for him. Insurance is very easy to oversell. And insurance is very easy to get people in there because they're afraid. I don't want my family to to worry about my burial. OK, well, let's get into this policy. It's $10. I don't want to pay $10. Well, we got one for eight. I don't want to do that. What's cheaper? Well, we've got this decreasing death benefit. You know, something's better than nothing, right? And I think that was his mentality. And unfortunately, it doesn't pay off in the end. So when you think about insurance, I want you to think, how much risk do I want to give to the insurance company and how much am I willing to pay for myself? So in this situation, he's paid $2,200 and he's paid $2,200 in premium. He could have took that money. He could have put into an investment account and says, this is going to be my money for my funeral. And he would have had his money and it would have every dollar or he could have transferred that risk of trying to make stuff in the market and give it to the life insurance company. It makes sense. So brothers and sisters, when you are trying to explain things to your children, make sure you understand how that policy works, because she has a heavy heart. She was told for years by her dad that his funeral costs were going to be taken care of. And now she has to come out of pocket. I don't know, $8,000 or so, $8,100 or $200. That's a lot of money to come out with thinking that he has the life insurance policy. So brothers and sisters, that's why you should always have your financial five, your financial advisor, your accountant, your lawyer, your power of attorney and your executor. This is going to be for your financial advisor. They can review your life insurance policy. They can go over the details. They can let you know the scenarios where you're going to profit versus when the insurance company is going to profit and maybe even a break even point. OK, if you're over 72, this policy is going to be no good. Or if you die before then, then they're going to get X amount of dollars. Now, we don't like to think about death, but it's a great way for you to truly inform your relatives so they know exactly what you do before you pass away. That's what life insurance is all about. Protecting your life, just like the guy who was talking about the insurance. He's right. You should know your goals and your life insurance should match the goals that you want. Well, that's it for me. My name is A.B. Ridgeway, and I'll see you on the other side of your blessing.