The New York State Department of Financial Services has released a news statement that included Superintendant Benjamin M. Lawsky’s announcement that life insurance companies will be required to pay the full amount to the beneficiaries of the policies that were held by veterans, soldiers, and others, without holding the money in their accounts.
Unless either the beneficiary or the policy buyer specifically indicates that the funds should be provided otherwise, this will be the new standard for all life insurance policies of this nature.
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For many years, the life insurance industry has been allowed to earn millions simply by withholding the payments for policies held by American veterans, soldiers, and other “retained asset accounts.” By doing this, regardless of whether that money is among that which is owed to surviving family members, the insurance companies are able to continue earning interest on these funds, and can continue to invest them until they are actually withdrawn by those survivors.
The beneficiaries are often under the impression that, based on the information that they receive from the usurers, the funds are being kept in the equivalent of a bank account, only it is held with the insurance company. They are led to believe that keeping the funds there is within their best interest. However, there is frequently a notably lower interest rate paid on the funds kept with the insurer than there would be if they had invested the money themselves. It is the insurance companies who receive the profit from the difference.