Question: In May 2002, I bought two life-insurance policies for $100,000 each on the lives of my parents. I have been paying premiums of $2,860 per month since then. In 2005, I lost my job. As a result, it has been quite difficult to keep paying this amount — especially since late last year. I am now unable to make any more payments and my parents are still alive and healthy.

I am amazed that the policies have lapsed and I cannot get back one cent of the over $200,000 that I have paid. It is very distressing to learn that my hard-earned money has gone down the drain. If I had put aside these monies in a bank account, I would have earned interest on accumulated savings. Can you do anything to help me?

- S.S., Santa Cruz PO, St Elizabeth

Answer: I cannot help you at this stage. However, I contacted the head of the company that insured the lives of your parents. My goal was to learn whether I could have got part of your money back. The company insured the lives of your mom and dad for seven years. If one or both of them had died during that period, they would have been liable to pay $100,000 or $200,000. The fact that the insured event did not take occur means they can pocket the premiums you paid. This is how insurance works. Unhappily, you appear to have been unaware of this fact when you bought the policies.

You have accepted some of the blame for the problem by not reading the contracts. This is unfair. Were the contract documents available when you made the purchase decision? Were they written in legalese, the language used in most life policies, or in plain English? Was the sales agent mainly interested in earning commissions? Did he (or she) say that the policies would only be considered paid up only after 20 years? Did financial literacy help the thousands of well-informed investors who Bernie Madoff robbed when US regulator, the Securities and Exchange Commission, closed its ears and eyes to the many warnings received about his operations?

Your parents' former insurers replied to my request to conduct a review of your case as follows: "... These policies were issued under the cover of our Live in Peace (LIP) plan. This plan provides for coverage in the event of death of the insured for a premium, which is, payable for 20 years, after which the policy becomes paid up and no more premiums are required.

"... The LIP plan does not comprise a savings element and therefore only the coverage amount would be available upon death of the insured. This information would have been pointed out at the point of sale as the information is included in the brochure which has the application form attached. In addition, the information is found in the policy contract. (Please see attached copy of brochure [it was not enclosed]).

policies lapsed

"We have noted, however, that these policies went into lapsed statuses (sic) on April 26, 2009 for premiums outstanding since January 20, 2009. It should be noted that the LIP plan will automatically cease to be in force if premiums remain unpaid after the expiration of the grace period of 90 days. Mrs ..., however, has the option of having these policies reinstated providing all outstanding premiums are paid.

"We are mindful of the economic crunch that some of our clients may be experiencing and take this opportunity to empathise with Mrs ... as it relates to her economic situation. We would also like to express our appreciation to her for being such a loyal and valuable customer ... ."

You paid the company $231,660 between May 2002 and January 2009. That was $22,880 in 2002, $34,320 per annum between 2003 and 2008 or the sum of $205,920 ($34,320 x 6) and $2,860 this year.

The estimated life expectancy at birth for men and women in Jamaica, according to the 2009 CIA World Factbook, is 71.8 and 75.3 years, respectively. When you bought the two policies, your father was 72 years old; your mother was 71.

Even though your money appears to have gone down the drain, you should be very thankful that they are still alive. Finally, thanks for sharing your experience with this column. If there is a lesson to be learned it is this: Doing homework before making important decisions tends to prevent nasty surprises.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, email aegis@cwjamaica.com or send a text (SMS) message to 812-7233.