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Life Insurance company decides to not pay policy but return premiums, then months later demand premiums back.

Worcester, MA |

Thought I had seen everthing. My Father had a term life insurance policy for $50k, payable to one of his sons ,not the Estate. Being less than 2 years old, they contested it, delayed it, then decided not to pay. They returned the premiums paid about $4k, to the Estate. Months later, they suddenly decide to pay on the policy (Due to an internal fraud issue, their broker falsified the application turned into underwriting). They have paid the beneficiary, but want the Estate to return the premiums. Considering it was the Insurance company's fraud that created this mess and they admit it, does it have to be returned.

Please note two additional facts. The policy was written in the state of Colorado. I received two letters from the insurance company (one of the major players) indicating inappropriate action by their agent in the application process led to their decision to change their mind and pay out on the policy. They have 'asked' for the return of the premiums before considering their legal options.

Attorney Answers 3


  1. Best answer

    The answer would depend on the law of the State where the insurance contract was negotiated and there are many sources of that law. If we assume that the insurance is subject to the law of Massachusetts, and that the return of premiums to the Estate was based on a unilateral mistake, that is, a mistake by the insurer but not the Estate, the Estate can be viewed as a donee or recipient of a gift, especially if circumstances change between the time of the erroneous payment and the time of request for repayment. For instance, the Estate is already liquidated or the money was used to pay an expense. Also, the fraud issue is to the Estate's benefit in that the reason for the return of the premiums was based upon a motivation self interest of the insurer, not the interests of the beneficiary or the decedent's intention. I would check with a local lawyer to make sure but it appears the Estate is under no legal obligation to return the premium payments.

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  2. I agree with Mr. Dion.

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  3. Depending upon the circumstances, it may not be economical for either the estate or the life insurance to litigate the matter. If it cost the estate money, or put it in a disadvantaged position, you may just want to offer the insurance company a portion, or none, of the premiums. Good luck.