Conspiracy check-- this time it's life insurance

I'm not one of those people who sees conspiracy behind everything that happens in the world. As a matter of fact, over the course of my life I have taken things at face value without questioning more often probably than I should have.

So, when I get the hint of some kind of ripoff, my first question is to myself, "Are you nuts?" Most often the answer is yes, but with some even when the answer is yes, there is a lingering doubt.

One of those popped up today. I have been maintaining a small life insurance policy, enough to mostly cover funeral costs and leftover bills so my kids won't have to deal with that sort of thing. The premium has been small enough that I barely notice.

But, a couple of weeks ago I received notice that my premium would double next month. Double! Same coverage, same payout, double the cost. My first reaction, and probably my course of action, was to cash out the policy. I did think it was kind of an outrage to hit someone on a fixed retirement income with a 100 percent cost increase.

Today I talked with the insurer and said something about not needing my premiums to double against my fixed income at my age. She giggled a little and said something like, "I can understand that." So the paperwork is under way to cash out the policy and leave me without life insurance. I do have other funds that will cover the same expenses and the cash out amount is almost the same as the payout in case of my death. After I started that process, it struck me that maybe that's what the insurance company wants.

I started thinking about that -- in case of my death.  In case of?  I'm pretty sure that's a given. But, now, here's the rub. The insurance company knows that's a given, too. They know when I die they will have to make the payout.

Remember the old joke about life insurance being a gamble in which you are betting you will die and the insurer is betting you will live? Something like that. Well suddenly I see a bunch of guys, their suit jackets off, suspenders over wrinkled white shirts, sleeves rolled up and one of them says: "You know everybody's going to die, so every policy we sell is going to pay off at some point. That's a big drain.  Maybe we can find a way to keep the money."

So, one guy says, "How about we do this. With people holding policies for a long time, once they retire and start counting pennies, we double the premium.  They'll decide they can't handle the added cost and cancel the policy.  We get their money for 40 years and then when they get close to the payoff we make it so many of them will want to cancel the policy. No payout. More profit. Bigger bottom line."

And now I feel like I have been walking down the path into their trap for almost 40 years. I don't even want to know how much I paid over the years, but I do know this, while I will get money for growth and interest, I will be getting a portion of my own money back, not a cent from the insurance company itself. So, they have been profiting from me for four decades, but when it gets close to the payoff for my heirs, they find a way out of the deal. Pretty slick.

On purpose, do you think? The way they go after numbers, it's doubtful it happens by coincidence. As a wise man once said, there are no coincidences. I wonder if there is a way to find out how many insurance companies do this and how many people they do it to. If they do, I would expect the amount of money they save goes into the millions, if not billions of dollars. 

I am beginning to think that little giggle from my agent after commenting on doubling premiums on a fixed income was more of a snicker --- we got another one. She'll probably get a bonus.