Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 9, 1994 TAG: 9405100023
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Long
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InfiNet offers full Internet access to anyone with a computer, modem and communications software. A standard account is $20 a month for up to 30 hours of use per month. For further information, call 1-800-849-7214.
Avoid disease-specific policies
Q You recently advised a reader that he or she did not need two supplemental Medigap policies.
Should a senior citizen carry additional policies if she has Medicare and a Blue Cross and Blue Shield supplement? I mean policies that provide benefits for accidents at $195 per year and for cancer at $267 per year.
These companies tell me I can collect insurance from them in addition to Medicare and Blue Cross and Blue Shield. Is that correct? Or do I need such extra coverage? The premiums on these policies will be due again soon. If I don't need them, I want to avoid further dues.
A: What they tell you is true. These policies will pay in addition to what you receive from Medicare and your Medigap supplement.
But most financial planners would tell you that disease-specific policies are not a good buy. The objective is to protect yourself with the best coverage possible for all illnesses, which you have done through your two programs of Medicare and Medigap. The only reason to buy a disease policy is if you have a special reason to believe that you are a very likely target for that ailment, such as cancer. Even then, you should not spend the extra $462 that you are paying each year unless you can afford it comfortably. You would be better off using that money to upgrade your Medigap supplement.
The purpose of health insurance is to protect you against all circumstances of illness.
Arbitration or court may be next stop
Q: In March 1988 I purchased an annuity contract through Charter Federal Savings Bank. My initial objective was accumulation of tax deferred interest. In 1990, 1991 and 1992 I withdrew the allowable 10 percent without penalty.
In 1991 I talked with a Charter representative about the liquidity of my contract. He stated the surrender charges would be high so I should continue with the contract until the charges disappeared.
In 1992, a Charter representative made an unsolicited call to say she had a contract with an 8 percent bonus. Later she said I could pay the current 6 percent surrender charge on the old contract because of this bonus and still be better off. At no time did she mention I would have to annuitize to receive the bonus and the interest rate would be 4 percent, which was less than I was earning. In fact, after five years I would be worse off because of the lower rate.
Being an unsophisticated investor and depending on Charter Federal, I authorized the transfer, counting on the bonus to offset the surrender cost of $2,663.37.
Only when I tried to take 10 percent in late 1993 did I learn that the bonus was paid only if I annuitized over five years. I found I had lost a great deal of control over my money.
I held many meetings with Charter representatives who first said they would try to correct the situation, but then said they could do nothing.
In talking with others about this situation, I have discovered Charter has placed them in this contract without a full explanation. I have been advised that these transactions were unsuitable, and that it appears generation of additional commissions could have played a major part of the reasoning behind them without regard for my best interests.
Where do I go next?
A: You purchased the annuity from Charter Financial Services Corp., which is a separate company from the bank.
In your much lengthier letter of three pages and in Charter's two-page reply, the stories are at variance. Charter said its inquiry did not support your version of what happened.
Charter said it gave you 20 days to read the contract, to seek further advice if you desired and to cancel. Charter said it is concerned about its customers and that in the seven years it has sold annuities, yours is the only complaint.
Because of the disparity between the two sides, your best and likely only recourse is to seek arbitration or to make a legal complaint and go to court. You would have to believe that the damages you allege are worth the time and expense of such a hearing.
by CNB