"I Lost My House. I Lost Everything" Says Widow After Underwriter Allegedly Stiffed Her Of $250K Payout From Deceased Hubby's Life Insurance Policy

In Southern California, the Los Angeles Times reports:

• American General Life Insurance Co. markets its policies as protection for "the hopes and dreams of American families" — a promise Ian Weissberger took to heart during his losing battle with Lou Gehrig's disease.

• But after the Cathedral City mortgage broker died in 2005, American General cancelled his life insurance policy and refused to pay his widow the $250,000 benefit. The Weissbergers' premiums were paid up. There was no foul play suspected. There was no question Sheila Weissberger was the widow and sole beneficiary. And Ian's illness was diagnosed months after he took out the policy.

• The problem, the insurer told Sheila Weissberger, was that Ian's application for coverage was incomplete. American General concluded that he had failed to disclose conditions, including bipolar disorder and pulmonary disease, that, according to his doctors, he did not have.

• For the company, which collected $2.3 billion in premiums last year, the amount at issue was minute. But it was no small matter for Sheila, 62, who reached a confidential financial settlement with American General earlier this year.

• "I lost my house. I lost everything," she said in an interview. "It was very, very devastating."(1)

For more, see Flaws can cancel life insurance — after death (If a policy is less than 2 years old, companies may dispute the claim, and thousands were denied last year).

(1) According to the story, most states long ago banned limitless rescissions to stop abuses by insurers, but in California and elsewhere, they are allowed during the two years immediately after a policy is signed. Experts and consumer advocates say some insurers have turned that into a "gotcha period," seizing on flaws after claims are made that they could have looked for before issuing coverage, the story states.