Life Insurance For Sears Retirees: What's The Deal?

Sears retirees have been dealt a blow with the company's decision to end life insurance benefits, leaving many wondering what options are available to them. The retailer, which filed for bankruptcy in 2018, initially proposed a plan that would have significantly reduced payouts to retired workers, offering them as little as $135. However, following a legal battle, Sears reached a $3 million settlement in October 2019, which is yet to be approved by a judge. This settlement is expected to provide some relief to retirees, but many are still facing the challenge of obtaining new life insurance policies due to their age and health conditions.

Sears retirees' life insurance benefits were dropped

Sears retirees were dealt a blow when the company ended their life insurance benefits. The retailer, which filed for bankruptcy in 2018, terminated the life insurance coverage of around 29,000 retired workers on March 15, 2019. The policies were worth at least $5,000, with most ranging from $8,000 to $10,000.

The life insurance benefits were canceled on March 15, though some retirees received letters notifying them of the change after that date. The retirees were given the option to convert their group life insurance policies to individual whole life policies and pay the premiums. This came as a shock to many, as Sears had promised generous benefits to its workers.

The National Association of Retired Sears Employees (NARSE) is considering a court challenge to the company's move, arguing that Sears is violating a 2001 settlement agreement that stipulated the retiree life insurance could only be canceled if the company liquidated and went out of business.

The fall of Sears has left retirees worried about their pensions and life insurance benefits. While their pensions are covered by the Pension Benefit Guaranty Corp., the life insurance benefits were not. The average age of the affected retirees is 80, and many are unable to obtain new life insurance policies due to their age and pre-existing conditions.

Sears has since reached a $3 million settlement over life insurance benefits, which is awaiting court approval. The settlement includes a compensation fund for the beneficiaries of retired workers who died after March 15, 2019, the day the company canceled life insurance benefits. Current retirees will be able to file a claim for their benefits up to a limit of $10,500.

Retirees can convert group life insurance policies to individual whole life policies

Searssection #1# retirees have had a difficult time in recent years, with the company's bankruptcy affecting their benefits. Sears cancelled life insurance benefits for retirees, which was one of the final links to the days when the company offered generous benefits to its workers. This change took effect on March 15, 2019, and while some retirees were notified before this date, others received the news after it had already taken place.

The life insurance policies were worth at least $5,000, with most ranging from $8,000 to $10,000. This was the last benefit that retirees had, aside from a discount at Sears stores. The company claimed that they could no longer justify paying high premiums for life insurance policies. Sears retirees were given the option to convert their group life insurance policies to individual whole life policies, but they would have to pay the premiums themselves.

Converting group life insurance to a personal policy has several benefits. One of the biggest advantages is the ability to do so within 31 days with no medical evidence of insurability. This is ideal for people who need life insurance but cannot get it due to age, smoking, or medical issues. However, the life insurance company protects itself by charging a higher premium for converting group policies.

If retirees are healthy, insurable, and in need of life insurance, it may be more cost-effective to shop around and buy a personal plan. A whole life insurance policy provides lifelong coverage until death or maturity, but the premium payments may be significantly higher than group rates. Additionally, a whole life insurance policy has a guaranteed cash value that builds over time, whereas term insurance policies only last for a certain length of time.

For Sears retirees, the option to convert their group life insurance to a whole life policy may be their only choice, as many are unable to obtain new life insurance policies due to their age. The average age of affected Sears retirees is 80, and due to their age and pre-existing conditions, some are not eligible for new life insurance policies.

Sears retirees may receive a $3 million settlement over life insurance benefits

Sears retirees may be eligible for a share of a $3 million settlement fund following the company's termination of their life insurance benefits. The retailer, which filed for bankruptcy in October 2018, agreed to set up the fund for the beneficiaries of retired workers who died after their life insurance benefits were cancelled in March 2019.

Sears ended the life insurance benefits of approximately 29,000 retired workers. The policies were worth at least $5,000, with most ranging from $8,000 to $10,000. The company claimed it "could no longer justify paying the significant premiums for the policies".

However, attorneys representing the retirees argued that Sears had given up the right to end these benefits in a 2001 settlement deal. This deal stipulated that retiree life benefits could only be cancelled if the retailer liquidated and went out of business. Sears had not liquidated and was bought out of bankruptcy by its former CEO, Edward Lampert, and his hedge fund.

As a result of the dispute, Sears agreed to set up a $3 million compensation fund for the beneficiaries of retired workers who died after March 15, 2019—the date on which the company cancelled life insurance benefits. Current retirees can file a claim for the amount of their benefits, up to a $10,500 limit. However, the amount they receive depends on how much money remains to pay Sears' creditors, which could result in cents on the dollar.

The settlement fund is still pending court approval.

Sears retirees are considering a court challenge to the company's move

The National Association of Retired Sears Employees (NARSE) is contemplating legal action, believing that Sears is "violating a 2001 settlement agreement" which stated that the retiree life insurance could only be cancelled if Sears liquidated and went out of business. The company filed for bankruptcy in October 2018 and sold most of its assets to Transform Holdco LLC, an entity controlled by its former CEO, Edward Lampert.

Sears retirees had coverage with death benefits worth at least $5,000 and up to $14,500, costing the company $1.3 million in total monthly premiums. The retirees were given the option to convert their life insurance to whole life insurance but would have to pay the premiums themselves. Many retirees are unable to obtain new life insurance policies due to their age and pre-existing conditions.

In response to the termination of the retiree plan, lawyers for the retirees objected, and in June 2019, a federal judge approved the formation of a committee to represent the interests of retired workers. This committee filed a lawsuit against Sears, and in October 2019, the company reached a $3 million settlement over life insurance benefits. The settlement is yet to be officially approved by a judge, and it is unclear how much each retiree will receive.

The fall of Sears has been indicative of the struggles of traditional retailers in the face of competition from online retailers like Amazon. Sears filed for bankruptcy with $6.9 billion in assets and over 700 stores across the United States. The company's attempt to cut losses by cancelling life insurance plans for retirees backfired as the retirees fought back and won in court. Now, Sears must set up a compensation fund for the beneficiaries of retired workers who died after March 15, 2019, the date on which the company cancelled life insurance benefits.

Sears retirees are unable to obtain new life insurance policies due to their age

The situation highlights the challenges faced by older individuals in securing life insurance. While Sears retirees can explore options like whole life insurance or burial insurance, their choices are limited due to their age and potential health issues.

The National Association of Retired Sears Employees (NARSE) has expressed dissatisfaction with the company's decision and is considering legal action. They argue that Sears is violating a 2001 settlement agreement that allowed the company to cancel life insurance benefits only if it liquidated and went out of business.

The life insurance benefits provided by Sears were worth at least $5,000, with most policies ranging from $8,000 to $10,000. The termination of these benefits has left retirees with few alternatives, and the proposed compensation is a mere fraction of the expected payouts.

The inability to obtain new life insurance policies due to age and health conditions underscores the vulnerability of retirees when companies renege on their promised benefits. While Sears retirees explore their options, their situation serves as a reminder of the importance of securing adequate financial protection while it is still possible.

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