When Byron and Kimberly Mallette refinanced their mortgage six years ago, their lender encouraged them to buy an insurance policy.
The extra $60 a month was a sacrifice, but they say it was worth the peace of mind — knowing that if one of them died, there would be money to pay off the mortgage. That was especially true when Byron was diagnosed with a terminal pulmonary disease.
But last month, that peace was shattered. Wells Fargo sent a letter stating that the policy would be terminated — three years early.
"I was depending on that money to help take care of my wife," said Byron, whose doctors say he could die at any time. "Now that I'm sick and I'm terminal, we get this thing in the mail, and it's just like a ton of bricks hitting you."
The Mallettes' situation highlights a catch with term life insurance: The insurance company doesn't have to live up to the contract term. A company can't cancel coverage because of a terminal illness, as the Mallettes first feared. But state regulators say the company can cancel early as long as everyone in the group policy loses insurance.
Wells Fargo blamed the company it contracted with, Jacksonville-based American Life Insurance Co. That company is owned by Allstate Insurance. Tom Goyda, a spokesman for the bank, said it was the insurance company's decision to cancel the policies.
News of the Mallettes' plight spread last week, and state regulators got involved. The state department of Financial Services' consumer division stepped in as mediator between the couple, the bank and the insurance company.
Days later, Wells Fargo and Allstate backtracked and now say they will honor the contracts of existing customers in Florida. But future Wells Fargo customers won't be eligible for the insurance, called credit life insurance. It's unclear how many customers statewide are affected, but state representatives estimate hundreds, possibly thousands.
Allstate spokeswoman Laura Strykowski said she could not say how many other lenders the company partners with on credit life insurance.
Jay Neal, executive director for the Florida Association for Insurance Reform, said he has never heard of a company canceling a policy like this one before the term expires. Although canceling the whole group policy may be legal, he said it's unusual and should serve as a warning for anyone buying this type of policy.
"People should know that this can be canceled at any time," Neal said. "Customers see the term date, they agree to that contract date, and they think the insurance company and lender agree to that, too."
Janet Walker in Sebring said she received the same letter from Wells Fargo and was upset because her term, like the Mallettes', was through 2015.
"We would not have considered this insurance, but the bank pushed it when we purchased our home," Walker said. "We were trying to plan for the future. Companies should tell you this could happen before you buy your policy."
Allstate representatives said customers who received cancellation letters soon will get new letters in the mail. Those letters will explain that their coverage will continue without any gaps.
"I can't explain how much this relieves me," Byron Mallette said. "I was so worried about her. I could go at any time, and I don't want to leave her in stress."
The Mallettes say they can't wait to get their hands on the follow-up letter. But they wonder why they had to go through this stress.
"This takes a big load off my shoulders," Byron Mallette said. "I won't have to come back and haunt them now."