I recently applied for and received an AARP Group term life policy underwritten by New York Life. In previous posts I believe I’ve clearly made the point that these AARP offerings are a rip off of the sleaziest form, claiming to be advocates of the elderly while fleecing them.
I actually applied for their term insurance policy and their whole life policy, $50,000 each. They never responded to the application for whole life insurance, but I see in the term policy where it states that the maximum I can have through AARP’s life insurance program is $50,000. So much for getting adequate coverage and diversifying in the process.
I received the new term insurance policy a few days ago and after reviewing it, had some questions. Attached is my policy.
my-aarp-group-term-policy
Note on page 4 where it says Premium, it explains that my premium will be going up each time I reach one of their 5 year thresholds. It also goes on to say that they can, of course, change my rates at any time as long as they change the rates of all policies in my class. A couple of questions came to mind. If my premium goes up every 5 years, how much does it go up? And, if my premium can be changed on a class basis, what defines a class?
Looking through the rest of the policy, the only reference I found to my premium level was on the copy of the application at the back of the policy. It is attached here.
aarp-life-insurance-application
In the upper left it breaks down the premiums depending on the size of policy and at the bottom of that box it says “Please refer to the rate chart for complete details”. There is no rate chart in the policy. There is nowhere in the policy that it spells out or illustrates what happens every 5 years.
I called the Colorado Division of Insurance and asked them if, even though this is a group policy, it should contain that type of information. Their answer was yes. The person I spoke to was very clear that if a policy doesn’t provide a table of maximum premiums, an illustration that shows how much they could potentially charge, it was not in compliance.
Taking them at their word I called New York Life to see if that information had been inadvertently left out of my policy. They assured me that the information was not there because it didn’t need to be there. When I pushed further about wanting something in my policy, per Colorado law, that shows what the rates increases could potentially be, Lucille from New York Life told me that she was willing to give them to me verbally over the phone, but that she couldn’t send them to me. She then explained that the rate increases were shown on the application, but that portion of the application is not included in the policy.
I then spoke to her supervisor Donald Ennis and reviewed all my concerns. He said that the illustration of rate changes is only contained in the master policy and that is held by AARP and that I should call AARP if I wanted a copy of that information. This morning I spent an hour in the quagmire that is the AARP phone system and was finally told that AARP doesn’t have a master policy and that they would refer my question back to New York Life.
Advocates for the elderly? I’m a 55 year old life insurance agent and I wouldn’t advise anyone to accept the AARP policy. The policy, the company and the organization backing it are all wholly inadequate at providing the information you should expect in order to put your trust in them. If I can’t put my faith in what they’ve provided and I can’t get the answers to questions I ask, how could the average person (non life insurance agent) hope to enter into one of these contracts with confidence. The answer appears to be that AARP and New York Life hope you will do it with blissful ignorance. “Trust us! We’ve been around for 160 years.”
Bottom line. Intentionally vague would be the only grade I could give to my AARP life insurance policy. It won’t go into force because it is overpriced, not guaranteed and missing key valuable information.
July 23rd, 2008
If I’ve gone bonkers once, I’ve gone bonkers 100 times about agents that sell universal life and whole life policies based on current or assumed values and not based on guarantees. If you have a policy that was sold based on the assumption that a company would continue to perform well, and it hasn’t, check out this excerpt from Volume 8, Issue 15 of TheInsuranceAdvisor.com, a newsletter to insurance agents.
“When Does the Opinion of a Life Insurance Agent/Broker Become FRAUD on the Buyer?
In a recent lawsuit, Wal-Mart Stores, Inc. alleged fraud (among other things) against AIG Life Ins, Hartford Life Ins, the brokers involved and their representative, and both the trial court and the appellate court found against the insurers and agent/broker representatives!!! While you may be thinking “I would never commit fraud”, that is almost certainly the mindset of those who were actually found guilty of fraud in this case in that the findings for fraud appear based on prevailing industry sales practices involving the use of illustrations of hypothetical future performance instead of investigation and disclosure of A) expected/possible costs and B) the reasonableness of expected/illustrated future performance.”
Bottom line. Any life insurance policy you buy should be purchased with full knowledge of what is guaranteed and what is not. Any agent that doesn’t fully educate their client on the guarantees of a policy should have to go in front of the judges mentioned above and have their rear end handed to them.
July 22nd, 2008
When I was helping out after Hurricane Rita in Mississippi, I got to experience, first hand, southern hospitality and also the gateway to obesity, down home southern cooking. The only thing that saved me from coming back from that trip 25 pounds heavier was the fact that this high altitude, low humidity Colorado guy was sweating from daylight to dark as we cut trees off the tops of people’s houses.
I don’t think you’ll find many from the south that will argue that the staple of southern diets, fried food, is a sure way to stay slim and trim. With the top three states in this years obesity survey being, in order, Mississippi, Alabama and Tennessee, you have a cultural cross section of the country that is all about family, friends and meals. I’m not saying that it’s like they are just out to get fat. Rather it seems more that eating is a form of community and fellowship.
Anyway, before I stray off and tick off everyone in the south, the point is that while the weight issue is more prevalent in the south, there is actually only one state where less than 20% of the population isn’t obese according to the body mass index and that is Colorado. And I don’t mention that because I live in Colorado, but because we all live in an absurdly overweight country.
Does it seem to anyone that having 30% of your state’s population over the standard for obesity is a healthy thing? From a health and life insurance standpoint it is a recipe for disaster. Chronic obesity throws the door wide open to the other great epidemic of the last 10 years, type 2 diabetes. Sure, these things are survivable and sure, you might still be able to get life insurance, but where is the quality of life and where is the affordable life insurance.
Bottom line. Studies have shown that losing weight can reduce the risk of numerous health conditions and even reverse, or cure, type 2 diabetes. Sometimes I think I come off a little too preachy, but let’s be real. Obesity can be reversed. You can change your diet and your life style. We can bring our country back from the brink of eating ourselves to death, for us, and for our children.
July 22nd, 2008
No! The question comes up all the time. Someone who has just completed an annual physical. A private pilot who recently did their regular flight exam. A CEO who gets semi-annual executive physicals at the Mayo Clinic.
It really doesn’t matter what the scenario is, insurance companies still want their own exam, done their own way, by their own service. The only good news in it for you is that the insurance companies don’t charge for the exam and labs even if you ultimately don’t accept the policy. I guess the other good news would be for those who don’t get regular checkups, here’s one for free!
So, why so picky? I’ve talked before about how life insurance underwriters and physicians really aren’t evaluating you in the same way. They were in fact trained, if not born on different planets. A different focus requires different testing.
A physician might care whether you smoke or not from a medical point of view, but they would never test for nicotine on your labs. Your word would be good enough. The truth with insurance is that plenty of people try to squeak half truths and little lies by and a “no” answer to tobacco use is confirmed by a nicotine test, a “no” answer to drug use might be confirmed by a test for drugs and if your liver functions are high, it’s not uncommon for a life insurance company to run an extra test called a CDT, an alcohol marker.
Life insurance companies commonly use one liver function test called a GGTP. Most doctors don’t use the test because it doesn’t provide a specific enough direction. On it’s face, the GGTP only measures whether there is irritation of the liver. Unspecified irritation of the liver can be explained as easily as using too much Ibuprofen and can also be as easy as too much Jack Daniels. An elevated GGTP will almost always trigger a follow up CDT.
Bottom line. Just a few examples that point out the difference in focus that keeps insurance companies from using your latest physical. They aren’t looking for convenience as much as they are looking for a complete underwriting picture.
July 22nd, 2008
Sounds like one of those reward programs that are promised with credit cards! “Earn extra life insurance miles!” I know I have claimed in previous posts that my health, as least mental health, benefits from an occasional escape to someplace other than my office. So, is there something to it?
The list of stress related health issues might as well start with a full medical dictionary and tell you what to remove from the list. The truth is that most health issues or the severity of those issues can be traced back to stress.
And what better way to unload stress than to leave it all behind. I mean really get away and don’t drag any of it with you.
I tried a working vacation a year or so ago. I decided that we really needed to get away but, well, it was a busy time with my business and I was working overtime on blogging, so I would just take the lap top and my cell phone…….and, that was not what the doctor ordered!
I am blessed with an office manager who encourages me not to call in, not to check my email. She is quite capable and handles things very well in my absence. She is my permission slip. There truly isn’t any reason for me to drag work or even thoughts of work along with me. I have probably taken five vacations since she came to work with me. Each time I leave I tell her it is OK to call if she has a question. She never has.
My wife and I decided a few years back that a 7 day vacation wasn’t really long enough. If you figure two days travel, that leaves you 5. In my experience it takes 3 days to unwind and feel like you’re on vacation. With a 7 day vacation that means that about the time you are unwound, you are starting to plan to pack to come home. My recommendation, if you can do it, is 9-10 days. Long enough to relax and short enough that you won’t forget to come back.
Bottom line. Just my thoughts on another way to live longer, enjoy it more and pay less for your life insurance because you are stress free.
July 21st, 2008
We’ve blogged long and hard for years about the obesity epidemic in our country and the high cost the participants are paying in added health problems, shorter life spans and higher life insurance premiums. So, not that we had anything to do with it, but hats off to those New York restaurants that are now posting calories along with price on their menus.
Our country has worked long and hard figuring out how to market fat and calories under cute names and making quick and easy a dietary choice that seems to have sucked the common sense out of our nation’s health consciousness. That is not to say that there weren’t poor choices to be made 40 or 50 years ago, but with today’s marketing machines in full gear, fit as a fiddle may have to be updated to a cello.
So what’s the big deal about obesity? Clearly, with a few exceptions, it’s a lifestyle choice that’s been made and you make your bed and lie in it, right? If obesity was the end result, from a life insurance perspective it wouldn’t be such a tough hit. Weight alone will keep you away from the best rates, but it still leaves you affordably insurable.
The problem is that the weight, the obesity, is the start of an almost certain downhill health slide and studies seem to indicate that unchecked obesity doesn’t leave you in a place where you wonder if you’ll have health problems, but rather how bad will they be.
Bottom line. If you’re tipping the scales in the wrong direction, you may want to consider purchasing adequate life insurance before the health problems start happening. Once you come face to face with diabetes, heart disease or cancer, the task becomes much harder.
July 21st, 2008
One of the challenges we face each week is finding affordable life insurance for people who have suffered a heart attack, or have undergone angioplasty or heart bypass surgery after having chest discomfort due to blocked arteries. The good news! The folks we are helping are alive and with the often hidden heart problem revealed, they have a greater chance of avoiding having a major cardiac event in the future that could end their lives. They have a new lease on life.
Heart attack survival has been on the rise for several years due primarily to advances in rapid response treatment and more aggressive treatment to open blocked arteries. The playbook has been rewritten in the past decade concerning how emergency response crews and emergency room staff react to heart attacks with more emphasis being put on rapid use of clot busting drugs and quicker intervention through angioplasty.
Another boon to survival rates has been the acknowledgment that post cardiac event exercise plays a huge role in how quickly a patient recovers and their chances of not having a recurrence.
From a life insurance perspective there are several points for optimism. First and foremost, you survived. Whether that is due to your event being a mild one or due to more advanced and aggressive treatment, the result is the same. Second, the damage your heart incurred was likely less than it would have been in the past and the amount of damage to heart muscle is a carefully viewed measure in underwriting. Third, the long term chances of not having a recurrence have improved due to recommended lifestyle changes and newer cholesterol lowering drugs so another underwriting challenge, avoiding chronic coronary artery disease (CAD), is avoided.
How long does it take to get good offers after a cardiac event? While there are exceptions, generally you will need to be one year out from the event and you will need to have completed an imaged stress test, either an echocardiogram or a thallium stress test.
Bottom line. While you will likely never see preferred plus rates again, there is every reason to believe that standard to slightly substandard rates will be available. In layman’s terms, you should be able to obtain affordable life insurance.
July 21st, 2008
At least a dozen times a week I get an opportunity to review someone’s current and historical health with them. I’m on a fact finding mission with the goal of getting each person the best possible life insurance rates they can expect in their unique situation.
Sometimes there is literally nothing relevant to life insurance in a person’s own or family history. Sometimes there is plenty to discuss about both past and present health. It’s at this juncture when clients are put to the test concerning their knowledge about the health issues they have gone through or are presently dealing. A surprising number, or at least it’s always surprising to me, kind of generally know about their health but don’t know what risk factors it presents for them or how to measure whether or not they have their situation under control.
When my doctor tells me something new about myself, I’m a pretty curious guy. And with Google I can find out plenty of information in about .23 seconds. A good example was recently when I had a blood test result from our local health fair come back with a high TSH reading. With the help of Google I found out that TSH stood for thyroid stimulating hormone and that a high reading meant that it was possible my thyroid wasn’t working up to its’ capability. I visited a doctor and had it retested. It turned out to be a false positive test so everything was OK, but the point is that I knew what was going on, what it meant in the whole scheme of things and if it had turned out to be a positive test, what type of treatment and prognosis I could expect.
When I talk to someone with diabetes and they don’t know what their hbA1c is, it really makes me wonder if they care about their health. This is a critical test in life insurance underwriting and a critical test for measuring control of diabetes. How can a doctor not educate a patient and how can a patient not educate themselves on aspects of their disease that are as important as this?
It never ceases to amaze me that someone can go through something as traumatic as cancer diagnosis and treatment and come out of that process not knowing beans about the cancer they had. How do you know if your doctor is discussing all the options for treatment with you if you don’t know what all the options are? How do you know what the options are if you don’t know the stage and grade of your cancer? For all the bad things that might be said about the internet, it has put a world of knowledge at our fingertips.
It surprises me that someone who has had a heart attack or has undergone cardiac surgery will have a follow up stress test and take the doctor’s synopsis that the “results were good” as relevant. How can you have a test like that and not question the results and know what each result means? Were my results good compared to a person who has never had a heart attack? Good compared to a person who has had a heart attack with my family history? Good compared to your last patient who had a second heart attack and died a year later?
Bottom line. An independent life insurance agent can ferret out the good deals for you if they have all of the relevant information. Without it it’s a roll of the dice. Quite often the information you provide will lead to or rule out specific companies. Two things. If you’re going to shop for life insurance, take the time to know about your health issues and, if an agent asks you to do some homework for specific information, do it. If they are asking for specific information they probably are an above average agent with an above average chance of getting you what you need.
July 20th, 2008
This is an area involving life insurance that is receiving more and more attention and a topic where the troops (life insurance agents) are definitely divided. A life settlement involves the sale of your policy to a third party. The third party takes over ownership, future premium payments and becomes the beneficiary of the policy.
Why would a person consider a life settlement? Two reasons really. This generally involves term insurance and a person may simply not need the policy anymore. If a policy was, for instance, purchased to cover a key person in a company and that person has retired, the company may wish to recoup some of their premium payments through the sale of the policy.
The other reason is simply that the owner of the policy needs money and sees the sale of the policy as an easy way to get cash. This can be an unfortunate choice when long term family protection is bagged for a short term cash fix.
A few things about life settlements. First, the policy has to be within the conversion period. The new owner needs to be able to convert the policy in order to keep in force until your death. Second. You really need to be sick to get any significant amount of money out of a policy. A healthy 65 year old, if they are offered anything at all, won’t be offered much. I have seen this process of elimination work and the companies who do life settlements evaluate a case and determine, at least to the satisfaction, how long they believe you will live, down to the year and month. They then base their offer to you on the face amount, minus what they will have to pay in premiums on the converted policy, minus a healthy (very healthy) profit.
In most cases, in my opinion which happens to coincide with a large number of financial advisers, if you are sick enough to get a worthwhile life settlement, you are better off converting and keeping the policy yourself. Your family will net more benefit almost every time.
Then there is my own bit of discomfort with life settlements. Life insurance is all about mortality assumptions based on statistics that have been built up over long periods. Underwriters use assumptions when deciding rates for people with heart disease, diabetes or a history of cancer. My discomfort with life settlements is that there are no mortality studies that I’ve been able to find for people who sell their life insurance policies to a third party.
This country harbors one of the greediest corporate mindsets on the planet. If a life settlement group has a large block of business and profits aren’t where they need them to be, who’s to say, especially in today’s unemployment situation, that $500 here and $500 there might not hasten the mortality experience a bit. I’ve had plenty of viatical and life settlement agents tell me that assumption is hog wash and I would suggest that they allowing their greed for the sale to overwhelm their common sense. People get rubbed out in this country all the time for a lot less than hundreds of thousands or millions of dollars.
Bottom line. As for me and my agency, we will not recommend or participate in life settlement business.
July 17th, 2008
A question that comes up fairly frequently is whether a person who takes up a new hobby, not knitting, but something more daring like flying, skydiving or the like, needs to take out a new life insurance policy in order to be covered.
This is a fair and prudent question because the last thing anyone wants to do is put their family’s future in peril because they took up a dangerous hobby and didn’t check. So, just to put this into context in as dramatic a situation as I could think of, let’s say I’ve just been approved to be an astronaut.
First let’s talk about the situation where someone who already has a dangerous job or hobby wants to take out a new life insurance policy. Generally they will be approved based on their health and then assessed what is called a flat extra. A flat extra is a certain amount per thousand extra above and beyond what a sane person would pay for their life insurance. I heard somewhere, although I’ve never seen this in writing, that astronauts pay $25.00 per thousand flat extra per year. So, if I wanted $1,000,000 worth of insurance it might cost me $3000 a year for the insurance and $25,000 per year for the flat extra to cover being blasted into space.
So, what if I have an application pending for life insurance and have applied for but haven’t been approved yet to be an astronaut? Well, in this case I would have to put on the application that I was earnestly seeking to become an astronaut, and the company would approve it with a flat extra which could be removed if I failed my astronaut test.
Now we’re down to where people get confused. Let’s say I just put my $1,000,000 policy in force and a month later a friend who just won the lottery buys two tickets on the space shuttle (yes I know you can’t do that) and wants me to go. Because I took out the policy with no intent, or even wild dream that I would get to go into space, the policy covers me while I’m ripping off through the wild blue yonder at 26,000 miles per hour. There is no flat extra. All insurance policies assume that there will be changes in the future that weren’t planned, so they accept that risk. If you think about it, it all balances out. People who don’t smoke will start smoking and many who smoke will quit. People who sky dive will quit and some who don’t will start.
The last scenario took place in the incontestability period, the two year period where companies can look back and make sure you weren’t concealing risk and they didn’t overlook any. So, even though it happened exactly as I laid out, the company is justified in investigating the time table that ended up providing me the chance to go into orbit. This two year period only comes into play if I don’t make it back from my trip. If everything checks out, the claim is paid.
One more scenario. I take out my $1,000,000 policy and honestly don’t have any intention of becoming an astronaut. I’m a bean farmer and even though I like roller coasters, I don’t see any logical avenue between bean farming, thrill rides and ever going into space, so I’ve never even considered it. Then, lo and behold, in Bean Farming Monthly is an ad asking for resumes from bean farmers that are willing to cultivate beans on the space station now that the toilet is fixed. I send in my resume and get picked and now I am an astronaut. Again, there was no intent of change of occupation when I took the policy out so the policy covers me fully without a flat extra.
Bottom line. Intent at the time of application is the key to whether you are covered without paying extra for the risk. I had a customer call today who was a student pilot in the 60’s and then gave it up. He took out a policy 8 years ago and correctly answered no to aviation. His financial situation has changed and he now wants to go back and complete his training and get licensed as a private pilot. He wanted to know if his current policy would cover him as a student pilot or if he needed a new policy. His current policy fully covers him because when he took it out he wasn’t actively intending to get back to flying. No need for a new policy.
July 16th, 2008
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