Situational mood disorders such as stress related anxiety or depression are something that probably all of us have gone through at one point or another. We all fall into one of three groups in this area, 1. Those who muddle their way through and are able to get back on track by themselves, 2. Those who seek medical intervention to get back on track and 3. Those who seek medical intervention to deal with an ongoing stress situation.
There’s a lot of misinformation out there about how these issues are handled by life insurance underwriters. While it’s true that most companies will rubber stamp depression or anxiety disorders with a best case standard, worst case decline, there are a number of companies that understand that just like getting treatment for high cholesterol, having sought help you’re a better risk. If the situation was in the past many companies will approve at best rates, correctly perceiving that if there was risk it is gone now.
A great example of this issue is with attorneys that while law students, especially leading up to and taking their bar exam, and physicians, especially during residency when they are pushed hard to cram as much experience into a short period as possible. The stress is tremendous and you can’t take a break.
It is not uncommon, if my client base is anything near a reflection of normal, for people in these positions to treat the stress medically just to make it through without having a train wreck. The right agent putting a case like this in front of the right underwriter should be able to get preferred plus rates every time if there are no other risk factors.
Personally I think that in rough times like we’ve seen over the last few years underwriters ought to just forgive anyone who has gone on Prozac. Far better that a person deals with the depression and keeps on moving ahead with a positive outlook.
Bottom line. Truly situational mood disorders where there is a beginning and a foreseeable end should not be a rateable life insurance issue.
July 29th, 2010
I’m a fan of sorts of National Public Radio. They take the time to talk about a lot of topics that regular radio and television really don’t find profitable and I love to catch “All Things Considered” when I’m traveling.
I would completely hypocritical to say something like “NPR can be a bit opinionated” when I’m offering the world according to Ed every day in this forum, but today they stepped over a line that goes beyond opinion and seems to have some genuine agenda.
In an article posted today they assert that life insurance companies profit by sending checkbooks to beneficiaries of policies as opposed to lump sum death benefit checks. They are more pointed in their assertion in regards to Met Life and Prudential and their handling of beneficiary payments of this type to parents and widows of people who die in the military. It’s a real shame on you big rich companies for taking advantage of grieving widows kind of attack.
The nuts and bolts of their complaint is that the widow is sent a checkbook, sometimes payable not by a bank but the company, and that it only pays .5% interest on the balance. They further assert that because the companies are investing this money and making a lot more than .5%, they are profiting from the grieving widow and it isn’t even FDIC insured!
I talked with an associate of mine who actually worked in the claims department of Prudential when the details of SGLI (Servicemen’s Group Life Insurance) was being worked out. Met and Pru were really the big boys that stepped up and agreed to all the terms that the government laid out, which is not to say that it isn’t profitable, but knowing government contracts, it’s probably not much fun to administer either.
One of the requirements the government had back then when the death benefit for soldiers was only $200,000, was that they wanted the widow to get a checkbook versus a large check. It was the government’s thought that there was less likely to be a binge spending spree happen if it was handled this way. As for the money being protected like FDIC, I feel confident that the government probably requires Met and Pru to hold those funds in government backed bonds. I might be wrong but probably not.
One of the other “shame on you” accusations is that they don’t feel like the insurance companies make it clear that you can write yourself a check for the lump sum. Well, excuse me, but everyone out there who doesn’t believe you can write a $400,000 check on your checking account that has $400,000 in it, raise your hand. Ok, assuming there are a few raised hands, would you be inclined to call someone and find out if you could write that check? Me too!
As for the .5% interest, well, that’s more than most savings accounts pay (FDIC insured and invested by the bank with a much higher return). So if you had $400,000 in a savings account, would you move some of it? All of it? What’s the difference?
Bottom line. If Paul was still around you can bet he would be up for telling the rest of the story, and as for NPR, shame on them for not telling it all accurately.
July 28th, 2010
Substance abuse treatment and life insurance underwriting are a delicate dance that if done correctly can be both successful in approval and reasonable rates. Having said that, like any impairment, there are parameters that have to be met.
Whether self admitted, medically or court ordered, treatment for alcohol, illegal drugs or prescription drugs is taken seriously by every life insurance company out there. Know right up front that you’re not going to walk out of treatment and into a life insurance contract without a little time between the two events. I believe the word is recidivism, or maybe that’s just in reference to crime, but the truth is that a lot of folks who enter, for instance, alcohol treatment don’t make it 2 years without hitting the bottle again.
In general there is going to be a three year waiting period after all abuse treatment with the exception of court ordered alcohol abuse classes or temporary AA attendance after a DUI. Most companies that will consider coverage at that point, and it’s not very many, want to see a squeaky clean record of no relapse and preferably continuous attendance to AA or NA along with a stable social history.
A recent case caused a bit of confusion. The client came to me after being declined by several companies due to prescription drug abuse and treatment that was completed just over three years ago. We got a rated trial offer, but in his mind a very fair offer compared to a decline. The application was shot down as soon as it came through the door because on the exam the client said that he had been treated for alcohol and prescription drug abuse, not just drugs. The company’s reaction was an immediate decline due to multiple addictions.
Since it had not come up in my initial conversation I called the client to determine where the alcohol came from. He said that the facility where he sought treatment insisted on treatment and abstinence, not just for in this case prescription drugs, but for any potentially addictive habit the client might partake in. In his case he used to drink wine in the evening with dinner but had never had any problems with alcohol. The facility insisted that he quit drinking completely and he was treated as if alcohol was also an issue.
Once I clarified this with the underwriter they withdrew their decline and agreed to review the medical records and, if the client’s description was accurate, stick to their original trial offer. Back on track.
Needless to say, companies would require an even longer waiting period if multiple addictions were involved. Based on my discussions with the underwriter it would probably have been at least a 5 year postpone from the end of treatment.
Bottom line. Each case is as individual as the people involved and the way to avoid declines and get approvals is to disclose everything accurately to your agent. It might mean you have to wait before you apply but you avoid a needless application and decline in the process.
July 27th, 2010
Most people that read my blog and call or email about life insurance for people with bipolar disorder or other serious mood disorders seem to be in their mid forties and below. Most but not all. We have had a fair number of successful professionals my age (55+), CEO’s, physicians, attorneys who we’ve been able to help after meeting with decline after decline.
I’ve been told that more people are diagnosed correctly today than when I was younger and I think there are a couple of reasons that we see more younger people asking for our help.
1. Bipolar disorder, anxiety disorders and depression today are better understood and less feared by underwriters than when I was younger. If, for instance, I had been diagnosed with bipolar disorder 20 years ago my chances of getting any insurance company at all to consider accepting my mortality risk would have been somewhere very close to 0. I might have tried several times to get life insurance for my young family but with the chances at or near 0 of approval, I would likely have just racked up a string of declines.
2. By now, in my post mid 50′s, I would have done the best I could to put some other plan in place knowing that life insurance companies didn’t want anything to do with me. Why, at this point, would I want to back track and put myself through the humiliation again?
It may just be time to take another look. More seasoned socially challenged folks actually, in the mind of underwriters, have something of a leg up on younger clients in that they are survivors and have stability written all over them. Bipolar disorder is one of those things that can tear you down at its’ worst and make you a stand out success at its’ best. By age 50 if someone has bipolar disorder they have most certainly taken one road or the other (through no fault of their own), and someone in their 50′s on the good side of things has established stability and control, business and family life with some certainty.
From the view of a life insurance underwriter, whether you are a 32 year old software engineer or at 56 year old actor or CEO, the same criteria lead to the best rates.
1. Someone who has not been hospitalized for bipolar disorder other than for diagnosis?
2. Someone who has not attempted suicide or had bouts with suicidal ideations?
3. Someone who is compliant with their treatment, both medications and regular followups?
4. Someone who is leading a stable family life or social life?
5. Someone who is exhibiting a stable work life?
6. Someone who is not on disability for bipolar and does not have issues with drinking or drugs? If there’s a problem here, then the answers to 3, 4 and 5 are no.
7. Better rates come with fewer drugs and without the need for anti-psychotic drugs.
Bottom line. So, don’t let past bad experience guide you today. Life insurance underwriting has changed and changed dramatically in the last two decades.
July 14th, 2010
A few years back I passed on some interesting statistics from a LIMRA study about all of the uninsured and under insured Americans. I offered my thought that the reason these people didn’t buy life insurance was that they couldn’t find someone they trusted to meet their needs.
LIMRA (the former Life Insurance and Market Research Association) did a follow up study, “Why don’t consumers buy the life insurance they say they need?” This study was in their 2006 book titled Every Excuse in the Book.
The top five reasons are listed below. There are two columns of percentages. The first column is the percentage that consider it a major reason, the second stated it is a minor reason.
1. Dread high pressure sales tactics 60%-26%
2. Have other financial priorities 55%-28%
3. Difficult to decide type to buy 46%-38%
4. Difficult to decide how much to buy 44%-39%
5. Worry about making the wrong decision 36%-43%
I think you could apply all the same reasons to just about any major purchase and the percentages would likely stay in the same range. I’m thinking #1 might go up a bit with car sales, but maybe not. High pressure sales feels the same no matter who is applying the pressure on you.
At some point or another I have addressed most of these issues either on the website or in a blog. Allow me to reflect back on a few of those. Pick a question that hits home for you and please ask for any clarification you need.
Dread high pressure sales tactics
Difficult to decide what to buy
Difficult to decide what type to buy
Worry about making the wrong decision
After years of facilitating Dave Ramsey Financial Peace classes, believe me when I say I understand you have other financial tugs. But, the battle of the budget is almost always won when we really take a good hard look at what’s important in our family.
Bottom line. You can use every excuse in the book, but life insurance is the right thing to do, so start loading you portfolio with ever good reason to take your responsibilities seriously.
July 13th, 2010
Pru rolled out a 16 page release on their new and improved underwriting guidelines in a number of areas. This comes on the heels of a much ballyhooed rate decrease that didn’t do squat for anyone under 50. Nevertheless there may be some morsels in here that will help someone get better rates.
First is aviation. I shared a few weeks ago that they were going to write home built aircraft owners without a flat extra as long as the private pilot has at least 50 hours in the home built. I still like that one even though it touches a pretty small group. They now say they will go best rate class on business jet pilots. Not that big a deal since several companies will do the same thing and remember these are private company pilots, not rent a jet pilots. They now say best rate class if a pilot is at least 30, has 1000 or more total hours and at least 100 hour in their current aircraft. Again, the same deal is available from other companies at a lower rate and without the strict stipulations.
They really are making a big deal out of the fact that they will go standard plus on stage 1 or 2 Papillary or Papillary-Follicular thyroid cancer upon completion of treatment. I haven’t had a chance to shop that, but my guess is that several companies would go standard and possibly standard plus with the same criteria. And with Pru’s rate “decrease” their standard plus would probably be left sucking wind.
They did gain some significant ground on family history. They have been the historical family history ogres for a long time with their best rate class requiring no parent or sibling deaths prior to age 70 due to cardiovascular, stroke, diabetes or cancer. Their second best rate, preferred, had the same guidelines but age 65 and standard plus finally got to age 60 where virtually every other company would have been preferred plus. Now they are at age 60 for preferred plus and they have dropped diabetes. Preferred they will actually allow one death prior to age 60 and standard plus is at the underwriter’s discretion. They have also changed their family history of cancer away from every kind of cancer to only those that have a high familial risk.
I also like their new written stance on elevated liver functions. They will go preferred plus if one of the three liver functions is no more than 4 times normal, and if 2 or even all 3 functions are no more than 2 times normal. This is assuming all other labs are normal, there aren’t any issues with alcohol abuse and they don’t have a history of liver disease.
They put on a brave face saying that a 67 year old female with type 2 diabetes since age 63, 5’4 and 186# with an A1c of 6.9 could get standard plus. Not a bad offer although with that late onset and good control I’m thinking Banner would also go standard plus and beat Pru decisively.
They did make a bold move on financial underwriting. Now up to age 40 qualifies for 35x annual income, 41-50 is 25x, 51-60 is 20x, and 61-70 is 10x. That definitely means if you can afford it you can get more coverage through Prudential.
They are still one of the best bets around for other than cigarette tobacco users. They will go standard plus non smoker even with positive nicotine in the labs for pipes, cigars, chew, nicotine patch or nicorette gum users and again, anything except cigarettes.
Bottom line. I’ll take every break I can find my customers and some of the things that Pru has thrown out in this release are tasty morsels.
July 9th, 2010
With so much financially unchanged I want to dust off some previous advice and suggest that it was right then and still warrants some consideration.
Everything I’m hearing, including from my wife, is that retirement accounts are not quite back to 2008 levels and certainly haven’t come anywhere near 2008 plus a reasonable gain. There are, by news accounts, as many negative signs as there are positive concerning the recession, unemployment and business growth. If you were comfortable with the pace of your retirement growth in 2007 and you’re still comfortable with it, you had a lot more money than the average person to work with.
My suggestion when all of this financial chaos began and suddenly everyone had investment accounts cut in half, was to buy at least a 10 year term insurance policy for about how big a hit you took. As I said then, if the economy comes roaring back you can always dump the term insurance, but no one then and no one now is saying anything that would make me at peace with a full recovery taking much less than 10 years. With life insurance you can guarantee that if you die prematurely your spouse can expect to have as much to live on as he or she did pre 2008.
Not as optimistic as me? Get a longer term, say 15 or 20 years, but there simply is no other cost effective way to bolster your net worth for a short period of time and if all of the economy talking heads know what they’re talking about, someday we’ll all look back and shake our heads at everything that happened and be glad that we survived it.
Bottom line. The longer I watch this whole economy thing play out, and now add on the catastrophe in the Gulf, the more I think the hit we took two years ago is going to be felt for a lot more years than we would like to admit. Put the pieces back together and make the picture whole again with term life insurance.
July 7th, 2010
It was only a matter of time before a crack in the US life insurance market opened up to non US citizens and residents. People in the US have been buying financial tools from around the world for years and there isn’t any doubt that if another country had life insurance products comparable to those here, they would make it easy for us to buy. Just makes sense.
At a time when we are struggling to find any kind of economic boost, opening up our insurance markets makes sense. Arguments against? Too hard to get accurate information to underwrite. Other countries are subject to overthrown governments, public unrest, tsunamis earthquakes, etc. Arguments for? Frankly in today’s world the US is at risk for all the same problems.
So along comes a company who is willing to accept that risk. A company that has determined how to accomplish underwriting comparable to what is done for someone living here with products that, while not equal to the best products offered here, are significantly better than what is offered for residents of most countries. Are they crazy or are they just the first to step off into an enormous opportunity?
To be fair, they aren’t inviting the whole world to the party. The really specialize in the America’s to the south with only a few Latin American countries where they are still working on logistics. They will consider other countries on request (except for the middle east) with the same underwriting requirements. The application and exam have to be completed in Florida and all financial and medical records requested have to be provided in a timely fashion.
The company is offering 20 year term insurance and universal life with guarantees up to and past age 100. The term insurance is underwritten at standard rates and the UL is offered at preferred or standard rates. The guidelines are comparable to guidelines for those rate classes from other US companies.
Bottom line. For the foreign national individual or company, or US company owner with a foreign partner who need the insurance but haven’t been able to get the products or price that truly fit their need, this is the opportunity.
July 7th, 2010
The truth is there are times when there is a legitimate question about whether life insurance is necessary, whether it is the tool for the job. Here are five times that I would submit to you that the answer is clearly buy life insurance. I am leaving the whole issue of term insurance versus permanent insurance out of this post. I’ll beat that drum another day.
1. The most often cited and I think without any question the most obvious time that you should have life insurance in force is when you have dependent children. A person might be able to fuss about carrying life insurance just for the sake of a spouse, but with children, not carrying life insurance, is holding out there the possibility of something akin to abandonment. There really is no good argument for not making sure that you spouse and children have the means to carry on, and there is no conscionable way to justify, as a single parent, leaving your children behind for someone else to raise on their dime.
2. The next time when I can’t find any justification for not having life insurance and good sound trust in place is when you have a dependent child or spouse who is permanently disabled. They are completely and wholly dependent on your income and care and to ignore that responsibility is wrong.
3. Another time when life insurance is just a matter of good common sense is when you are a partner in a business. Your business partner (and obviously this goes both ways) deserves to know that if you die prematurely, there is money to buy your families interest in the business. This ensures they will get a fair price for all the years and work their loved one put in and it also ensures the other partner that the business won’t be squeezed to death trying to get enough cash together to take care of this fairly.
4. There are times when banks just don’t come through and friends loan money for personal or business purposes. A bank will survive if you pass away and a loan doesn’t get paid, but not accepting that responsibility when it will leave a friend or relative who went out on a limb for you in a lurch isn’t OK. In my opinion, if you’re loaning money, life insurance should be a requirement.
5. When estate taxes will gobble up all you’ve worked for it just makes good sense to have insurance in place to pay those taxes. More than one family business or fortune has been left to the federal and state governments because life insurance wasn’t in place. You worked too hard to not leave that legacy to your family.
Bottom line. It could have just as easily been ten times, but the idea carries through all of them that if responsibility for someone else exists, it needs to be addressed and not just left to chance.
July 5th, 2010
For most being declined for life insurance feels a little like being convicted of a crime that you didn’t commit. It’s also scary not knowing what to do, whether to try again, whether you will be black balled because of the decline, who knows.
The problem from my end is that there are so many companies in the business that simply avoid risk be declining anyone for anything that could be wildly assumed to have a negative impact on their life expectancy being 100+. Those companies far outnumber those who really weigh mortality risk and assess appropriate decisions. This is problematic for customers because all companies represent themselves as fair and competent. Maybe 2 of every 100 companies that sell life insurance are telling the truth.
Just a little disclaimer. There really are times when every company out there should choose not to accept a life insurance risk. My contention though is that 9 out of 10 declines could be reversed in the hands of the right agent using the right company.
A decline usually comes with an explanation like, “decline due to information in Dr Smith’s medical records”, or “declined due to abnormal lab results on insurance exam”, or “declined due to abnormalities on ekg”. My recommendation is that you don’t waste a lot of time asking the insurance company for more details. You won’t find out anything fast and in most cases it will be another rather vague answer. Instead, take what they told you and get the lab results, the ekg or Dr Smith’s records and find an independent agent that can review that information informally with an underwriter friend (we all have one) and find out exactly how to tackle the problem so that you can get approved.
Declines don’t blackball your chances of getting insurance. One company’s decline will look to another company like an opportunity. In many cases I think it actually gives the good underwriters incentive to show how it should be done. There really is such a wide disparity between company underwriting guidelines and philosophies that it really isn’t crazy to go from a decline from Company A to a preferred from Company B.
Bottom line. So, declines give you the information you need to 1. choose the right agent who can then 2. choose the right company who can then 3. approve a new life insurance policy.
July 1st, 2010
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