Insurance agents annual reviews have gotten a bad name over the years and with some justification. Some agents see it only as an opportunity to sell more and kind of do service as an aside.
But don’t underestimate the value of those annual calls. I know before I call a life insurance client I always review what they have, what kind of rating they accepted and look for possible changes in underwriting that could possibly put them in a position to pay less, or possibly get more for the same.
Case in point is a client of mine with bipolar disorder. On an annual review I did, as described above, I re-shopped his bipolar history and a company that had offered the 4th best trial quote the year before now offered an extraordinary quote.
He and his wife had just had their first baby and wanted to increase his coverage but were concerned about the budget. With this offer we were able to double his coverage for just barely more than he was paying before. So, the annual review call filled a need with additional coverage and also gave us an opportunity to talk about, with the new baby, the need for a life insurance trust.
Bottom line. If it’s all about selling you more, then tell your agent to skip the annual review calls and get a life. If, on the other hand, your agent is truly working for your best interests and serving rather than selling, take that call. You’ll be glad you did.
March 17th, 2010
America has spent trillions of dollars monitoring, spying on and fighting enemies abroad since its’ inception. Now it would appear that we are being overtaken from the inside, not by armed terrorists, but by fat. Obesity is out to kick our behinds.
Now I’ve got good news when it comes to availability of affordable life insurance when people are overweight, but first let’s shake this subject out a little. Our country thinks it has a health care crisis on its’ hands now? At the rate we’re getting fatter, in 2020, 2010 will seem like the good old days because along with obesity, unchecked obesity, comes cancer, heart disease, diabetes and a host of other expensive catastrophic illnesses.
I happen to live in Colorado and while Colorado is the only state in the country that is under 20% obese, as of last year it was at 18.9% in adults and somehow that’s not making me feel like we ought to be proud of the job that we’re doing. When you factor in children you can see that we’re right in the mix for not passing on our barely passing obesity grade to our kids.
So, before I go telling someone that is 6′ and 400 pounds that I can get them approved for life insurance, I just want to scream at our country, all of us collectively, WE’RE SINKING OUR OWN SHIP AND IT’S BECAUSE WE ATE TOO MUCH!!!!! If you’re overweight, get a grip. Get exercise. It’s free. Quit eating so much. You don’t need it. Get help. Losing weight is more fun with a friend. Get a gastric bypass if it is just simply too much to conquer! Nothing to be ashamed of because it really is a decision about life or death.
Now the good news. Even though you have eaten yourself into a position where your body is looking for diseases that can kill you, if you’re still healthy, even with the weight there is affordable term insurance out there. Get it while you’re healthy because no one is going to sell it to you if you’re overweight and your health is headed over a cliff. We’ve helped a lot of people get coverage they had been told they could never get.
Bottom line. Don’t wait. Don’t wait to see your doctor and discuss options. If he says exercise, don’t wait. If he says diet, don’t wait. If he recommends more drastic measures, and a second opinion agrees, don’t wait. If you don’t have life insurance and you still have your health, don’t wait.
March 16th, 2010
I went to the big city with my wife the other day. Now understand that I dislike shopping about as much as a person can, but a couple of times a year I will give in, amuse my wife, and do it with a smile.
That is in sharp contrast to shopping for the best life insurance deal for a client, something I do daily and with gusto. It pays off big time for my clients. Today we got an approval for a client who has bipolar disorder. He had thrown it to the wind several times and was declined with the exception of a highly rated approval by one company.
We shopped it were able to get a standard rate approval for this client, a full $5000 a year under the best offer he had received from his other applications. There are rewards for being methodical and not haphazard when it comes to shopping and there are rewards for not assuming that just because most companies are going to beat up on an individual, that one company won’t bust through and get the job done.
This particular client fit perfectly into the criteria that I’ve laid out in this blog so often for bipolar, the steps to a good approval.
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. Best rates come when a person is not using anti psychotic drugs for control
Bottom line. Shopping with gusto is something I can do as long as it’s for life insurance and not shoes.
March 15th, 2010
Not a week goes that I am not called by someone with a history of cancer. It can be as common and treatable as prostate cancer or breast cancer, or as unpredictable as multiple myeloma. They would like to have life insurance, just like anyone, but insurance quotes take more information and leg work than if your health issue was high cholesterol.
Unless a client has saved all of the reports and paperwork, it often means going back to doctors and asking for the information. But let me be real clear about this, there is no way that I, or any other agent or agency out there, can accurately quote life insurance with a history of cancer without the pathology. The only exception to that hard and fast rule would be a history of basal cell carcinoma, the most common and least deadly of all cancers.
So, when someone says they had breast cancer or prostate cancer, the next question coming from me is, “do you remember the stage and grade of the cancer?” Most of the time the answer is no. They might remember that it was an early stage or a low grade but those terms are about as generic and useless as they sound. Those are the things oncologists say because frankly they don’t want the patient burdened with details that they won’t understand.
Personally I think having that information allows a person to truly educate themselves on what they are facing and what their options are. Knowing the actual pathology opens the door to enlisting 2nd opinions. With all of the information available on the internet it also gives you the information needed to know if you would have other treatment options available.
From a life insurance underwriting standpoint, no matter what type of cancer you had, the earlier the stage and the lower the grade the better, but in order to shop it those have to be actual values and not just lower and better. An example might, simply stated, be a stage 1, grade 1 cancer. With breast cancer a stage 1 tumor measures less than 2cm/1in. Stage 0 would be an insitu, or fully encapsulated tumor. The lymph nodes in the armpit are not affected and there are no signs that the cancer has spread elsewhere in the body. A grade 1 breast cancer means that the cancer cells look very like the normal cells of the breast. They are usually slow growing and are less likely to spread.
Pathology is the key to the rating of the policy. It means, in most cases that clients will need to make a call or go by the oncologist’s office to get a copy of the pathology report. It’s not a big deal and shouldn’t require an appointment or cost anything. If you have paperwork from your cancer treatment stored, check and see if the pathology report is mixed in with that.
Find an independent agent, preferably one knowledgeable enough to know that you needed that report, and review the entire history from diagnosis through treatment to recovery and cure. Not all cancers are created equal, so stay open to what you will hear from the agent. It might be a good quote and it might be information on how long you will have to wait before you can get offers on life insurance.
Bottom line. Many types of cancer are insurable at very affordable rates within a short period after the end of treatment, so do the home work and Google your type of cancer and life insurance. Try to pick through and find truly independent agents who stand out as having a good understanding of how to get you from point A to approval.
March 12th, 2010
I’ve often heard and read several places that most men will get prostate cancer to some degree if they live to a moderately old age. The good news is that, for many, it will have little or no impact on their lives or their mortality. For a great many they will, as the theory goes, never know they had it and it won’t be the cause of their death.
Prostate cancer that is slow growing, that is to say a low stage and grade, is quite often not treated in older men, but rather just monitored. This is known in the medical and insurance circles as watchful waiting. I polled a number of very good life insurance underwriters and was told that watchful waiting is not considered a treatment by them, and with all of them a client would be declined until an active and measurable treatment is completed. It is the medical stance that if the cancer ever does become more aggressive or dangerous then treatment can start and because it will be caught early in its’ aggressiveness, the treatment would likely be successful.
But let’s talk about the rest of us guys. There really is good news when it comes to prostate cancer and life insurance for the majority of cancer survivors. Especially if you get annual checkups (health fairs are great for this) prostate cancer can often be detected while the war is still very much winnable.
If a prostate cancer is a stage T1 or T2, and a Gleason grade of no more than six (this is the majority of cases), and the PSA at the time of diagnosis was less than 10 (this again is the majority of cases) better than standard rates should be attainable within a year after a prostatectomy and within two years after a radioactive seed implant. The underwriting guideline at that point would be that if they took the prostate out, your psa needs to be 0, and if they did a seed implant it needs to be .5 or less.
When you start talking about better than standard rates after most other types of cancer, that is not the norm. Getting those rates within a year or two would be completely unheard of with other types of cancer. Early detection is the key. A small price to pay for protecting your life, let alone your ability to purchase affordable life insurance.
Bottom line. Guys aren’t exactly known for our proactive approach to health. We may exercise and eat right, but actually going to the doctor on a regular basis and having labs or even, dare I say it, a digital exam of our prostate, well, that’s just not normal.
March 11th, 2010
Like cancer and car accidents, there are probably very few of us who haven’t been touched by the loss of a relative or someone we know by suicide.
I try to address this sensitive issue a couple of times a year just because I believe a lot of life insurance claims go unpaid when the death is due to suicide, not because the company doesn’t want to pay them, but because claims aren’t filed.
To say there is a stigma that goes with the whole subject of suicide would be soft peddling the impact it has on the family and friends of the deceased. It’s often unexpected and always traumatic and very often produces feelings of guilt in a family that feels like they should have been able to keep it from happening.
It is the stigma, shame if you will, and the myriad of other feelings that often lead surviving spouses to either forget or just not file a life insurance claim. Mixed in with that most people don’t believe that insurance companies have to pay in the event of suicide, so why file?
But they do pay! There is a two year exclusion for death due to suicide, the suicide clause, in most states, one year in the others, and by law after that exclusion period the company has to pay.
But here’s the kicker. The companies don’t watch the obituaries and contact families when there’s a death. A claim has to be filed. If no claim is filed, no benefit is paid.
Bottom line. I just don’t want to see cases where a widow doesn’t get the life insurance proceeds that are due to her because she somehow believes it is owed or deserved. If you have a friend whose spouse commits suicide, bring the subject up. Help them out. File the claim!
March 10th, 2010
“My great concern is not whether you have failed, but whether you are content with your failure.”–Abraham Lincoln
Well, Abe was certainly easier to please than me. When it comes to protecting your family future with life insurance, with the very rare exception of someone who is simply not insurable, failure is not an option. For the rest of us, being content with just having done something, however inadequate, while certainly better than nothing, is still being content with failure.
I know there are circumstances when a health issue and the premium rating that comes along with it may limit our ability to do everything we wish we could or everything that we really should. And I am not an advocate of breaking the bank with life insurance premiums, or even running a budget too close to the brink. But doing everything possible within your means should be the least you do. This is your family we’re talking about.
I know this is kind of a lame analogy, but my Dad taught me at an early age that when you borrow something you should give it back at least in as good shape as you received it, preferably better. If you borrowed a car, you brought it back with a full tank and maybe a car wash. If you borrowed someone’s cabin in the woods, you cleaned it and stocked it with a large stack of split firewood.
We don’t know how long we get with our families and we should endeavor to ensure that, if we leave prematurely, they are better off than when we were there. That’s right…better off! That’s just my opinion and my deeply held belief, but if you really love them, like me, you would want nothing less than a life without worry for them.
Bottom line. Is not enough life insurance really OK? That’s your call.
March 9th, 2010
Yesterday I offered a post about term insurance versus whole life. There was on piece of the puzzle I left out, a particularly disturbing one since, first and foremost a life insurance agent should be all about making sure there is enough death benefit to take care of the family.
I have a young couple as clients who came to me a few years ago concerned that they might not have enough life insurance. They had been sold whole life policies by a Northwestern Mutual agent who had started out suggesting $500,000, 6 times the husband’s annual income, but they insisted that whatever insurance they bought had to fit within their budget. (Dave Ramsey would have loved them for that) Being the dutiful Northwestern agent that he was, he didn’t let go of whole life. He came down to their budget and ended up selling this young couple $150,000 worth of whole life, not quite 2 times the husband’s annual income.
Based on their age and income and family situation this couple felt like they needed at least $1,000,000 on the husband and at least $500,000 on the wife. They admitted that they got all wrapped up in the agent’s pitch about the cash value aspect and all of the advantages it would have down the road and finally just signed on.
We were able to get this couple into 30 year term insurance for the amounts they felt they needed and stay within their budget. This is the point I get hung up on with agents that are wholly sold on whole life. To the detriment of the family’s needs, they will stick to their guns and under insure them rather than go to a term product and make sure that the family is taken care of completely if something happens. All the rap about cash value wouldn’t have done these folks any good if the husband had died. The family income would have been gone and the widow and three children would have had just a fraction of the money they needed to carry on.
So why did this agent beat them down in death benefit and stick to whole life when it made no sense for the clients? Whole life insurance is insanely profitable for life insurance companies so they spend more than just a little training time teaching agents how to keep turning clients back to whole life and how to make sense of too little insurance. They of course also remind them of the commission and renewal advantages of whole life just in case the agent has a conscience but is able to be swayed by money.
Bottom line. The most important components of a life insurance sale are the client’s needs and their budget. The needs should be met and the budget should remain intact.
March 9th, 2010
Clients being ever vigilant for the fine print or hidden costs occasionally ask how I get paid. The core of the question for them is, of course, any additional cost they might incur above and beyond the premium.
Almost all life insurance agents are paid on a commission basis by the company. For term insurance it is generally a percentage of the first year premium with no renewal commissions paid. With whole life or universal life it is generally a percentage of the first year premium and a modest renewal commission for anywhere from 5-10 years.
I’ve made no bones about the fact that I’m not a fan of whole life insurance and that I believe that if you get down to the core of why agents choose to concentrate on whole life versus versus term insurance or even universal life with a no lapse guarantee, it’s commission. I’ve been torn asunder for this assertion on a number of occasions by whole life agents who will claim to their death that they really believe whole life is the answer for all life insurance needs.
I maintain there is a point when a person “outlives” the need for most of the life insurance they might carry during their child raising, higher income days. So, let me just throw out some facts and you can give it some thought. Maybe I’m all wet. Maybe not.
Let’s use a 48 year old guy who needs $1 million of coverage. He’s a doctor and is confident he will be comfortably retired by age 70. Just to give him a little wiggle room we got him $1 million of 30 year term that will cost $3320 a year at the preferred rate he qualifies for due to his being a private pilot. At the end of 30 years he will have paid $99,600 for the protection he wanted. If he reached a point before then that he had outgrown the need for it, he could have dropped it and paid less.
He can get $1mm of whole life for $21,000 a year. Over the next 30 years his premiums will total $630,000, but that will be offset (according to the whole life agents) by the fact that the policy will have accrued cash value of $591,572. So, without digging any further it’s plain that a person could take the cash value and end up paying about $38,500 for the insurance over that 30 year period. Good deal?
So, where’s my leg to stand on? Well, let’s start with the most obvious, $300 a month versus $1750 gets my attention. But what if money just really isn’t an issue. I know “buy term and invest the difference” is a worn out, beat up old piece of common sense, but really, it still is common sense. If you can afford $21,000 a year without stressing your budget, buy the term and free up $17,680 a year to invest outside the policy.
Whole life guys will tell you no one has the discipline to actually budget that $17,680 and invest it, so the whole life is a kind of forced investment/savings/retirement plan. Well, that may be true for some, but I would venture a guess that if someone can’t do that, they will also eventually lapse the whole life policy. If they lapse their insurance their family has no coverage. If they don’t invest the $17,680 one year, they still have all of their life insurance.
So, what if a disciplined investor socks away $17,680 a year for 30 years? At a fairly modest 6% return, that generates $1,481,000. There are plenty of mutual funds out there that have averaged 12% or more for a very long time now. What if they put that extra money into those kind of funds? At 12% “the difference” generates nearly $5 million. Even with the taxes that will be due it beats whole life.
And about that cash value. Generally it isn’t left alone. The truth is that the agents will tell you that you can borrow it (use it as your personal bank) or pay premiums from it. Well, unless you pay back the loan the death benefit has been reduced.
Now all the claims I’ve made came from a real whole life policy from a highly rated company. I took all of my numbers off of the guaranteed side of the illustration. Any agent that would use the non guaranteed figures to sway you to buy should have to take in your family and care for them when you die without any insurance.
Bottom line. If you lack discipline and have enough money to buy whole life, buy term and put the difference on an automatic eft into an investment plan.
I almost forgot why I got off on this subject. It’s the commission. On the term insurance an agent would typically get about 90% of the first year premium or about $3000. The whole life agent would typically get about 70%, so they make $14,700 the first year. Normally they would get around 3% annually on renewals, $630 a year, for at least 5 years, another $3150 in commission, $17850 total. So, all I’ve been saying is that the amount of commission could certainly be a factor in swaying someone to push a client in a direction that just might not be best for the client.
March 8th, 2010
If there is a common thread through the whole life insurance application/underwriting experience, it’s that those applying tend to underplay their mortality while feeling like underwriters really overplay the whole mortality thing.
Life insurance pricing and mortality risk evaluation is far from a perfect science. If it was “perfect” and absolutely fair to everyone, there would be more than four basic rate classes and eight subclasses (table rating). There would be maybe 100 rate classes and every conceivable health issue would be graded on a point system and your overall evaluation would lead to a specific rate that was custom just to you.
In this fantasy underwriting idea everyone would start at the worst rate class and deductions would be awarded for all of the underwriting categories that currently exist, height and weight, smoker or non smoker, cholesterol levels, blood pressure averages, liver functions, family history and so on. If a person was a perfect specimen and got a deduction for everything they would pay the equivalent of the best rate class now, preferred plus or preferred best.
But here’s where the difference would kick in. If a person only had one deduction out of all the categories, instead of the current system that would bump them one full rate class, they would only be bumped the appropriate mortality experience percentage relating to that one issue. For example, if I were in perfect health and wanted $250,000 of 20 year term I could get that for $955 a year. For the sake of my experiment here let’s say that the total cholesterol level for the best rate class had to be 220 or less and mine was 227. In today’s underwriting reality that would bump me to a preferred rate at $1104 a year, a 14% increase.
But what if, scientifically speaking, there was really only a 2% increase in mortality risk due to that elevated cholesterol? With my system I should then pay 2% above the best rate class, $974.10. I like it!
Bottom line. There is a mortality reality that we, as customers, don’t really want to admit to and there is an inherent unfairness in generalized underwriting rate classes that insurance companies don’t want to talk about, admit to or deal with. But, it is what it is for now and as long as life insurance companies keep rates as low as they are, even when we don’t get the best rate, we still get good rates and probably ought to cease whining.
March 5th, 2010
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