I was reading a summary of a case that involved the denial of payment on an accidental death claim where the car accident may have been contributed to, or caused by the insured’s blood alcohol level of .17. Just to be clear, this involved an accidental death and dismemberment policy, not a life insurance policy.
The insurance company, Life Insurance Company of North America, as part of its’ definition of “covered accident” excluded intentionally self inflicted injury as a covered accident. Now, there was no evidence that the plaintiff’s mental state would have led him to roll his car intentionally as an act of suicide. The insurance company claimed and was ultimately upheld to be correct that driving after drinking is an intentional act that a person should know could result in serious injury or death. This case went through several appeals but in the end the insurance was not held liable for the requested death benefit.
This led me to wonder if a life insurance company would use the same logic to invoke the suicide clause under a standard life insurance policy. I have a friend who worked for 30 years in a claims department of one of the largest life insurance companies. He was the director of the department the last 10 years he was with them. His immediate take was that the claim would have been paid in full. I asked him if there was a suicide note or if the insured had been having suicidal ideations that was known to his family or doctor, if that would then lead to denying the claim.
He said that logic would tell you that those things coupled with a drunk, fatal accident would bring in the suicide clause, but he said it just isn’t that cut and dried. Even if he had written a suicide note and left it with a friend, left the friend’s house drunk and died in a rollover 45 minutes later, an insurance company would have to prove that, at that split second in time the insured’s thought process was to roll the car to kill himself.
If, on the other hand, there was a note left with the friend saying that in about 45 minutes he could send an ambulance to mile marker 63 where his car would be wrapped around a bridge support, a company could probably find a court that would uphold the suicide clause.
But this veteran of 30 years of claims processing said that the rule of thumb was to pay claims even if there was a reasonably high chance that it was suicide related. He said for large companies like the one he worked for paying the claim was much cheaper and far better for their image than fighting it.
Bottom line. Since I wrote my first life insurance policy in 1978 I have not had a claim unpaid for any reason including the suicide clause or the incontestability clause. As an agent I would have to say that most companies, or at least the companies I’ve chosen to deal with are honorable and process claims with their focus being square on paying the claim.
September 2nd, 2010
With almost all life insurance underwriting in relation to someone with a history of cancer there will be a waiting period after the completion of treatment before a company will approve a policy. The only exception to that rule that I can think of would be the two most common skin cancers, basal cell carcinoma and squamous cell carcinoma of the skin.
From there in general it would jump to a one year waiting period after treatment primarily to see if there is any quick recurrence, which would suggest either a more aggressive cancer than was thought or possibly some cancer cells that were missed with the treatment. The one year waiting period would most likely be used in the instance of low stage/low grade cancers such as in situ breast cancer, a grade 6 or lower prostate cancer and in general any cancer that is considered to be a stage 0, fully encapsulated tumor or cyst. We were recently able to get standard plus rates about 9 months out from a very low stage and grade Melanoma.
My wife recently had a large ovarian tumor that was taken out with a total hysterectomy. Pathology showed it was a stage 0 Brenner tumor, cancerous yes, likely to spread or recur no. If she needed more life insurance we would likely be looking at a year before we could get standard rates.
It’s not uncommon with cancers that are more aggressive or are more prone to recurrence for companies to postpone consideration of coverage for 5 years or even as much as 10, or rather than postpone, approve the policy but with an extra charge per thousand dollars worth of coverage per year until that 5 or 10 year point is reached. When we place a policy like that we continue to shop it every six months or so just in case someone has changed their stance on the waiting period or extra charge. Companies don’t set their guidelines in stone and never review them so the possibility for improvement is always out there.
Bottom line. The key to success is to find an independent agent who understands the different company stances on cancer and provide them with the pathology report, post surgical or whichever report is their final conclusion. Understand that coverage won’t be available if you are still being treated and just because your oncologist says you are cancer free, insurance companies aren’t going to be treating it as if it never happened.
September 1st, 2010
Wow, what a day. I normally can focus on a topic and try to coherently share my thoughts on one life insurance subject or another, but today life is just gobbling up the energy I had set aside for that.
Tomorrow, three weeks after my wife’s hysterectomy, we are finally meeting with an oncologist to let us know what they really took out of her and what it really means going forward. She had/has some kind of cancer in her ovary. Of course that was taken out with the total hysterectomy, but the surgical pathology report says that one of the tumors was cut “intraoperatively”. They also say that they believe it is a Brenner tumor, but it also looks a lot like a transitional cell carcinoma, a bladder cancer. I don’t have to tell any of you have waited for this kind of meeting just how difficult it is.
I’ve mentioned before that my wife and I have been raising our granddaughter for close to a year now with a revocable guardianship. Our daughter showed up this weekend and threatened to take her away even though she is jobless, homeless and broke. I would be heartbroken if my granddaughter was jerked back into a life of chaos and poverty just to spite us.
And then this morning a friend of mine didn’t show up for a meeting. When his wife called to remind him he didn’t know what she was talking about. He has been in the hospital all day and they still can nail down why he can’t remember anything for more than about 30 seconds and a lot of his long term memory is gone also. Stroke? TIA?
Bottom line. Please, those of you who will, hold each of these situations up in prayer.
August 31st, 2010
I am not a big fan of “no exam” life insurance simply because when you are going to lock in 20 or 30 year term insurance it just seems prudent to do an exam and get the best possible rate you can. After a talk with one of my nieces the other day I am ready to back off of that advice for younger people.
The discussion we had pitted my advice that long term savings were more important than short term convenience. From her side she said that for herself, and she thought her friends, the exam was definitely not something she wanted to do if she didn’t have to (ah, to be young and not care what your cholesterol is, or that you even have liver functions). She also was liking the ability to apply, get fairly instant approval and pay with a credit card online.
She’s 27 and in good health, but likely preferred due to weight, so I ran some numbers for her. She wanted to look at $100,000 of 30 year term. The best rate out there was just over $12 a month. I then showed her the best simplified issue price at $16.50 per month, about $55 a year more. She wasn’t swayed by the $1500 she would save over the life of the policy. She was convinced that for herself and her friends quick, convenient, online payment and no exam was worth a few dollars a month.
She then also made a point about the future. Even though she would prefer to take this route now, when she has children and a mortgage, she will likely want a higher amount of insurance and at that time would be willing to do an exam to lock in a better rate, so she might only have this policy for 5 to 10 years. And if that’s the plan, when she does apply for the larger policy, she can replace the RBC Express Term policy.
Bottom line. I was 27 once and I can remember having that same kind of logic in my thinking 30 years ago when I was. So, I officially back off of part of my position on simplified issue, no exam term life insurance. I still believe that at about age 40, unless you are just in a screaming hurry to get life insurance in force, simplified products just aren’t a prudent choice. Before that, if you can live with the same logic as my niece, well, why not. It’s still real guaranteed level term life insurance.
August 27th, 2010
I had to change the top of my drum today. I’ve worn it out over the past two years beat it about all of the absolute crap (forgive me) that insurance companies are trying to pass off to consumers in the form of non guaranteed universal life and whole life products.
Now several companies are doing away with their guaranteed level term products and are replacing it with what they call a term/UL policy. There are actually some up sides to this product, but later in this post I will discuss those upsides along with a serious downside.
But for now the same old drum. I have been able to get companies, off the record, to confirm the fact that the majority of the in force universal life business they have is not guaranteed for life or even to age 100. Even the old out dated warhorse whole life policy is often sold underfunded to keep the price down, but the cost of the discount is a shortened guarantee. So you are sold on cash value and lifetime coverage only to find out 10 or 15 years later that neither is going to be there for you because the assumptions they used were based on a solidly growing economy.
It’s the same old story. An agent thinks they need to present the lowest price to win the business of a client and the only way they can lower the price and keep the same face amount is by putting all of the weight of the policy on assumptions about interest, mortality experience and company performance as opposed to putting the health of the policy all in the guaranteed column. Here’s where I pull out my old friend the Good ULto show you that even if there is no guaranteed cash, a universal life polcy death benefit can still be guaranteed forever.
Where the great disservice happens. Oh, let’s call it what it really is. Where the great misrepresentation happens is when an agent gets you to focus on the right side of a UL illustrations which is called the current side or the assumed side. If they can get you to believe that historically the company and the product have been bombproof they can get you to buy into a Bad ULby just ignoring the chaos and collapse that are obvious on the guaranteed side of the illustration.
With easily 60% or more of the in force universal life policies out there headed for a meltdown, the owners of these policies need to pull their heads out of the sand and find another agent who can help them put their protection back on a solid foundation. And just a word of advice, don’t go back to the same agent. He will either claim there isn’t a problem to cover his rear or he’ll replace your old policy with a new one and the guy will get paid twice, once for selling you junk and again for fixing the junk he shouldn’t have sold to start with.
And the new term/UL products that are starting to filter into the system. I said there are some upsides to the product. The price is competitive and like term the rates are guaranteed level for a certain period, say 20 years. That’s the upside. The downside is that you can’t convert it when you want to because it’s a UL and doesn’t convert. So, if 5 years into the policy you decide you want to make it permanent, you can’t. At year 21 the policy will continue at what would be close to a term conversion rate then, guaranteed level for a long period of 30 years or more, but if you wanted to convert in the 5th year you are force to wait and pay for the UL at what the conversion would have cost you 15 years later. Years are not your friend when it comes to life insurance rates.
The other downside is that you cannot lower the face amount, for instance during the first 14 years of a 20 year term/UL without paying a surrender charge. The surrender charge is hefty and looks like it will only leave you a choice of keeping what you have or dropping the insurance and buying a new policy for the amount you now need. This accomplishes exactly what life insurance companies love. All the costs of a policy are paid and it is pure profit and then someone is either forced to keep it like it is or drop it, so they either continue to make a profit or they bank the profit they’ve made with paying a death benefit, exactly the same reason the companies allow and actually encourage agents to sell non guaranteed UL’s.
Bottom line. I encourage you to get an in force illustration on your universal life policy. The company should do that for you once a year at no cost. Have it reviewed by someone other than the person that sold it to you and ask if the price is going to go up or the whole policy collapse if you just keep paying your current premiums. Agents, I encourage you to join the battle to get this type of policy out of circulation and get your clients the type of guarantee their family deserves.
August 26th, 2010
It’s been an interesting 3 years working with bipolar clients and at times tripolar life insurance underwriters, but headway has been made and we are successful in filling our clients needs most of the time. The sad thing for me is that getting approvals without wasting everyone’s time and money has meant spelling out clearly what it takes to get approved. I can imagine how it must feel if you don’t meet the criteria.
I know that leaves a lot of people with bipolar in the not insurable boat, but for the sake of those who do meet the thresholds for approved life insurance coverage, it’s been worth putting out the criteria for approval so that everyone knows clearly whether they will win the war or not.
The criteria have been developed by working with underwriters, clients, and psychiatrists and have been evolving as we go. Let me be very clear about these criteria. Even if you are the perfect client based on these guidelines, if you use the wrong agent who takes your application to the wrong company you will more than likely be declined. I shop every case with bipolar disorder as if I’m really not sure who will quote what. I don’t want an underwriter getting cold feet on a formal application.
Having said that, the guidelines that seem to be gathering approvals are:
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 are definitely available if your condition is well controlled without the use of anti psychotic drugs.
Have you already been declined? These guidelines really work well with all of the major mood disorders, anxiety, OCD and depression. With most medical impairments the key to success is compliance with treatment and control of the condition. The only thing different with bipolar is that compliance and control need to equal stability.
Bottom line. Most agents don’t know what questions to ask and don’t understand what the answers mean when they are interviewing someone with bipolar disorder. If they don’t understand the mission their chances of succeeding for you are as close to zero as you can get.
August 25th, 2010
I know over the past few years thanks in part to Dave Ramsey and also in part to a reality check in the economy, I’ve had to take a new look at my budget several times. The days of paying more than we need to really are over.
The same thought process couldn’t be more true when it comes to your life insurance portfolio. There are three primary reasons why you may be paying easily twice as much as you should and very possibly four to five times what you need to.
1. You were talked into buying permanent insurance for a temporary need. Cash value whole life and universal life policies can be 3-4 times more premium than a 20 year term insurance policy for the same amount of coverage. If you have permanent insurance, have a serious talk with your spouse about a truthful answer to the question “does your life insurance need to be permanent?”
2. You simply used the wrong agent who used the wrong company. For instance if both of your parents died prior to age 60 of cancer, most companies would approve you in a standard rate class due to family history which, just quickly, for a male age 50 in otherwise good health wanting $500,000 of 20 year term would cost a little over $1700 annually. But if you used an independent agent who knew the myriad of underwriting niches, you could have had the same policy from ING Reliastar for just barely over $1000 a year.
3. You bought your life insurance from your old friend, your auto and homeowners agent. He pointed out to you that by placing your life insurance business with him you would get a discount on the entire package. What you weren’t told was that the discount is nowhere near enough to cover the difference between paying a fair price on your life insurance and paying what, for instance, Farm Bureau would charge.
I often stop by businesses and simply ask the owner if they would like a comparative quote just to make sure they aren’t paying more than they need to for their business life insurance. 4 out of 5 business owners are paying too much. A lot of them know it without even doing a comparative quote. Some of them, and I understand this while disagreeing with it, choose to continue to pay too much because they bought it from someone that they don’t want to offend by replacing their policy with a better value. It just seems to me that every life insurance agent should want nothing more for everyone in the world than for them to have life insurance and have it be the best value available.
Bottom line. This down economy has brought a real gut check into our spending habits and our budgets. That’s a good thing but it often means some tough choices. You may have to tell your car insurance agent that you’ve found better life insurance than he has to offer. You may have to shop a bit longer for your life insurance to make sure that the right agent uses the right company for you. You may finally have to come to grips with the fact that whole life insurance is not the best product for you and tell your agent that.
August 24th, 2010
Obesity has always been a life insurance underwriting challenge. Companies are keenly aware that while weight may not kill you, it dramatically increases your risk of everything from heart disease to cancer.
The explosion in type 2 diabetes worldwide can be directly linked to the epidemic of obesity that has swept so many countries, with the US near the top of the list because, well face it, we have more money to spend on more ways to pack on pounds than most countries. Below is a list of the top 10 countries and the percentage of people that are considered obese (BMI over 30).
Rank Countries Amount
# 1 United States: 30.6%
# 2 Mexico: 24.2%
# 3 United Kingdom: 23%
# 4 Slovakia: 22.4%
# 5 Greece: 21.9%
# 6 Australia: 21.7%
# 7 New Zealand: 20.9%
# 8 Hungary: 18.8%
# 9 Luxembourg: 18.4%
# 10 Czech Republic: 14.8%
So, with a direct, unquestionable link between mortality and obesity, is there a way for the overweight to get a fair shake on life insurance rates? The good news is that most companies don’t take a real exception to those that fall in the overweight, BMI 25-29, category. It’s the obesity range between BMI 30-40 where companies start jumping ship and either offering highly rated policies or declining to offer coverage at all.
It’s at this point where there are a few companies that, in the absence of any current health issues related to weight, will step forward and offer policies where no other companies will go. Is it going to be more expensive than someone who isn’t overweight? Well, yah! It’s possible you may not be able to get as much as you want or you may have to go with a shorter term without breaking the budget, but it’s a wise person that understands that with life insurance, something is always, always better than nothing. In almost all cases I’ve run into we can at least get coverage. Some sample approved builds with Prudential would be 5’10, 380, 5’4, 320 or 6’2 425. At age 40 $500,000 at those builds would run $3165.00 annual for a 20 year term, $2550.00 for a 10 year term.
Those would be rated policies, but with most companies they would be a decline. Again, something is always better than nothing and approved is always better than declined. Even if you had to cut that coverage in half, just to be able to tell your spouse that you had life insurance in force with a guaranteed level premium is a good feeling for both of you.
For the less altidutinally challenged the best value at a standard rate would be 5’10, 260, 5’4, 220 and 6’2, 290, again for a 40 year old male with no other health issues, $500,000 20 year term at $1085 annually.
So, which company will stretch the furthest and still give their very competitive best rate class? That would be Genworth Life and Annuity who for the same guy above would only run $359 annually with these builds. 5’10, 209, 5’4, 174 and 6’2, 233.
Bottom line. If you think you are being mistreated because of your build, more than likely you are. Seek out an independent agent who will show you Prudential’s or Genworth’s build charts.
August 23rd, 2010
Liver function tests have been the nemesis of life insurance underwriting for as long as I’ve been in the business and the source of a tremendous number of unfair ratings and declines on applications. Because of a long held leap of assumption that elevated liver functions are usually a result of excessive drinking, I actually had a client declined by Federal Kemper for a GGT of 68 (0-66 is normal), because he had a DUI 30 years prior.
While you won’t find any argument from anyone that excessive drinking can lead to liver damage and disease, it is also common for liver functions to be abnormal in combination with high cholesterol and also in connection with the taking of many prescription medications. Elevated liver functions are also fairly common with frequent use of the drug of choice for my generation, my friend Ibuprofen.
The three liver function tested on life insurance exams are the AST, ALT, and GGT. Each of the tests measures different aspects of how well your liver is working. The thing the tests really leave up in the air for underwriters is why they are elevated. It could be as simple as the body’s reaction to a medication or as complex as liver disease or viral hepatitis. It is not uncommon for life insurance applicants to find out due to the results on their LFT’s that they have hepatitis, something that could have gone unnoticed for some time simply because most people don’t get lab work done on a regular basis.
Prudential has recently taken a new stance on liver functions that relies heavily on the fact that if liver functions are elevated for bad reasons there are usually other lab results that will show as abnormal also. This should be great news for all the people that would have been a preferred rate candidate except for a mysterious elevation in liver functions.
Pru will now offer preferred best rates, their best rate class if:
1. Only one liver function is elevated no more than 4 times normal or
2. If 2 or all 3 of the liver functions are elevated no more than 2 times normal.
These exceptional approvals have three caveats:
1. There are no concerns about drinking. You don’t have a history of DUI that could lead to a suspicion of alcohol abuse. You’ve never been through alcohol treatment and you’ve never been told by your doctor that you need cut back or stop drinking.
2. All of your other labs are normal. I believe this is the key to their aggressive stance.
3. No personal history of or diagnosis of liver disease.
Bottom line. It would not be an exaggeration to say that there are probably hundreds of thousands of people paying far more than they need to on their life insurance due to this one issue. If you’ve ever been told that the rate you were quoted has changed due to elevated liver functions or that you have been declined, check out Prudential. We all deserve to pay a fair price for our family protection.
August 21st, 2010
While there are plenty of life insurance companies and agents out there that stick their fingers in their ears when a client starts talking about their weekend hobby. The truth is there is an affordable and prudent way to approach the subject of life insurance for those that enjoy the thrill of jumping out of a perfectly good airplane.
There is no escaping the fact that skydivers, whether recreational or insanely professional, are going to pay an additional mortality cost (flat extra) if they want to be covered for that avocation along with everything else. I think where some people get hung and and eventually just take an exclusion or bag life insurance altogether is the idea of your life insurance having to be all one way. There is this hangup about it either all covering skydiving or none of it covering skydiving. One direction ends up too expensive and the other, well, just not prudently covered.
For the truly recreational, 50 jumps or less per year, most companies are going to charge a flat extra of $2.50 to $3.00 per thousand per year. This is about as low as it gets for what companies call dangerous hobbies. That amount increases with the number of annual jumps with some companies going to $5.00 per thousand over 50 jumps and $7.50 per thousand over 100. Things start getting a little dicey when you are bailing out more than 200 times a year. This is truly recreational. No stunts. Just enjoying the scenery.
So let’s put that into perspective for a 30 year old guy whose wife has told him he is now a father and if he wants to skydive he needs life insurance to cover. He should have had it before she asked, but he’s a guy! We’ll assume great health, non smoker, good family history. Marching orders from the Mrs are to find it and don’t come home with less than $250,000.
So, you can go out and get a quote for $250,000 of 30 year term with an exclusion for death due to skydiving for around $20 a month. If you’re really brave (read that not so bright guys) you run home and tell your wife that “I’m more likely to die in a car accident on the way to the airport than from jumping. After all I have a back up chute and have never even had a close call….”. That is not only unlikely to fly (just like you, if you don’t get the right insurance), but let’s be real. She wants that insurance because she is concerned about her future if that chute tangles or doesn’t open. She doesn’t want any exclusions for anything. She will need that money, or more, to raise your children.
So what is the real cost for full coverage? We already know that the base policy will be about $240 a year. With some companies it will be slightly higher because they won’t allow a flat extra charge to be added to their best rate. I know it doesn’t make sense but it’s my job to steer you away from those companies. So, added to the $240 is, best case, $2.50 per thousand ($2.50 x 250) or $625 a year. So the total is $865 a year or about $74 a month. Just a suggestion guys. Don’t try the “that’s too expensive” argument with your bride when you spend more than that every month getting airplane rides up to 12,000 feet. Much better to budget the insurance and a few less jumps a month if you think that’s too much.
Another way to handle it might be to split the difference. Take out two policies for $125,000, one with an exclusion and the other with full coverage. Due to a higher cost per thousand below $250,000, the policy with the exclusion would be $170 a year and the policy with full coverage would be $324.50 for a total just under $500 a year, around $42 a month. If you and your spouse both believe skydiving won’t be your demise this is a plan that can provide peace of mind no matter what. If you died from any cause other than skydiving you spouse would receive $250,000 and if it was due to skydiving it would be $125,000.
Keep in mind that if you have life insurance that was taken out before you took up skydiving, you’re good to go. Because it was taken up after you bought life insurance it is “grandfathered” in for lack of a better term and you already have full coverage for all causes of death.
Bottom line. Work with an agent who has access to a lot of companies and can get the best price on full coverage. Remember something is always better than nothing.
August 20th, 2010
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