Ed Hinerman On Life Insurance

Why do universal life and whole life policies fail?

Universal Life, Whole life.  Sounds like it ought to last forever. Almost without fail the life insurance agent who told you about universal life or whole life led you to believe that it would last forever. An unfortunately large percentage of those agents didn’t tell you the truth. Yes, they lied!!!!!!! A conservative guess would be that between half and three quarters of all whole life and universal life policies will fail even if you religiously pay your premium every year.

Universal life and whole insurance qre the most misrepresented products to hit the market since, well, since life insurance has been for sale. Misrepresentation of  life insurance performance has been the source of more lawsuits and agent’s lost licenses than any reason.

So, is there something inherently wrong with the products……or is there something inherently wrong with the life insurance agents who just can’t bear to tell you the truth for fear they may not make the sale. Let me narrow it down for you. The products, sold correctly, are solid and dependable. It will do exactly what you want it to do. It is guaranteed to perform. The problem is not with the product!

So, all of this begs the question, “why would an agent sell you something that can fall apart without warning in the future”? 

Life insurance is a tough business. Most agents don’t make it through their first year and a very small percentage could actually be considered successful by anyone’s standards. For most agents the difference between making a sale and not making a sale can be the end of their career.

 The easiest way to make a universal life or whole life sale is to show the customer the non-guaranteed illustration at the lowest premium possible and hope you don’t ask about the other side of the page, the guaranteed side. Then if you buy, they hope you can’t remember their name, so that when the policy unravels, they won’t have to answer the question above.

Use a reputable independent life insurance agent and insist on guarantees. Get it in writing and insist that your agent review your policy with you annuallly.

2 comments March 10th, 2007

Does your build affect your life insurance quote?

Probably one of the most common surpises and points of contention in life insurance underwriting is when, even though your health is perfect, your life insurance quote changes after you apply because your height and weight (build) weren’t exactly what they thought they were. For that reason, rather than telling your independent insurance agent what you think your height and weight might be, step gently on those scales, get a grip on reality, and an accurate quote up front.

Here is a sample from a middle of the road company. These are their build guidelines for their best rate. Honestly most companies are within a few pounds of this. Some are stricter and some more lenient, but count on them to adhere to it especially if you want their best rate class.

Add comment March 10th, 2007

Life insurance and foreign travel!

It’s interesting to see the debate on this issue. Some states have adopted regulations that don’t allow insurance companies to use foreign travel as criteria for underwriting life insurance. I’m not convinced that is a prudent move. Whenever a health condition or an activity is disallowed weight in underwriting, it simply shifts the burden of that potential mortality risk to the entire risk pool.

In simpler terms, rather than charge someone extra for going to countries that don’t have a great safety record, the life insurance company will simply charge all of us a little more so that person won’t be penalized.

Did you know that smokers, on average, pay about 3 times as much for their life insurance as non smokers, if all else is equal? Did you know that Alaskan bush pilots (who don’t always land on runways), will pay about 2-3 times more for their term insurance than a private pilot who takes off and lands from established airstrips, all else being equal? Did you know that men pay more for their life insurance than women, all else being equal (except in Montana)? Why you ask. Because men, smokers and bush pilots don’t have the same mortality experience as their counterparts.

Ok, let’s just be real. There are some places in this world that aren’t necessarily safe to travel to. Life insurance companies should be allowed to consider that. They shouldn’t be allowed to be abusive about it, but they should be allowed at least the opportunity to assess any mortality risk associated with that activity. If they aren’t allowed to assess the risk where it belongs, they will assess the risk to all of us.

If states start dictating what can and can’t be used for underwriting, I can see the bush pilot risk being shared by all private pilots in the future.  Again, I don’t think life insurance should be able to abuse the knowledge of foreign travel, but it should be able to be considered. A good independent life insurance agent can steer you to the companies that don’t abuse the knowledge.

1 comment March 10th, 2007

An optimist’s look at life insurance and heart disease and heart attacks!

You have to love an optimist. I had a call a few years back from a man inquiring about life insurance. As we were going through health questions I asked about cardiac issues and he admitted that he had gone through a two vessel angioplasty after a minor heart attack. At this point I was the optimist, since, given some specific criteria having been met, he would be very insurable at competitive rates.

I then asked him when he had the angioplasty and his answer smashed my optimism and brought his to the forefront. He was still in the hospital and the heart procedure had been done the day before.

Well, there are criteria to meet if you want life insurance and life insurance quotes that are competitive. The day after the procedure doesn’t meet any of the criteria, but I went on the explain to him the threshholds he would need to meet in order to once again be in the life insurance market.

First, a little bit of time. For most companies that would be a year. For a few, as little as six months. During that time they will want to see compliance with any life style changes the cardiologist has recommended such as STOP SMOKING. All companies will insist on what most cardiologists regard as normal followup. Regular checkups with ekg’s and at least one stress test within the first year after the procedure.

So, if you have had an angioplasty, bypass surgery, with or without a heart attack and are thinkng that little wake up call might be a good time to consider life insurance, do the following. If you are a smoker, STOP!!!!!!!! Can’t qute emphasize that enough. Life insurance companies don’t have a lot of sympathy for smokers with cardiac issues. Get regular checkups and comply with everything the doc says to do. When you get your stress test, get a copy of the narrative report. This gives the independent life insurance agent you are going to use the information to know what company to go to.

Just like a diabetic needs to know what their A1C level is, if you have had heart problems you need to know what your LVEF is. That stands for left ventricular ejection fraction and is a measure of how efficiently your heart is pumping, or how much damage your heart has sustained. An ejection fraction below 50% is a tough sell to an insurance underwriter.

Bottom line, take the wake up call seriously. Good news is you are still around to read this. Even better, if you do all the things you should do, life insurance will be affordable going forward.

Add comment March 10th, 2007