Ed Hinerman On Life Insurance

Life insurance and foreign travel!

March 10th, 2007

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.

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Entry Filed under: Independent agent, insurance, life insurance, private pilots, term insurance