Archive for July, 2007
Return of premium term insurance provides coverage for a guaranteed period at a level premium and when you outlive the term, it gives you your premiums back. The annual cost is higher than straight term, but with term insurance you pay for coverage and if you outlive the term, well, you’ve spent the money for protection you needed. That’s not a bad thing. Both straight term and return of premium term have advantages.
I’ve mentioned more than once the AL Williams “buy term and invest the difference” theory as it compares to whole life. I decided to run that same comparison using return of premium rather than whole life.
So, we’ll assume we have a 35 year old male in preferred plus health. We will assume this guy lives somewhere other than New York or Utah. Both states are decidely anti-return of premium. So, we’ll put the lucky guy in Colorado. He wants $1,000,000 of 30 year term. He has decided that AXA Equitable offers the best options for him.
For this scenario we will offer two options. The first option will be a 30 year return of premium term. The second will use the same premium amount and use it to purchase a 30 year level term policy and put the difference into a fixed annuity at 5.2%. Just in case anyone jumps all over that annuity, yes, I am aware that there are no annuities that can be guaranteed for that long, and yes, I am aware that surrender charges could be incurred and taxes will be paid.
The 30 year return of premium policy will be $1685.00 annually. If kept to the end of the term that will produce a tax free refund of premium in the amount of $50,550.
A straight 30 year level premium term would be $995, leaving $690 annually to invest in that annuity. At the end of 30 years, adjusting for taxes, but not adjusting for premature withdrawal penalties, the annuity would produce $40,700.
Bottom line. If you have the money to put into a return of premium product, the tax free status of the end refund makes it a choice worth looking at.
July 31st, 2007
Heart disease is no longer the number one cause of death for Americans under the age of 85. Dramatic decreases in the death rate per 100,000 have been cut almost in half for both men and women in a study that spanned 1980 to 2000. This bumped cancer up to the number one position for the first time. From a life insurance standpoint, this could be good news as the decrease seems to be more linked to preventive medicine and treatment than any significant nationwide lifestyle change.
In a New York Times article today, there is optimism about the decrease in deaths dusted with a bit of pessimism as the downward trend could be stopped or even reversed as obesity and diabetes numbers skyrocket. Both obesity and diabetes are primary contributing factors in heart disease.
The study noted that the one lifestyle change that has had a dramatic impact is a decline in smoking . While there has been a large decline in the percentage of the population that smokes, about 45 million adults still smoke and with about 20% of teens still smoking, there should be plenty to replace the adults.
Just an underwriting reminder for those who choose to walk both ends of this discussion and continue to smoke even after being diagnosed with heart disease. Underwriters will be nothing short of brutal when they make their decision. Life insurance companies already make it clear where they stand on smoking with the rates they offer a healthy smoker. When you couple that with a disease who claims smoking as one of its’ primary risk factors, well, it just isn’t going to come out making you happy.
Bottom line. Know the risk factors for heart disease and make it your mission to do what you can to avoid them. It will prolong your life and lower your life insurance premiums.
July 31st, 2007
From a life insurance standpoint, diet and exercise control of diabetes, if well controlled, would certainly earn the best possible rates that someone with diabetes could expect. But what happens if someone has diabetes and also happens to be an athlete? And not just an athlete, but an extreme athlete!
One thing immediately came to mind when I was pondering the situation. One of the red flags underwriters look for in the labs of anyone with diabetes is whether they are spilling any protein in the urine. Protein, or blood, in the urine is also, unfortunately, a common occurrence with athletes who push the boundaries of endurance. Marathon runners and bike racers come to mind. When they train and race they are straining every part of their system for 2 to 4 hours or more.
The New York Times had a great article a few days ago on the subject of diabetes and extreme athletes. It really hit home on the subject of how diabetes can impact lifestyle.
A client of mine was rated due to protein in his urine several years ago. He was 68 at the time. He was also a distance trail runner. He would run about 7 miles daily up a mountain near where we live, unless he was training for a specific race, then he upped the mileage to about 10 a day. He was training for a race when he did the exam. Anyway, he came back positive for protein and the insurance company allowed us to do a retest. It was his good fortune that he had the flu during the retest and came back negative for protein because he hadn’t been able to run for several days.
Bottom line. I think everyone would agree that exercise is a good thing and be assured that life insurance underwriters would much rather see that someone is taking care of themselves than not.
July 30th, 2007
I recently worked with a client who, seven years after his radical prostatectomy for prostate cancer, once again had a detectable and rising PSA. This news was discovered from the lab results on an insurance exam.
While his PSA wasn’t high, in the absence of a prostate, any level is a concern. He is now back in the hands of a urologist to determine if there has been a recurrence and what course of action needs to be taken. This put his life insurance on hold of course. As I’ve mentioned before, any PSA level above zero after a prostatectomy, will not be insured.
A recent Medical News Today article brought up a point not to be overlooked by anyone who has had prostate cancer and certainly to anyone who has been recently diagnosed. Bottom line is that a rather substantial survey has shown that a recurrence rate after a radical prostatectomy is significantly higher with surgeons who are less experienced with the procedure.
The good news is that the survivability is good in either case and that life insurance underwriters don’t underwrite the credentials of your surgeon, just the results. In most cases prostate cancer can be underwritten resulting in better than standard rates.
Bottom line. If you can, get the most experienced prostate surgeon. The good news is that the most experienced independent life insurance agents are available for everyone.
July 30th, 2007
How often have I said it’s all about mortality? That is the bottom line for life insurance underwriters. The better the survivability of any health issue, the better the underwriting and subsequent life insurance rates.
A recent Washington Post article provided details of overall cancer mortality improvements such as this comment, “U.S. cancer mortality rates have declined every year since 1991, an unmatched achievement in the developed world. Five year survival rates for breast cancer, if detected early, are over 95%. In January 2007, the American Cancer Society reported that total cancer deaths in the U.S. declined for the second straight year, despite an aging population that is at higher risk for cancer.”
The article makes a good point concerning Michael Moore’s documentary “Sicko” that slams American health care. While health care in the U.S. may not be all that it could be, mainly more affordable, the truth is that the cancer survivability in the U.S. is higher than any of the other countries that Mr Moore suggests as good examples.
Bottom line. Cancer, and especially breast and prostate cancer, are becoming more manageable and more insurable all the time. Just a footnote. Life insurance in those other countries comes at a much higher cost than it does here at home.
July 30th, 2007
If people didn’t die, or if people knew at birth exactly when they would die, the need for life insurance would certainly be looked at differently. The truth is that we all know we will die and unless I am mistaken, mortality tables would show that approximately half of us will die prior to the average mortality experience (and half after). There are life insurance products that directly address both of those experiences.
Probably the largest need and the most concern is with premature death. When I talk about premature death, I’m not talking about someone who almost, but didn’t quite, make it to the average mortality age.
Premature death is the one we all remember. If it has not been a close family member, I would be surprised if any of us hasn’t been a little shaken by news of someone we knew dying in their 50’s, 40’s, 30’s, 20’s……..teens. Think about it. Remember that feeling in your stomach when you heard that a friend, a way too young friend, died of a heart attack. What about when a friend’s teenage child is killed in a car accident. Or a friend of a friend who was diagnosed with cancer at age 48 and died within weeks.
It seems like these events come just frequently enough in my life that I have long since given up any thought of immortality. The best that I, or you, can do is to hope for a long life and plan for the possibility that it won’t be.
Bottom line. Don’t be worried about it, but be realistic and prudent. Unless you just simply don’t have a responsibility in the world and it’s OK if they just put your remains out with the trash on Wednesday, get life insurance.
July 28th, 2007
When doing a needs analysis for life insurance, one of the most critical factors is replacement of income. Normally when we think about replacement of income we are looking at what it would take to replace $25,000 or $100,000 a year. In the case of pro athletes, with income often ranging from $500,000 to millions per year, the need for substantial life insurance is paramount.
I know here in Colorado the Denver Broncos have lost two football players to untimely deaths in the past year with the shooting of Darrent Williams and the apparent cardiac death of Damien Nash after playing in a charity basketball game. Both of these athletes were in their 20’s and highly paid. Both had bright and long careers ahead of them.
It happens all the time, whether it’s an actual sports or traning related death, or, just like your average person, an untimely death due to health issues or an accident. The big difference is the size of the lost income. It is the size of the policy that it takes to replace lost income that is the challenge. When you start looking at life insurance policies in the $25,000,000 to $50,000,000 range, you had better have the right independent agent working for you.
I know it’s all relative. If someone is used to living off of $50,000 a year, or $1,000,000 a year, the loss of the income is makes it virtually impossible for those left behind to continue on with a lifestyle they are used to.
Where there is a need, there is generally a person or team to meet those needs. Whether it is income replacement for an accountant with diabetes, or income replacement for a professional baseball player or football player, the combined experience that I have with Rich Fuller can provide the right products as well as any agency in the country.
July 28th, 2007
A study done by the Georgia Department of Health showed that diabetes was the 7th leading cause of death in their state. The good news noted in an article by eMaxHealth was that with only moderate lifestyle and diet changes diabetes is preventable and in some cases reversible. I don’t need to tell you how important it would be from a life insurance standpoint if someone could actually “cure” their diabetes.
Even a well controlled diabetic with no collateral health issues will likely pay twice as much as a person without diabetes. While underwriters would likely require some time period of sustained control to accept that the diabetes has been reversed, eventually even the most skeptical of them will have to accept that it is not a health issue any longer.
The study should be of significance to anyone that doesn’t exercise and is overweight. It points out that with moderate exercise and a decrease in weight of 5%-7%, diabetes can be prevented or delayed. This is significant when you consider that someone who has type 2 diabetes, on average, will live 8 years less than if they didn’t have diabetes. This, obviously, is also the reason that underwriters are careful to get a complete picture of a diabetic applying for life insurance before they approve it.
The University of Illinois offers some great resources for diet. Maybe someone can offer a link to an exercise program. I know a lot of exercise programs are rather intimidating.
Bottom line. Making the right choices can lead to a healthier life and lower insurance rates.
July 28th, 2007
Writing life insurance in New York is challenging on a good day. New York has only recently stepped into the last century as far as insurance law and available products. With the challenges in underwriting life insurance for diabetics, it would behoove someone to drag the state insurance regulators into this century so they can be on a level playing field with the rest of country.
A New York Daily News article from Wednesday paints a picture of an amazing rise in the occurrence of type 2 diabetes in New York City. Between 1990 and 2003 deaths caused by diabetes went up 71%.
Remember that life insurance underwriters are not only concerned with how well controlled your diabetes is, but with the associated risk factors such as heart disease. There is no doubt that a large percentage of the increased deaths are attributable to collateral risk factors.
There are a couple of things that New York residents should know. First, you don’t have nearly as many options for life insurance companies as every other state. Second, the New York regulators are trying to make it impossible for you to cross the state line to take advantage of better underwriting and therefore better prices.
Bottom line. With limited options, an independent life insurance agent licensed in all states is a good choice. If you have diabetes, be prepared with your most recent lab results and for a candid discussion of any other medical history. Good rates can still be found.
July 27th, 2007
There is something about most of us that makes us believe that untimely death only happens to other people. I know I fall in to that category. I jog daily and exercise and eat right and I assume I will live a long life barring an accident. I do have plenty of life insurance, but why should i?
But, lingering in the back of mine and most of our minds, the reality that we all know or have heard of someone that was way to healthy and just died. An Excite.com news story
this morning drove it home again.
Skip Prosser, a teacher and basketball coach at Wake Forest, died at his desk of a heart attack. He was 56 and a guy that took very good care of himself. He was athletic and exercised daily.
I hope he was one of those guys that did all the right things to ensure that his family will be ok. I truly hope that he had adequate life insurance in force.
Still feeling immortal? Do you have life insurance to protect your family?
July 27th, 2007
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