I am always surprised by the number of cigarette smokers who inquire about life insurance and when they find out what the cost is, they suddenly lose all interest. The difference in cost is likely no where near what they are spending on the habit, but they aren’t going to give up the habit, so……..
Just a few examples of the difference in cost using perfectly healthy 45 and 55 year old men. Assuming they are both looking for $500,000 of 20 year term.
- For non smokers the best annual rate for the 45 year old is $615.00 and for the 55 year old it is $1500.00. Man, they really don’t cut us old guys much slack.
- If they both smoke cigarettes, the best annual rate for the 45 year old is $2010.00 and for the old guy it is $4440.00.
Sooo, nearly three times as much if you smoke. Life insurance underwriters are all too familiar with the health risks associated with smoking. Heart disease and cancer top the long list of health issues that are either directly caused by smoking or are made worse by smoking. In a post not too long ago I cited a study that showed that smoking didn’t seem to have any impact on whether a man got prostate cancer. But for those men who did have prostate cancer, the men who smoked were three times more likely to die from the cancer.
Then there are the other types of tobacco. Most companies are at least moderately forgiving of an occasional cigar. Occasional meaning, depending on the company, 4 a year, 1 a month, no more than 2 a month or something like that.
One company, Prudential, will allow cigar smoking without limitation and smokeless tobacco use at standard plus non smoking rates. For our two guys up top, that would mean that if they applied with any company but Prudential they would pay the rates in #2. With Prudential, the 45 year old would pay $1115.00 and the old guy would pay $2960.00
Bottom line. Those that smoke know the risk. When they apply for life insurance they get to assume that part of the risk.
October 21st, 2007
I can remember learning the fine art of selling the spouse add on, or spousal rider nearly 30 years ago. The primary reason that most wives were added as riders back then is that the premium on their insurance was so low that it cost the company more to write a separate policy than they would ever make back. And in fairness to the companies, that was a reasonable way to offer the coverage.
Over the last 10 years the number of companies offering a spousal rider on personally owned, as opposed to group, coverage has dwindled dramatically. The move has now been toward writing individual policies on each spouse. While I am still asked occasionally, the truth is that the spousal rider has outlived its’ time.
If you give some thought to the structure of those old policies and then try to make it make sense today, it has actually become something that I wouldn’t necessarily suggest even if it was still available.
Think about it. On a policy that has a spousal rider, the primary insured is the owner of the policy and is therefore the only one who can make changes. At the time the policy was taken out, there was definitely an insurable interest for both the husband and the wife and they had each other as beneficiaries.
Enter a divorce. I know they are rare these days, but let’s pretend. So now you have an ex-husband who owns an insurance policy on himself and his ex-wife. He can change the beneficiary on his insurance to whomever he wants. On the other hand, the ex-wife can’t cancel the insurance, can’t remove herself from the policy, and can’t change the beneficiary from her ex-husband.
The insurable interest is gone, but the contract cannot be changed unless the policy owner wants it changed. Now, if it’s a friendly parting of the ways, this is probably no big deal and they will work it out. But, I’ve been told that not all divorces are friendly. So as the rider on the policy, the ex-wife, how would you feel about someone that didn’t like you owning a life insurance policy on your life? I’m not suggesting that there are a lot of guys out there having ex-wives bumped off, but I am suggesting that allowing a policy to stay in force when the insurable interest is gone isn’t a good thing.
So, the logic of married couples owning individual policies……well, let’s just leave it at a more practicial and flexible way to insure two lives in this day.
Bottom line. By writing individual life insurance policies, it leaves the insured owner of each policy able to make changes as needed. It also provides the couple with a chance to get better rates, because the truth is that very often the best rate for one may not be with the same company as the best rate for the other.
October 21st, 2007
