Archive for November, 2007
Currently the federal estate tax exemption, the amount of an estate that can pass on to a family without being taxed (at the federal level), is $2,000,000. This is up from an estate gobbling $600,000 just 7 years ago.
Remember that a persons entire estate can pass tax free to their spouse, no matter how large it is. Estate taxes come due upon the death of the second spouse. This is the point at which many families see much of what their parents have accumulated gobbled up by the government, in many cases trashing a lifetime’s worth of work.
In 2009 the estate tax exemption will increase to $3,500,000 and in theory, if the congress doesn’t do anything to change the course of events, the federal estate tax will be gone in 2010. Two scenarios will play out at that point.
First, if the federal goverment actually lets the estate tax disappear, state governments stand poised to fill that void by increasing their state death tax limits. Many states have been raising their taxes as the exemption has been increasing at the federal level. The states can already see the dollar signs. So, while the payee will have changed, the drain on estates will likely continue.
The other direction this could take, the more likely direction in my mind, is that congress will vote to leave the $3.5 million exemption in place, having accomplished what needed to be done, giving tremendous relief to mid sized estates.
Bottom line. Estate taxes, whether federal or state, will likely continue beyond the drop dead date of 2010. One of the most efficient and cost effective ways to leverage the pay off of those taxes is through a second to die life insurance policy owned by an irrevocable life insurance trust. Whether your estate is over the taxable limit, of headed for it, you should be looking at this tool.
November 26th, 2007
Some time ago I started on a quest to find out the facts about mortality experience of children with type 1 diabetes. The issue I had initially run into was that insurance companies simply would not offer life insurance to children with type 1 diabetes, almost across the board. A few said they would consider it as a highly rated policy if they were over age 15 or over age 19, but most just said no thanks.
I enlisted the expertise of Mike McFarland with Prudential to help me understand why insurance companies were so freaked out by this age group with this problem. I was thinking that surely 1 in every 5 must die before age 20 or there would be at least some high priced product for them. Mr McFarland clued me in that the problem wasn’t the death rate at all, it was the lack of statistics on which to base rates. Insurance companies use mortality tables that go from 0-100, not 0-20, 20-40, etc. They simply didn’t know what mortality experience they would be looking at, making it impossible to design and price a product.
Today the Center for Disease Ccntrol released a study that really centered around the difference in mortality in children with type 1 diabetes and type 2 diabetes, depending on whether they were white or black.
The point I would like to take from this 25 year study is not the difference in deaths per ethnic background, but the fact that compared to other causes of death, death due to diabetes is minuscule. Even using the higher level for blacks, we are talking about 2.5 deaths attributed to diabetes per million.
A child is 60 times more likely to die in a car accident than due to diabetes, 10 times more likely to die of heart disease, 3 times more likely to die from influenza, 4 times more likely to die of respiratory disease, 4 times more liikely due to falling or poisoning and 40 times more likely due to drowning.
Bottom line. It’s time for insurance companies to quit crying wolf, or ignoring the wolf or whatever they are trying to do. There is no fact that would lead to the conclusion that a type 1 diabetes child is uninsurable.
November 21st, 2007
No need to cringe. I’m not about to go on another tear about obesity……but I did run across a rather interesting phenomenom in an article today. The premise is that PSA readings in obese men can be falsely lower because they have a larger volume of plasma, thus “decreasing serum concentrations of soluble tumor markers - a phenomenon known as hemodilution”.
We’ve discussed plenty of issues where obesity is a contributing factor in causing collateral health issues, but this is the first time I’ve seen a study that suggests that being overweight might somehow mask a health issue.
If the theory of hemodilution is correct, obese men are at risk of not having prostate cancer detected as early as their smaller counterparts. We’ve discussed plenty of times how early detection is one of the keys to successful treatment.
Bottom line. Obesity is not your friend. It can cause or compound numerous health issues and make the whole issue of getting life insurance far more complicated than it needs to be.
November 21st, 2007
The beat to death mantra of needing to get out and exercise 30 minutes at least 5 days a week to prevent our demise due to sedentary life styles is accurate, but without much effort we can do a lot more. Consider this in our battle with obesity, heart disease and diabetes.
Think small now. Instead of sitting at your desk while on the phone, consider standing. Doesn’t sound like much, but compared to sitting, standing up and stretching during a phone call is major. Use stairs once in a while. For you folks working on the 72nd floor, get out 5 floors early and walk up and back down. Stand instead of sit at your child’s ballgame. Get into that game and pace a bit.
These aren’t big things and they don’t take any time you won’t be using anyway. They aren’t a replacement for the 30 minutes, but a few extra calories burned here and there have been proven to make a difference.
Studies show that the enzymes that are responsible for fat burning are “turned off” after a period of inactivity. These enzymes can be turned back on with just minor activity. Just the act of standing and holding the body upright takes twice as much energy as sitting upright.
I know I spend an inordinate amount of time at my desk, and that just getting up to go to the fax or printer feels good. I do my mandatory run at lunchtime (my 30 minute duty), but I can see where some of these suggestions will be beneficial.
Bottom line. The more we can do to fight off sedentarianism, the healthier we’ll be and the better chance we have of nailing down low life insurance rates.
November 20th, 2007
Bait and switch! The practice of sucking someone into the sales process by offering something attractive with the full knowledge that you (the salesperson) can’t come through with that offer in the end.
Bait and switch is a favorite topic of those who whine about life insurance and life insurance agents. So, why does it work? Why do people jump at prices that deep down they know they don’t qualify for, and then get mad when they don’t get those rates?
Cutting right to the chase on this, it’s because people don’t want to hear the truth. Given the choice of two agents, one who quotes a standard rate because you’re obese and that is what you qualify for, and one who quotes you rates that Superman would die for inspite of the fact that he and you know you don’t qualify, you won’t even return the call to the one who quoted it accurately.
Common sense goes out the window and somehow people believe that the agent that is being honest is really out to burn you. This scenario is plays out most often with two groups, those who smoke and those who are overweight. They inquire about life insurance and, when sent the rates they inquired about, they refuse to return calls. It’s like life insurance is really important to them, as long as they can get it cheap.
It often makes me wonder if these guys ever discuss this with their wives. “Well honey, I really wanted to make sure your future was secure, and I was ready to get the job done at $40 a month, but darlin, it’s going to be $80 a month because I’m fat, and frankly your future just isn’t worth that much. Well, yah, I could have cut down the amount of insurance to make it affordable, but if I can’t give you the whole thing, I just don’t want you to have anything.” Allrighty then!
Or they go with the agent that quotes them rates they can’t get, and when that doesn’t come through they just drop the whole thing. Another way to stay uninsured.
Bottom line. Get real. If life insurance was the same price for everyone, no matter what their health, it would have to be very expensive for everyone. Life insurance rewards good health and habits. Don’t BS yourself into believing that if you go with a low quote and just stay real quiet, you’ll actually get those rates approved. If someone quotes you low rates and someone quotes you higher rates, find out why the agent quoted higher rates. Consider it. It may be reality even if it’s not what you wanted to hear.
November 20th, 2007
Not too long ago while writing on the obesity problem in America I ran across a state by state breakdown that showed my home state, Colorado, as being one of the 4 leanest states in the country. I wasn’t too surprised, as we are kind of an exercising, outdoorsy bunch.
Then last night I heard on our local ABC channel that a study showed that Denver was the heaviest drinking city in America as measured by the instance of cirrhosis of the liver. Two other Colorado cities were in the top ten.
This was also not a big surprise to me. I’ve lived my whole life in the Rocky Mountains and drinking, and especially drinking beer, has always had an acceptance here that borders on silly. I can remember growing up in Wyoming and being shocked when law enforcement started cracking down on drinking and driving. DUI was generally accepted and, I can remember times that, even if you were pulled over for not being able to keep it in your own lane, you were either told to be more careful or at worst given a ride home.
While DUI is taken far more seriously than when I was young, the Rockies are obviously still a hard drinking region of the country. Looks like we have more work to do to keep that healthy lifestyle image intact.
Bottom line. Lifestyle choices are an important issue in life insurance. Having your weight down and your liver functions out of whack due to excessive drinking is not the balance that life insurance underwriters are looking for.
November 20th, 2007
Life insurance underwriters have a tough job, determining mortality risk based on all the different health factors, assigning rates that are fair to the customer and the company. But sometimes they don’t want to deal with something, so they jumble it up and throw it back at us agents.
Before I get vague, let me just tell you some realities about life insurance companies and beneficiary designations. The companies want to be sure there is financial justification for a policy. That is to say that they want to know that the insurance they are providing is there to take care of a financial loss, and not for the purpose of creating wealth where there isn’t any. They also want to know they are not opening themselves up to adverse selection, offering insurance in a dangerous situation. I don’t have a problem with that.
Let me offer a few examples of how insurance companies look at financial justification. If there is a husband and a wife, they simply justify the amount of insurance based on a multiple of the husband’s income. If the wife is employed, insurance on her is figured the same way. If the wife or the husband is a homemaker, unless there is additional justification, they can get half as much as the employed spouse. By the way, insurance companies don’t ask how long a couple has been married, how they’re getting along, or if it is an abusive relationship.
Next, let’s say we have a man and a woman living together. If we put the woman down as girlfriend or domestic partner, some insurance companies will want to know what common debt they have and generally question the validity of insurance, even when a couple has been together for 20 years. If they happen to be engaged and have only been together two months, no questions. Insurance companies somehow feel that the financial justification is solid if there is an engagement, knowing full well that not all engagements make it to marriage and marriage has a survival rate that is far worse than most types of cancer.
Ok, let’s step off the deep end. Two women living together who have shared a household for 10, 15, 20 years. They are domestic partners. Insurance companies want to know what common debt they have, what percentages each of them pays, what the beneficiary’s occupation is and what her income is. They also want to know if the beneficiary carries an equal amount of insurance in reverse. They question it to death even though they know the answer should simply be replacement of income. If one dies, the common household will be minus the income from the deceased.
So why am I fussing? Life insurance companies are discriminating, which, actually, they can do. It’s OK for them to give better rates to someone that is healthy as opposed to someone who is not healthy. But they are discriminating against homosexual couples and using the guise of financial justification. Again, legally they can discriminate, but they won’t come out with a company stance that they don’t want the business, or that the maximum they will allow for domestic partners, is say $250,000. They leave it up to agents to dig into their private lives and discuss why they have to meet threshholds that no one else does.
So, am I pro-homosexual? No, I really am not. Morally and spiritually I don’t agree with it. I am also morally and spiritually against divorce, living together outside of marriage, people who lie and people who own businesses that are immoral. So, should there be a sin question on life insurance applications? Should anyone who is sinning or plans to sin in the next three years be excluded from buying life insurance?
So, back to financial justification. “Insurance companies want to know that the insurance they are providing is there to take care of a financial loss, and not for the purpose of creating wealth where there isn’t any.” So, just because a couple is same sex, is it adverse selection. I don’t think so. Is there financial justification? Probably as much as with most couples.
Bottom line. Some days insurance companies just tick me off. In case you can’t tell, this would be one of those.
November 19th, 2007
I know that I’ve often heard that the big drug companies really don’t want to find cures for things such as diabetes and it always leaves me shaking my head. Their purported reason for avoiding the cure is that a cure would kill the cash cow they have in selling the life long treatment. I know I’m naive, but that just seems so wrong as to be, well, just so damn wrong. How can a company knowingly subject someone to a lifetime of treating an illness when they have the power to cure.
I know Allie Beatty, whose blog www.lovediabetes.com, has brought major pieces of reality into my world, thinks I wear rose colored glasses. But I wear those glasses with a passion toward knowing and sharing the truth.
And the truth still blows me away. In a New York times article, a story is told about Dr Denise Faustman’s quest to ”cure diabetes. When all signs pointed to her being on the verge of just that, a real cure, her request for research funding was turned down by the drug companies. It was even turned down by the Juvenile Diabetes Research Association.
Funding finally came from Lee Iacocca, whose wife had died from complications of type 1 diabetes. The $11 million dollars he donated and raised has gone a long way toward proving Dr Faustman’s theories correct.
”I can’t wait for the pharmaceutical companies or even government tax money to fund what looks promising,” Mr. Iacocca said. ”They are not known for high risk and they are also slow to react. We are trying to get a cure.
Bottom line. Even when someone is treating their type 1 diabetes and it is well controlled, life insurance can be inordinately expensive. How good would life be if they could put on their life insurance application that they used to have diabetes, but it’s been cured?
November 19th, 2007
All things being equal, underwriting type 1 diabetes and type 2 diabetes really hinge on the same issues. So, why is it that type 1 seems to incur a heavier hit than type 2?
Remember that with type 2 diabetes, underwriting focuses on age of onset, control and other risk factors. The real swing factor is age of onset. After age 50 is the best possible benchmark. 40 to 50 takes a swing into being rated even with good control and other risk factors being well controlled. Onset prior to age 40 will be treated almost the same as type 1.
The reason that age of onset is such a large factor is that, the longer the disease works on a person’s body, the higher the risk of collateral health issues such as heart disease and kidney disease. This is the primary factor in why early onset type 2 and type 1, which is almost always early onset, are underwritten basically the same.
With most type 1 diabetes onset is prior to age 30. Remember, the longer your body has to deal with the stress that diabetes puts on your systems, the harder it is for your body to keep other associated health issues at bay. That is the reality of the way underwriters are currently looking at the two issues.
I am working with underwriters from several companies to review this logic. The truth is that there seems to be a substantial difference in favor of type 1, compared to early onset type 2. Generally speaking, if you have someone with type 1 at age 35, onset age 15, that is exhibiting good control over the disease, they are also someone who has adopted a healthy lifestyle. If they continue to maintain that control, they should have a normal or at least near normal mortality experience.
On the other hand, if someone is diagnosed type 2 at age 35, it is generally because of some poor lifestyle choices, often poor eating habits leading to obesity. At this point the two are starting at the same age and statistics I’ve seen would indicate the person with type 2 is less likely to gain control before suffering collateral health issues. It is my contention, and unfortunately not the contention of the underwriters, that these two are on equal ground. We’re working on that.
Bottom line. Early onset is a problem, a real challenge, no matter which type of diabetes a person is dealing with. Control and a healthy lifestyle are going to win the best life insurance prices available, and for now at least, those prices are higher than later onset.
November 19th, 2007
Family history is one of those life insurance questions that kind of gets people on the defensive. Generally the contention revolves around the fact that the younger person claims that they live an entirely different lifestyle and therefore, whatever happened to their parents doesn’t pertain to them.
I just read an article that kind of slams the whole family history issue into context. In a family of eight men, six were diagnosed with prostate cancer within just a few years of each other.
It started with the older men, brothers, being diagnosed within a short period. It sounds like this wake up call was a call to action with the older men insisting that their sons get tested. This led to an early diagnosis of prostate cancer in three of the younger men, so far.
Bottom line. Family history is relevant. It’s not just a question on an insurance application. It is something you should know and pay attention to. Prostate cancer detected at an early stage and grade and successfully treated gets very fair underwriting treatment.
November 17th, 2007
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