I suppose it has something to do with age, but each year the journey toward winter solstice seems a little more daunting. As the days get shorter and my workday starts in the dark and ends in the dark, and I have to bundle up to survive the 45 second commute from my home to my office, I really start to wonder if I’ll survive another one. Winter that is.
I didn’t used to be such a woose, but now I really rejoice in the fact that we’ve reached the bottom of the pit, winter solstice, and the days are getting longer (albeit only by a few minutes a day). If I was a life insurance underwriter determining my own mortality, a week before winter solstice I would probably decline myself. I’m not suicidal or anything. It just, as I mentioned, seems that actual survival is a legitimate question.
A week after solstice (today), I would be a little more aggressive in my underwriting. I suspect that at this point there could be as high as a 30% chance of survival. Could have been higher, but the low last night was -10. At the end of January the whining has generally softened and the survival rate could be as high as 90-95%, unless there’s one of those arctic express things happening. By March I am finally confident of survival.
Then they change the time which kind of jacks with my attitude for a while. Whoever thought up that daylight savings thing should be forced to sit on one of our Colorado peaks naked all winter……just because.
Bottom line. While I am blessed to be very good at some things like life insurance, I am a woose extraordinaire when it comes to short days and cold weather.
December 29th, 2007
When I sold my first final expense (burial) life insurance policy nearly 30 years ago, it had a face amount or death benefit of $7000. It was certainly, at that time, adequate to properly bury someone and even have a little left over to host a wake.
I still get 10-20 requests every week from people that “don’t want much, just a final expense policy”. When I ask how much they are considering it is always somewhere between $3000 and $10,000. I understand that the reason for asking for a small amount of insurance is always cost. The hope is that the smaller the policy, the smaller the cost. Unfortunately the logic doesn’t hold true.
For a little help with illustrating this I went to Colonial Penn. I believe, after a lot of study, that Colonial Penn is the best company in the business of writing small policies between $5000 and $25,000. This is a truly unbiased opinion. They don’t use agents. Everything is written directly through the company. I can’t sell it and can’t make anything from recommending it. Their products and pricing as so much better than the AARP policies written through New York Life, that AARP should really take a month off and just write letters of apology to all of us members.
OK. Now that I have put AARP in their place again, let’s look at a few examples of what Colonial Penn offers and what the alternatives are. For this example let’s assume a 65 year old man in pretty good health looking for $10,000 in life insurance. A little high blood pressure, a few new knees, but nothing serious. Colonial Penn offers a whole life policy, so we go to their website and get the quotes. All you have to do is type in the state, age and sex and hit submit. These are not guaranteed issue prices, so if our guy is hiding a few health problems they will likely show up on his medical information bureau report which could lead to a decline. But for now let’s assume good health.
Ok, let’s assume a 62 year wife, in comparable health, wants coverage as well. After all, properly burying you and not her is, well, just not proper. Use the same procedure to run quotes for her.
So, for $10,000 of coverage this couple would pay a total of $166 per month. If they wanted $25,000 it would run them $245 per month…..if they stuck with Colonial Penn. If they found an independent agent and asked them to find the best value for them, the results would be substantially different.
First I would have to explain that we are going to ask health questions and they will have an exam, at not cost to them, done in their home at their convenience. I would also have to explain that we don’t offer policies under $25,000, but if price is the issue, there’s good news. To write $25,000 on each of them, approved at preferred rates (not superman rates), their total monthly cost would be $93.39.
Keep in mind that whether through Colonial Penn or Genworth Life and Annuity (the company I quoted), these rates are guaranteed level and payable for life. So, if the reason for only wanting $10,000 is cost, wouldn’t it make more sense for you and your spouse, to have $25,000 in coverage for $70 less per month. More coverage? Less money? There’s no trick to this. Two things drive this out of balance scenario. Colonial Penn offers simplified issue which means no exam. So they are accepting the risk of not having lab results. That coupled with the fact that they are pushing cash value policies where they are simply not needed increases the cost. You’re buying life insurance, right? Take that extra $70 a month and throw it into an annuity if you need the cash, or gift it to your grandchildren if you don’t need it.
Bottom line. What appears to be the easy route, and yes, even appears to be the logical route can lead to higher prices for less insurance. Use your good health to your advantage. Take the physical and get the most bang for your buck. Don’t need that extra $15,000 in life insurance? Leave it to your grandchildren, or your church.
December 29th, 2007
That could be true of any part of your life. The truth is that compliance with motor vehicle laws and controlling your urge to speed can help you avoid violations that can, in fact, impact your life insurance rates.
But generally speaking, from a life insurance standpoint, compliance and control are referring to your management of a health issue. Whether it is high blood pressure, type 1 diabetes, type 2 diabetes, or bipolar disorder, compliance with treatment (taking medication just as prescribed and not just when you feel like it), and having the health issue controlled so that you are managing it and not the reverse, are the two primary ingredients needed for affordable life insurance.
In relation to type 1 diabetes, there are times when even the best effort can’t bring the two ingredients together. Take for instance the issue of brittle diabetes. With most diabetes compliance brings control. In other words, if you take the medication as prescribed, avoid eating the wrong things at the wrong times, and take monitoring seriously, you can expect that your glucose levels will remain in acceptable ranges and the diabetes, while still a piece of work, will not lead to other complications.
With brittle diabetes the rules don’t seem to apply. You can do all the right things all of the time and glucose levels can still swing wildly, basically out of any real control. From a life insurance standpoint this presents a real problem since lack of control will ultimately lead to collateral health complications and the assumption of shorter mortality by insurance underwriters is not just a wild guess.
Bottom line. There are instances when the prudent decision by a life insurance underwriter is to decline coverage. There are instances when even the best independent agent can’t get offers for clients. Fortunately those instances are rare.
December 29th, 2007
