Archive for May, 2008
Some weeks I feel like I’ve been a bit rough with the reality thing, so I thought I would end the week on a lighter, more upbeat reality note.
One of the common threads out there for the “right thing to do” for your health, especially when it comes to avoiding high blood pressure and heart disease, is intake of antioxidants. Sounds a bit like something you would clean your toilet with, but the truth is that they are tasty and fun.
From a glass of good wine to a chunk of dark chocolate, pecans and yes, blueberries, antioxidant loaded foods and spirits are loaded with health benefits. You can have a good time and drive your life insurance rates down.
Bottom line. Have a good weekend. Drink some wine, but don’t drink and drive. Eat some chocolate covered blueberries and don’t share with the kids.
May 30th, 2008
There’s probably none of us who haven’t known someone whose family has gone through a terminal illness of a family member. The anticipation of the loss, the battling against the inevitability of the loss, the tremendous expense and strain of the process and ultimately the death take a huge toll on the family. In the very best of situations, it’s a bad deal.
It’s a great thing and a comfort when there is life insurance in place that will help the family deal with the financial part of the loss and get back on their feet. Quite often, especially with an extended terminal illness, medical bills pile up and the only hope is that the life insurance will come through to pay it. Now, with most new policies there is an automatically included rider that offers help when it is first needed, prior to the death.
An accelerated death benefit rider will allow the owner to receive, in most cases, up to half of the death benefit once a person has been diagnosed as terminally ill. Terminally ill is generally defined as a prognosis of less than 12 months to live. Attached is a sample rider from an American General Life term insurance policy.
accelerated-death-benefit-rider
Generally this benefit is used for staying current with medical bills and loss of income if the insured is no longer working, but the nice thing is that the insurance company doesn’t put any restrictions on how it’s used. I see one of the great uses as the ability of a spouse to take time off to stay at home and take care of a dying mate. That may sound a little morbid to some, but for anyone who has helped with hospice for a loved one, I can’t think of a greater gift to a dying spouse.
It might mean the money to move someplace more comfortable. It might mean an outrageous family vacation, a memory that will last forever especially for children, as that last great time they had with their mom or dad.
Bottom line. No matter how the accelerated benefit is used, it is a blessing that is built right into most life insurance policies. If you read through your policy and can’t find where it says the rider is included, you may want to consider applying for a new policy that does include it. The rider doesn’t cost anything so, with prices still declining in many instances, you may be able to add the benefit and lower your cost.
May 29th, 2008
Pre-paid funeral plans. Pre-paid burial plots. Burial Insurance. All are products that are designed to tug at the emotions, tug just hard enough to get you to ignore the realities, ignore the math, and ultimately make a decision that is free from logic.
If memory serves me right, my parents bought pre paid burial plots way back when they were much younger. The idea (the pitch) was probably something about wanting to be buried near loved ones or perhaps being able to ensure being buried next to each other. My dad reads these blogs so I’m sure he’ll correct me if I’m wrong, but the sum of $600 sticks in my head as what they paid. This had to have been 30 or more years ago and they held onto that idea until recently when they decided to be cremated rather than buried.
So, the math to see if the deal was good for them is simple. They gave someone $600 and let’s say they left it with the funeral home for 30 years and let’s be modest and say the funeral home made a 12% return on that money. Am I using too aggressive an interest rate? I’m thinking not because if you know, just based on mortality statistics that you have a long time to use money, high yield mutual funds will provide that kind of return. And, after all, they would need to earn interest to cover the current cost of a plot. So a plot today would go for about $2500 and the money earned by the funeral home would be about $10,200. At the time my parents bought those plots it would have been no hardship for them to have put that money aside. Ultimately they plots were sold and a handsome profit realized by the plotters.
On the other end of the spectrum are burial policies or final expense policies. Globe Life is famous for offering these with no exam and only $1 premium for the first month. The dirty truth is that they are guaranteed issue whole life policies that are exorbitantly priced. In their advertising you will see “rates as low as $3.27 per month”. What they don’t tell you is that is for the youngest age group and that is the per thousand cost, so $10,000 is $32.70 per month and so on.
It is guaranteed issue so if you’re really sick it may be the only deal in town, but if you’re healthy keep in mind that they are offering you the same deal that they’re offering to someone who is really sick. I’m not opposed to permanent life insurance for final expense purposes. If you are reasonably healthy there isn’t any reason that you can’t have substantially more life insurance using a universal life policy with a no lapse guarantee, for less money.
Bottom line. Burial insurance is a rip off as offered by most of the companies selling life insurance under that heading. Again, unless you are too sick to qualify for traditional insurance, burial insurance is a poor choice.
May 29th, 2008
In my last post I hope I made a clear distinction between a life insurance agent who is qualified to handle cases that involve health issues, and those who really shouldn’t play with sharp objects. At the end I alluded to the definitive way to separate the two groups.
First let me broach the subject of bait and switch. Baiting, telling the client that they qualify for a rate that they don’t, is a way to get the application. Getting the application is a way to get anyone who told you the truth out of the picture. Let’s say I quote you $1200 a year for a term insurance policy. I’ve presented my quote based on the fact that I know you have type 2 diabetes that was diagnosed at age 51 and we reviewed your last set of labs and I know that your hbA1c was 6.4. Another agent quotes you the same policy for $800 a year. Most people will jump on the less expensive band wagon and won’t even talk to me again.
The switch is when the policy is approved. Generally, because a bait and switcher just goes with their favorite company (where they get the highest commission), the approved rate will come back even higher than what I quoted. The B&Ser will come up with some song and dance about why the rate changed and then, having just drug you through a 2-3 month application process, suggest that unless you want to start over and take your chances, this is really as good as it is likely to get.
I know you’re all sitting there saying that you wouldn’t fall for that, but the truth is that bait and switch is alive and well because most of you will accept the higher priced policy rather than start over.
You sound mean, but you’re not.
Which brings me to the magic bullet. How can you weed out the B&Ser right up front? How can you tell if they’re telling the truth or just low balling a quote to capture the application? The bullet is called a trial offer. They way trial offers work is that, for instance, I would send an email out anonymously to the underwriters from all the companies I represent. The email might go something like this:
Proposed insured born 3/14/53, 5′10, 175, non smoker. Diagnosed 4 years ago type 2 diabetes. Most recent a1c 6.4. No other risk factors. All other labs normal. Good family history. Takes 500mg Metformin daily. Looking for $500k term insurance.
Insurance underwriters respond, always with the caveat that any final offer is subject to an exam and a review of medical records. There offers, and these are actual insurance company responses, come back like this. “Tentative ok without a rating if fructosamine is normal”, “Very tentative Standard No Nicotine subject to app,exam,labs,EKG and APS (attending physician statement)”, “Our tentative quote is Standard (due to glucose)”. Once received, we know which company will ultimately provide the best approved offer.
So here is the way to ferret out the bait and switch agent. If you are shopping for insurance and you have health issues, and one quote comes back significantly lower, insist that they provide you with a copy of the trial offer from the company they are quoting. If they don’t have one, they don’t know what they are doing. If they try to tell you that they don’t need one or that companies don’t really honor trial offers, they don’t know what they’re doing. And ultimately, if you think there is some chance that they might come through, apply with them and also apply with an agent who can produce a trial offer, and do it concurrently. Simply let the agents know that it is your intention to accept the best offer after underwriting. That’s fair. Smart too.
Bottom line. The life insurance industry has it’s share of slime balls and their favorite sport is bait and switch. You now have the ultimate weapon for stopping them before they can get you to join their game. Do you want a low quote or an honest quote? Do you want the policy to be approved with no surprises? Do you want to deal with an honest life insurance agent? You decide the game you’re going to play.
May 28th, 2008
There must be a couple of million people in the US licensed to sell life insurance. If you take in the giant internet mega agencies, all of the independent agents, and all of the captive agents (work for just one company), the possibilities for purchasing life insurance become staggering.
Put in context, there are probably as many, if not more doctors. Does that mean that no matter what is wrong with you, there are 2 million choices for a place to go for treatment? I’m thinking not. If you have a cold, a cardiologist is likely not going to see you, and if you’ve had a heart attack, it’s highly unlikely that your general practitioner won’t refer you to a specialist. There are those unfortunate times when GP’s think they know the answer to everything and attempt to treat serious illness in house, but those are rare.
Life insurance is one of those areas where the millions of choices doesn’t mean you have millions of appropriate choices. For the average very healthy person under 50 probably any independent agent or agency can do a good job of finding a low rate with a good company. As I’ve mentioned before, young healthy buyer beware though. Even though the mega agencies on the internet can find competitive rates, they have a bad habit of signing lucrative bonus contracts to push the bulk of their business toward a certain company. The good news is that the company is generally competitive. The bad news is that, as I’ve noted in so many previous posts, competitive doesn’t mean best. An independent agent doesn’t do the volume and therefore we are never offered these type of contracts. Speaking for myself, I place every case with the best possible price and product for my client. Seems like the right thing to do.
One other note on our perfect health client. Stay away from your auto and homeowner’s agents. You will be outrageously overcharged for life insurance because it isn’t what they do. Sure, they have a product and they are licensed, but having a license doesn’t mean you know what you’re doing and having a product doesn’t mean the price isn’t way too high.
But I want to make a very important distinction. Just like the doctor scenario, if you have some medical issue, a knowledgeable independent agent is where you want to go. We are the specialists in the life insurance business. Just a quick list of what I am talking about will help separate the GP’s from the specialists. If you have diabetes, Hepatitis C, heart disease, a history of cancer, a seizure disorder, mood disorders such as depression, anxiety or bipolar, and on and on. These are issues that it is hard for the average agent to provide good service on. These are issues that will get automatically declined with most property casualty companies (auto, homeowners).
How do you know you’ve called the right person or stepped in the right door? All insurance agents make money from the culmination of a sale, the placing of a policy in force. They all want your business and the truth is that most of them are struggling. There is a real tendency in the business for agents to take on business that they have no idea what to do with, just in hopes that it works out. It usually doesn’t. You know you’ve found the right agent if they show a knowledge of your particular issue by the questions they ask. If they don’t ask questions they don’t have the information it takes for them to come through for you. If they don’t seem to know, for instance, the difference between type 1 diabetes and type 2 diabetes, they don’t have any business working for you.
Bottom line. Before you commit to applying through an agent, be confident that they know what they’re doing. In my next post I will reveal the secret weapon for weeding out the BSer’s from the straight shooters. It works every time, guaranteed.
May 28th, 2008
The word cancer used in reference to anything to do with life insurance usually conjures up visions of declines and huge rates. In that regard skin cancer is something of a different animal.
Skin cancer is the most common cancer in both men and women, mostly thanks to the fact that most of us had no idea that sun could be harmful 30 and 40 years ago as we religiously broiled ourselves at Memorial Day lake parties. There are three types of skin cancer.
Basal cell carcinoma, sometimes called non-melanoma skin cancer is the most common. It is most frequently seen in light complected people. Basal cell has about a 95% cure rate, so it isn’t the most feared cancer by any stretch, but recent surveys have shown that multiple basal cell instances put a person at higher risk of more dangerous skin cancer. This fact has not been lost on life insurance underwriters who, as recent as five years ago, didn’t rate basal cell at all, not even multiple instances. Now, while most companies will let a single instance slide, multiple instances may bump a person to standard rates.
Squamous cell carcinoma is almost identical to basal cell except in one aspect. Basal cell, in the 5% of cases where it becomes a problem, generally goes deeper into the skin and can sometimes reach the bone, but it doesn’t spread to other areas of the body. With squamous cell, the cure rate is essentially the same, about 95%. The issue with the other 5% in this case is that squamous cell can spread to other parts of the body. Underwriting on squamous cell will depend on the stage and grade and if it has spread. If it is a low stage and grade with no spread, often preferred rates can be done if there is a single instance. Multiple instances would be standard rates best case.
Melanoma is the last of the skin cancers and although it represents only a few percent of the total skin cancer occurrences, it is responsible for 75% of the deaths. Underwriting melanoma is a whole different ballgame. With a low stage and grade melanoma, the best case would be a rated policy (higher than standard) when you’ve reached one year post treatment. That is best case. Remember, with cancer it is all about stage and grade. I’ve seen melanoma history get no better than standard 10 or more years after treatment.
Bottom line. Skin cancer is not an issue that you want to tackle without an independent agent. Most life insurance companies will be more cautious than I have described.
May 28th, 2008
Estate tax repeal, just like getting older, is gently creeping up on us at about the speed of a Lear Jet. In 2010, if congress doesn’t do anything the estate tax will disappear until, of course, reinstated by a congress and president of sound mind. Most of those with taxable size estates are still taking the prudent route of insuring the interest of whatever family business or fortune they have been blessed with.
There are a couple of reasons that I believe are valid to consider in favor of overturning the federal estate tax repeal, but first let’s talk about why it’s prudent to act as if it will never happen.
Probably the most compelling argument for not pulling the plug on estate tax protection, such as second to die universal life insurance, or not moving ahead with estate tax protection is that, in all likelihood it repeal will never happen. Change may occur but I am hard pressed to find anyone that believes it will be repealed. Under current law, in 2009 the estate tax exemption will raise from $2,000,000 this year to $3,500,000. Remember, this is up from the overbearing exemption of the year 2000 of just $600,000. We’ve come a long way. This has paved the way for especially small business owners to be able to pass on the fruit of their life long labor to their family without the government taking a giant bite out of that piece of fruit. So, reason number one, I just don’t see it actually happening.
Reason number two not to abandon estate planning is that if, for someone unfathomable reason, the federal government does allow estate tax to lapse to nothing, fully expect individual states to fill that void just as surely as one wave follows another on the beach. Many states, such as Washington with their 17% “death tax” have already jumped the gun in anticipation.
So, it likely won’t happen. Here’s a couple of practical reasons why it shouldn’t happen. Anyone that has been paying attention at all to the national debt and deficit knows that this past 8 years has been a bit like handing a teenager (the government) a limitless credit card with no guidance and expecting a good outcome. Repealing estate taxes would be a huge revenue hit at a time when they can ill afford it.
The other impact of estate tax repeal would be a drought in charitable giving that is so huge that it would seem almost un-American in its’ magnitude. Currently an overweight estate can be purged through charitable giving to avoid taxation. A good thing for the family and the charity. If there is no tax, there is no incentive to give prolifically. Now I know this crushes the idea that all charitable giving is heart driven. Well, it’s not really crushed. I happen to think it is a noble and heartfelt thing when a family or person happens to choose a charity over the federal government.
Bottom line. Rather than a time to give up on estate tax protection and sack any efforts at new planning, today is a time when well thought out estate planning is as important, if not more important, than at any time in our past. In another post I will cover current proposed estate tax bills floating around congress. It doesn’t appear as though anyone is waiting for 2010 to deal with the poorly thought out repeal issue.
May 27th, 2008
I was providing some information on the underwriting of bipolar disorder a few days ago on a bipolar forum when the question came up, “Why is bipolar disorder an issue with life insurance”.
Being in the life insurance business I am keenly aware that most people believe life insurance underwriting is an over reaction to whatever their particular ailment might be, from high blood pressure to cancer. I have shared more than once that I have that same reaction to the rates I pay. I understand why I pay the rates I do. I just happen not to agree with the logic that got them there.
I would like to address bipolar disorder straight on and answer that question. I have said many times that a person who admits to being bipolar is likely to be declined off hand, without any further study or thought on the part of the insurance underwriter. The reason, although I believe unfair, is the link between bipolar disorder and suicide. I have seen the argument raised in bipolar forums that suicide shouldn’t be an issue because insurance companies don’t have to pay for death due to suicide. There is where part of the rub lies. Insurance has to pay for death due to suicide after 2 years, 1 year in a few states. So, whether the suicide issue is valid or not, it is fair for insurance companies to consider.
With that in context, let’s look at the upside of all of this information. First, the majority of suicides that occur, happen during the early phases of diagnosis of bipolar, if not before the diagnosis. In general once a person is diagnosed and under treatment, stability begins to set in and, while life may never be completely normal, in many cases it is.
From a life insurance agent standpoint, my job becomes something like a door to door salesman. I sell something that people would probably really want, but the knee jerk reaction is to slam the door without even hearing about what I have to sell. With life insurance underwriters it is the same thing when shopping a case involving bipolar. I have to get them over the knee jerk reaction long enough to tell the story. When they hear that my client is a classic well controlled, stable member of the community who not only hasn’t attempted suicide, but certainly doesn’t intend to, the open the door a little further. When I explain that they are compliant with treatment and their only hospitalization for bipolar was when they were diagnosed, they invite me in and we discuss how we can work together to help the person get what they want while the insurance company gets exactly the same.
Bottom line. The answer to the question about why bipolar is an issue is that any health or mental impairment is an issue. I can’t escape that fact and unfortunately neither can my clients. What can be done is to minimize the impact that bipolar has on the outcome. If you use the right independent agent who uses the right companies, bipolar will get the same fair underwriting that anyone else would get.
May 26th, 2008
Whether you fly for the big boys like Net Jets and Executive Jet Management, or some smaller group, there has been a move in the life insurance industry to charge you more than other ATP rated pilots.
I won’t be long winded about this. If you have had that experience, take heart. Not all companies share that desire to pillage your take home pay.
Bottom line. If you are a private pilot or a professional pilot, talk to an independent agent today who knows what companies will give you the best rates, and more importantly, which won’t.
May 24th, 2008
Probably one of the most challenging parts of life insurance is explaining to clients why their, at least to them, seemingly innocuous health issue impacts their life insurance rates. Their belief is that if it isn’t bothering them too much and their doctor hasn’t told them to buy a house close to the emergency room, what’s the big deal?
Sleep apnea is one of those issues. In most cases of obstructive sleep apnea a person would probably claim that they had overcome their only real mortality issue, that being their demise at the hands of their spouse if they didn’t do something about the snoring.
The most common risk factor (cause) of sleep apnea is obesity. While it is not uncommon in other cases, it is a relatively frequent occurrence among those who have lost control of their weight. In most cases the issues that arise from sleep apnea, snoring and sleep deprivation, are those kinds of things that fall into the “so what” category when a person is trying to wrap their mind around their own perceived life insurance risk.
The issue that very often doctors don’t talk about with their patients is the connection between sleep apnea and CAD (coronary artery disease), stroke and congestive heart failure. It is my belief that most doctors aren’t real keen on attempting to help people get a grip on lifestyle issues, so they treat the symptom and don’t discuss the underlying causative issues.
There is a definitive link between these issues, although the still unclear factor is whether sleep apnea leads to an increased risk of heart disease and stroke, or whether it is obesity that is the real culprit. Studies are ongoing to determine that answer. The other issue of congestive heart failure seems to be very clear. While sleep apnea doesn’t cause CHF, it absolutely aggravates it.
From a life insurance standpoint, while none of these cause and affect scenarios are consistent from person to person, underwriting has to consider the issues. Sleep apnea, if well controlled, is ultimately insurable at very good rates as long as it is characterized after testing as mild to moderate. Severe sleep apnea is generally still insurable, but there can be increased rates.
Bottom line. It’s not your snoring that concerns life insurance underwriters. If you have sleep apnea and need life insurance, find an independent agent who understands sleep apnea. They will know what questions to ask and most importantly, what companies will help you and what companies to avoid.
May 24th, 2008
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