Ed Hinerman On Life Insurance

Suze Orman On Life Insurance! Brilliant….NOT!!

OK. It’s been months, but Suze Orman has crawled back out of her cave and pretended that she knows all that needs to be known about life insurance.

I am a huge advocate of the fact that term life insurance works well for most life insurance needs. The truth is that most life insurance needs have a definable end to them. This is a perfect definition of a term insurance need. But Suze
has this one size absolutely, positively fits all as long as you take the rest of my financial wisdom to heart and absolutely, positively follow it mentality.

Her thoughts on life insurance are summed up as follows:

“SUZE SAYS

* I HATE WHOLE LIFE INSURANCE
* I HATE UNIVERSAL LIFE INSURANCE
* I HATE VARIABLE LIFE INSURANCE
* THE ONLY TYPE I LIKE – FOR THE PURPOSES FOR INSURING YOUR LIFE – IS TERM INSURANCE!
* If you are smart with the money you have today and you get rid of your mortgages, car loans and credit card debt and put money into retirement plans you don’t need insurance 30 years from now to protect your family when you die.”

If you’ve followed my blog, you know I’m not big on whole life or variable life. Personally I believe there are better ways to invest excess money.

But, there are needs for permanent life insurance. For the life of me (and any other financial advisor that knows what they’re doing) I can’t figure out how you provide estate tax protection through life insurance with term. If you do all of the “smart” things that Suze recommends above, at the end of whatever term you can buy, you will have a substantially larger estate for having done the right things. The need doesn’t go away Suze, it gets bigger. I’m not saying getting your financial house in order is a bad thing, in fact I agree, but it makes your estate larger and if your insurance runs out, it makes it more vulnerable to taxation. I believe this permanent need should be addressed with a universal life policy with a no lapse guarantee. No cash value, just insurance.

Again, I believe term insurance takes care of most needs, but Suze, you’re filthy rich and don’t have a great grasp of the average American family. I carry $50,000 of permanent coverage. At this point in my career I carry a substantial amount of term insurance. By the time the term insurance runs out I don’t believe my wife will NEED the $50,000 given the other assets we should have, but try this shoe on. That $50,000 policy is a universal life policy with a no lapse guarantee. It doesn’t cost squat because it’s just insurance. No cash value. If I die after all the term insurance is gone I want my wife to have $50,000 of instant tax free cash so that she won’t have to make any rash decisions about how to arrange her assets to take care of herself. $50,000 isn’t much insurance, but it will give her time to put a plan into action without shooting from the hip.

Bottom line. These were just a few examples. Term insurance meets most needs, but it most assuredly does not meet them all. In her article Suze Orman answers questions about every conceivable type of insurance. She doesn’t hold any insurance licenses and doesn’t have to carry Errors and Omissions insurance to protect people from her bad advice. She portrays herself as a financial adviser. Grrrrr!

1 comment June 5th, 2008

Body Mass (BMI) and Life Insurance!

Everyone believes they should get the preferred plus rates that are advertised everywhere. “Di you know that John can have $500,000 of term life insurance for just $12 per month?”. The truth is that many qualify for those rates and get them, but for the average person with average health issues, we don’t.

Probably the quickest group to rebuff anything but a best rate approval on life insurance are those folks that are overweight and know they’re overweight, but simply don’t see it as an issue. It has been my experience that this group, more than any other, seems to have a firmer grasp on denial than most. They, inspite of knowing the link between obesity and other health issues, don’t believe it is fair for them to be charged more for life insurance than someone who is fit and taking care of themselves.

Now let me be clear about this. Using a body mass index calculator I appear to fall into the overweight category at 5′10 and 175#’s. But insurance companies aren’t abusive about the build issue. With most companies, even though I am clearly in the overweight category, would actually allow another 20#’s or so before they would bump me out of the best rates as long as I didn’t have any other health issues that would preclude that.

Having said that, 5′10, 220#’s is going to catch the prize with any company. They aren’t going to care if that is the same weight that you played football at in high school. They aren’t going to care if you work out five times a week or run five miles a day. They aren’t going to care if your health is perfect in all other aspects. Obesity is obesity and along with it comes substantially increased risk of health issues that have the ability to shorten your life span and assessing your mortality risk is what life insurance underwriters do.

So, the folks whose weight (or lack of height) doesn’t get them what they want, in general, will blow off whoever is honest enough to tell them what insurance will really cost, and go on to another agent. Many are apparently so offended, in my experience, by honesty that they will never return a call again. It’s as if I called them fat or ugly or something, when all I really did was gave them an accurate quote. To them, possibly it feels as though I am just one more person in their lives who is treating them unfairly.

I don’t know what is going through their minds really, because they don’t call back to discuss it.

The truth is that the rates are fair based on build and that evenly the morbidly obese can put together a plan of life insurance that should fit into their budget. The challenge is to get over the fact that weight is an issue and it’s not going to change and work with your independent agent to find the company and the plan that will work best for you. There is not a cookie cutter interpretation of the weight issue from company to company and there are good rates to be found.

Bottom line. With obesity ranking high among the leading causes of type 2 diabetes, heart disease and cancer, underwriters can’t afford to ignore weight. Even if those health issues are currently present, you are at a greater risk than the average sized person of coming face to face with one, or more of them.

2 comments June 5th, 2008