Archive for July, 2008
I’ve often mentioned that getting approval and good rates on life insurance is a matter of the right agent in combination with the right company. The other key to success is an application that is properly thought out and presented.
A case in point is a client we just got approved who had applied through another agent before coming to us. Her application was declined off hand by a company that assumed she had bipolar disorder because of a medication she was taking that is quite often used with bipolar, Lamictal. This company declined her without asking for medical records because they assumed she wasn’t being forthcoming concerning her mental health issues.
On her application she had indicated treatment for depression. Had the company taken her at her word they would have discovered that, in fact, she was diagnosed with and treated for depression and attention deficit disorder, not bipolar. Had the agent understood that the medication she was taking is commonly used for bipolar, he could have simply put on the application “Client’s use of Lamictal is not for Bipolar disorder”. Wrong agent! Poorly thought out application!
The other thing that wasn’t done that is a must anytime there are health issues is that the agent didn’t ask for trial quotes before submitting the application. Had that been done he would have discovered that the medication was going to be a question, easily clarified up front. Then, with trial quotes in hand the application would have flown.
Bottom line. The client now has the coverage she wanted, at a good rate. It may not be rocket science, but it does matter who your agent is and how the application is presented.
July 31st, 2008
It’s no secret that I’m a fan of Dave Ramsey. My wife and I have been through his Financial Peace University and his no nonsense approach to finances has reshaped, or perhaps given shape, to our approach to money management.
Dave is about as clear and plain spoken as a person can find on the subject of why term life insurance is the right choice in almost every case. His position mirrors my own, that most life insurance needs are not permanent and that cash value life insurance policies are a rip off.
These are challenging economic times we are living in right now which makes wasting money on the wrong life insurance product even more egregious than it is during good economic times. Please hear me clearly. Cash value policies are a bad idea during any economic time but anyone who is wasting money on one right now is clearly not thinking clearly.
Whole life insurance or any universal life policy, including variable universal life whose selling point is cash accumulation is just a bad idea. “But if I replace my cash value policy with term I will lose the cash that has built up”!!! Read my lips. That cash is all fluff anyway. If you have a $1,000,000 policy with $300,000 of cash value and you die, your widow will get $1,000,000. “But I can borrow the cash value”!! OK, borrow it and don’t pay it back, which is what happens most of the time, and your widow will receive $700,000.
The cash value isn’t magic money. It comes out of your pocket to start with and it is never going to go back into your pocket. Never!!!
Bottom line. Life insurance agents make the big bucks selling cash value policies. Life insurance companies make the big bucks when life insurance agents sell cash value policies. You pay the big bucks that make all of that possible when you buy a cash value policy. Kind of a special relationship, isn’t it?
July 31st, 2008
As we’ve reviewed the underwriting criteria for life insurance when it involves diabetes over the years, I’ve beat the need to know your hbA1c to death. I would guess that more than 50% of diabetics I have spoken with don’t even know what I’m talking about, which in my mind heaps shame on their doctors for not educating their patients properly.
The hbA1c is a lab test that the doctor that is managing your diabetes will typically run every three months. This test is extremely relevant to them as it is the most accurate indicator of how your treatment is working. It tells them if you have achieved control and average glucose levels are low enough that no collateral issues should occur.
Life insurance underwriters are very interested in the same information. They take with a grain of salt what your fasting glucose level is. The proof comes when all the highs and lows are averaged. Control isn’t measured by your ability to fast and artificially lower your glucose, but rather by averaging those fasting periods with the more frequent real life periods when you aren’t minding the shop and your glucose rises.
Another relevant issue to underwriters when it comes to diabetes is the age of onset. Diabetes has potential impacts on other health issues such as heart disease and kidney health. The longer a person has diabetes, the greater the chances of complications and the greater possibility of a negative impact on mortality. From an underwriting standpoint, onset prior to age 40 is substantially different than after age 50.
Also important to underwriters are those health issues that, in combination with diabetes, make it harder for a person to avoid complications. Probably the two most important are obesity and high blood pressure. With obesity being one of the primary causes on diabetes onset, trying to control diabetes with unchecked obesity is problematic at best.
The good news is that for many with onset after age 50 and well controlled diabetes, standard or better rates are available.
Bottom line. Make sure you educate yourself on what diabetes means in your life. Don’t expect that your doctor will provide answers to questions you don’t ask. Seek out a knowledgeable independent agent to help you seek out the best rates and be ahead of the curve when you do by having your most recent set of labs available.
July 30th, 2008
Early on in my work with cardiac patients needing life insurance I learned to ignore what they remembered their cardiologist telling them about their prognosis, and just dig for facts. The most important fact that we needed uncovered and on the table was the amount of damage the heart muscle incurred.
Cardiologists, as near as I can tell, are taught in school to tell their patients that, having survived a heart attack or angioplasty or bypass surgery, “that they now had the heart of a much younger person”. That would be nice if it was true. A brush with the leading cause of death in men somehow does not equate to you somehow, suddenly, having the heart of a much younger person unless you happened to have a transplant in the mix and literally did have the heart of a younger person.
The measure of strength of the heart and therefore the measure of how much damage has occurred is generally drawn from one of the results of an imaged stress test, the left ventricular ejection fraction (LVEF). It is literally a measure of how effectively the heart is able to move blood out of the left ventricle, the heart’s primary pumping chamber. The heart’s function is to pump blood and if that ability is impaired, the rest of the body that is dependent on that flow suffers to some extent.
Clients often get weary of my need for the facts, but it is those facts that lead to accurate life insurance quotes and ultimately a successful search for the best possible life insurance rates. When I don’t take the cardiologist’s rosy synopsis without seeing a copy of the last stress test I am often perceived as “asking too many questions”. I am told more often than I can count that “other agents will give me quotes without all of that”. What life insurance seekers don’t understand is that ultimately the underwriters at the insurance companies will be looking for the very information I asked about and, if they deferred to an agent who wasn’t so bothersome up front, the chances of the end result, the approval, being the same as the beginning, the quote, is very slim indeed.
Underwriters evaluating risk in cardiac cases want to know your age when the condition was first diagnosed. They want to know what happened and what was done. They want to know how many vessels were affected. They want to know how often you see your cardiologist and when your last stress test was. (I just had one client who told me it was two years ago, which is kind of a hinge time for underwriters. Less than two years is good, more isn’t. So I asked him to check and he came back and said it was actually 5 years ago. My how time flies when you are ignoring your health and your cardiologist’s recommendations). They want to know your LVEF. If it is more than 50% you are still in the game. If it is less than 50% you had better hope that some offsetting factor will lead an underwriter to make a highly rated offer. That would be good news as most often less than 50% is an automatic decline.
Bottom line. Most doctors aren’t going to do it for you, so educate yourself. If you can’t answer the question, “how much damage was done”, get copies of your tests and Google the results and find out what they mean. Make a list of questions and demand answers. If a run at life insurance is in your future, seek out the independent agent that asks the most questions, not the least.
July 30th, 2008
Oshkosh is wall to wall private pilots this week. It’s a week long fest of vintage planes, shows, and even the much anticipated Martin Jetpack kicking things off with it’s first public flight.
Life insurance will be well represented I’m sure, but before you buy into the best rates coming from those agencies, bring their information home, shop and compare. Just because you are a private pilot doesn’t mean that an agency that specializes in pilots can necessarily find you the best deal. It’s important to remember that your life insurance risk isn’t just measured by one thing, but by a combination of health, family history, hobbies and even foreign travel.
The Pilot Insurance Center is generally well represented in Oshkosh, and to their credit they’ve done a fine job for a thousands of pilots over the years. But even PIC isn’t always the source for the best rates available. A second opinion could put money back in your fuel jar.
Bottom line. Enjoy the show and when you get home do some prudent shopping.
July 29th, 2008
Skin cancer is the most common cancer among both men and women in the US. Life insurance underwriters have shown a lot of movement on their underwriting guidelines for skin cancer over the past several years. Unfortunately, until recently, it didn’t seem to be in any clear direction.
Probably the best news has been in the risk evaluation of low stage melanoma. Melanoma is the least common skin cancer but accounts for 75% of skin cancer deaths. But, what we’ve seen recently especially in stage 1 and 2 melanoma , is a tendency to get back to standard rates quicker after surgical removal of the cancer. While higher stages may incur a flat extra for a longer period, lower stages can generally be seen within a year with no recurrence.
The other significant shift in skin cancer underwriting has come in basal cell carcinoma and squamous cell carcinoma. In the past these two generally flew under the underwriting radar because of the relatively low mortality risk. A few years ago a study indicated people with multiple basal cell carcinomas were at increased risk of acquiring melanoma. This led to an underwriting swing away from ignoring basal cell to offering no better than standard for people with multiple instances. This stance has also softened somewhat with further studies showing the connection to be more vague than first thought.
Bottom line. Once again, this is not an area where your car insurance agent is going to shine, and I wouldn’t depend on large internet agencies to really dig in deep and get the job done as it should be. A knowledgeable independent agent should be able to ferret out the best opportunities for low rates with your particular history of skin cancer.
July 29th, 2008
The argument of term versus permanent insurance has raged on since before I first got into the business in 1978. Back then the defining lines between the two were more stark, with the only term product available being a yearly renewable term, a product with a low initial cost that went up every year until it was no longer cost effective.
Today the yearly renewable term policy is largely ignored with the advent of longer term guarantees ranging from 10 to 30 years. The reality is that with the introduction of the universal life with a no lapse guarantee, a cashless UL, term insurance to age 100 is now available, just under another name. At the risk of pointing out that Americans are not at the cutting edge of everything, term to age 100 has been available for some time outside of the US.
So the question of whether term insurance is just a cheap way out for those that want life insurance but don’t want to pay whole life prices, rises to the surface. There’s no doubt the term insurance is less expensive, but the crucial question for both the insured and the agent has to be whether term insurance meets the need.
I’ve maintained, since longer terms became available, that term insurance isn’t just a viable alternative to whole life, but in almost all cases it is the more appropriate product. First let’s dispel with the whole life argument that a policy building cash value is a good thing. I had one whole life agent point out to me that without the cash from his whole life policies, Walt Disney would have never been able to get Disneyland off the ground. Well that was then and term life insurance wasn’t available.
I suspect that Walt Disney today would think long and hard about the lower payments he could make on term insurance and the fact that those lower payments would free up immediate cash versus waiting for his policies to build cash value.
Almost all life insurance needs are temporary whether the whole life companies want to admit that or not. Dependent children, in almost all cases, are only dependent until they reach adulthood. Banks don’t make loans for life, but rather for certain periods. Retirement and the need to replace income don’t last until age 100, but rather come to an end generally in our 60’s and 70’s. Even with retirement age increasing due to economic forces, term insurance guaranteed into your 80’s is available.
Bottom line. Term insurance is not just a cheap way out. It’s the smart choice in almost all cases. On the flip side, I would argue that whole life insurance is the wrong choice in virtually all personal insurance portfolios.
July 29th, 2008
I’ve mentioned many times that the large internet agencies are well equipped to pursue and sell the younger age, completely healthy market. It is, for them, an uncomplicated and easy way to keep the cash flowing.
It is much quicker and easier than dealing with older clients that have health issues or for that matter, any age client with serious health, physical or mental, concerns.
We have been very successful by focusing on just the opposite market of the larger internet agencies. We specialize in finding and placing the best possible rates for people with issues ranging from bipolar disorder to heart disease to diabetes and epilepsy. In writing about these specific topics before I have often noted that if you have one of these issues and are looking for the best possible rates, you need to find an independent agent and avoid both the large internet agencies and agencies that specialize in auto and homeowners insurance.
Simply put, the large agencies don’t want to invest the time it takes to find you the best rates. You local Farmer’s Insurance agent doesn’t have the products or the underwriting power to get the job done for you.
Bottom line. If you are in less than perfect health, your time and effort is best spent talking with independent agents who understand your health issues and know what companies to go to and which to avoid.
July 28th, 2008
I recently applied for and received an AARP Group term life policy underwritten by New York Life. In previous posts I believe I’ve clearly made the point that these AARP offerings are a rip off of the sleaziest form, claiming to be advocates of the elderly while fleecing them.
I actually applied for their term insurance policy and their whole life policy, $50,000 each. They never responded to the application for whole life insurance, but I see in the term policy where it states that the maximum I can have through AARP’s life insurance program is $50,000. So much for getting adequate coverage and diversifying in the process.
I received the new term insurance policy a few days ago and after reviewing it, had some questions. Attached is my policy.
my-aarp-group-term-policy
Note on page 4 where it says Premium, it explains that my premium will be going up each time I reach one of their 5 year thresholds. It also goes on to say that they can, of course, change my rates at any time as long as they change the rates of all policies in my class. A couple of questions came to mind. If my premium goes up every 5 years, how much does it go up? And, if my premium can be changed on a class basis, what defines a class?
Looking through the rest of the policy, the only reference I found to my premium level was on the copy of the application at the back of the policy. It is attached here.
aarp-life-insurance-application
In the upper left it breaks down the premiums depending on the size of policy and at the bottom of that box it says “Please refer to the rate chart for complete details”. There is no rate chart in the policy. There is nowhere in the policy that it spells out or illustrates what happens every 5 years.
I called the Colorado Division of Insurance and asked them if, even though this is a group policy, it should contain that type of information. Their answer was yes. The person I spoke to was very clear that if a policy doesn’t provide a table of maximum premiums, an illustration that shows how much they could potentially charge, it was not in compliance.
Taking them at their word I called New York Life to see if that information had been inadvertently left out of my policy. They assured me that the information was not there because it didn’t need to be there. When I pushed further about wanting something in my policy, per Colorado law, that shows what the rates increases could potentially be, Lucille from New York Life told me that she was willing to give them to me verbally over the phone, but that she couldn’t send them to me. She then explained that the rate increases were shown on the application, but that portion of the application is not included in the policy.
I then spoke to her supervisor Donald Ennis and reviewed all my concerns. He said that the illustration of rate changes is only contained in the master policy and that is held by AARP and that I should call AARP if I wanted a copy of that information. This morning I spent an hour in the quagmire that is the AARP phone system and was finally told that AARP doesn’t have a master policy and that they would refer my question back to New York Life.
Advocates for the elderly? I’m a 55 year old life insurance agent and I wouldn’t advise anyone to accept the AARP policy. The policy, the company and the organization backing it are all wholly inadequate at providing the information you should expect in order to put your trust in them. If I can’t put my faith in what they’ve provided and I can’t get the answers to questions I ask, how could the average person (non life insurance agent) hope to enter into one of these contracts with confidence. The answer appears to be that AARP and New York Life hope you will do it with blissful ignorance. “Trust us! We’ve been around for 160 years.”
Bottom line. Intentionally vague would be the only grade I could give to my AARP life insurance policy. It won’t go into force because it is overpriced, not guaranteed and missing key valuable information.
July 23rd, 2008
If I’ve gone bonkers once, I’ve gone bonkers 100 times about agents that sell universal life and whole life policies based on current or assumed values and not based on guarantees. If you have a policy that was sold based on the assumption that a company would continue to perform well, and it hasn’t, check out this excerpt from Volume 8, Issue 15 of TheInsuranceAdvisor.com, a newsletter to insurance agents.
“When Does the Opinion of a Life Insurance Agent/Broker Become FRAUD on the Buyer?
In a recent lawsuit, Wal-Mart Stores, Inc. alleged fraud (among other things) against AIG Life Ins, Hartford Life Ins, the brokers involved and their representative, and both the trial court and the appellate court found against the insurers and agent/broker representatives!!! While you may be thinking “I would never commit fraud”, that is almost certainly the mindset of those who were actually found guilty of fraud in this case in that the findings for fraud appear based on prevailing industry sales practices involving the use of illustrations of hypothetical future performance instead of investigation and disclosure of A) expected/possible costs and B) the reasonableness of expected/illustrated future performance.”
Bottom line. Any life insurance policy you buy should be purchased with full knowledge of what is guaranteed and what is not. Any agent that doesn’t fully educate their client on the guarantees of a policy should have to go in front of the judges mentioned above and have their rear end handed to them.
July 22nd, 2008
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