Archive for November, 2008
One of the things that is hard to drive home to people who are looking for life insurance is the cost of waiting to correct a situation that is keeping them from the rate class they want. Probably the single issue where this comes up most frequently is obesity.
Just a quick example. Let’s use me at age 55, good health. I’m 5′10 and for the sake of this example I weigh 260#. I want $250,000 of 20 year term and I can only budget about $1200.00 per year. The problem is that at 260# the best rate class I qualify for is standard and the best annual rate is $1482.50. So, being my typical customer I tell myself that I will go on a diet to get down to 225#. Then I will be in a standard plus rate class. Just 35#. I can do it.
This is where the cost of waiting kicks your overweight rear. Let’s say I really go nuts and actually lose 50# in the next twelve months. I’m only a year older and now I qualify for standard plus rates, right? Not quite where I wanted to be, but instead of $1482.50, the rate is $1325.00. Wrong. Life insurance underwriters have caught on to the fact that dramatic weight loss is almost always temporary, so whatever you lose in a years time if it’s over 20#, you get half of it added back on for underwriting purposes. So, I lost 50# and I get 25#, added back on, making me 235#, and I am still in a standard rate class.
So, I beat the odds and maintain my weight at 210# for a year and now I truly qualify for standard plus rates. The problem is I am 57 and the rate is now $1452.50.
But the real issue with postponing life insurance for rate gratification is that during that two years you didn’t do anything to lock in your insurability. So, let’s say that during that period one of the obesity buddies shows up. Let’s take diabetes. Your rate would be at least 50% higher than the $1452.50. What about cancer? That would likely render you not insurable at all until after treatment and a waiting period.
Bottom line. Buy your life insurance now, even if you only buy 10 year term insurance. At least it locks in your insurability. Then work on your weight or your cholesterol or whatever is keeping you away from your dream date with your dream rate.
November 26th, 2008
With very few exceptions life insurance applications are accompanied by a physical exam and blood and urine tests. Occasionally the issue of a blood draw can complicate things with people whose veins are hard to find or those that are just plain freaked out by needles.
The two options that are available for someone who simply refuses to have blood drawn would be simplified issue life insurance (no exam), or in lieu of a blood draw which generates a couple of vials of blood to be tested, a few companies will allow a “finger stick” which generates far less blood and narrows what the company can test for simply due to volume.
First let’s put this in perspective by using a sample client. A man in his early 50’s. Trying to quit but still actively smoking. Good health and family history. He just had a horrible experience with a blood draw when he had shoulder surgery a few years back. If we did a full exam and blood draw his price for $250,000 of 15 year term insurance would be about $1500 annually.
To go with simplified issue insurance where there is no exam and no blood or urine specimens, the best price on the same amount and term length would be $3892 annually. Taking this course of action to avoid giving blood would cost about $2400 more per year for 15 years. I don’t know, but I’m thinking I could figure out some way to give blood to save $36,000 over the life of the policy.
The other option, the finger stick, will generally not be allowed for preferred rates, so in this case the person would be looking at standard smoker rates and the best of those with a company that will accept a finger stick would run $2600 annually, an additional $16,500 over the life of the policy.
So, what does a company lose by not doing a finger stick versus a full blood draw? One of the losses is a lipid panel, cholesterol, triglycerides, hdl, ldl, etc. They are also lacking the blood it takes to run liver and kidney function tests. No PSA test. That is a lot of health information that the insurance company is going to forgo a glance at, and the less information they have to help determine potential mortality, the higher the price. Obviously with a simplified issue policy there are no tests and not even an examiner who gets to look you over, so the company is assuming risk without full information (remember Reagan, “trust, but verify”), so again an even higher price.
One option that can occasionally save the day is that those who are hard blood draws and are scared to just let any old nurse working for an exam company do it, may have a favorite nurse at their doctor’s office who can get the blood on behalf of the exam company. There are some guidelines that have to be followed, but sometimes it works.
Bottom line. The best rates for life insurance come with the best, and most, possible information for the insurance company to scrutinize. A few tips for those that have a hard time giving blood. Drink more water than usual in the 12 hours leading up to the exam and, if you’re up for it, do some push ups right before the blood draw.
November 25th, 2008
The tools that are available for doctors to investigate our innards these days are the tools of science fiction from my childhood. Back then if you couldn’t figure it out with an x-ray you needed to be cut open.
The truth is that even then, even with you laid wide open, there was a good chance that they could visually miss something that might show up on newer imaging devices such as CT scans and MRI’s. But with some new advances comes a danger, a danger that was mistakenly attributed to the common x-ray “back in the day”, but is a very real danger with CT scans.
The truth about good old fashioned x-rays is that a person would be hard pressed to have enough of them to incur any significant radiation exposure. On the other hand a CT scan, in one fell swoop, can expose you to hundreds of times more radiation than an x-ray. And this amount of exposure isn’t simply linked to a possible higher risk of cancer, but rather has been proven to cause cancer at a fairly alarming rate.
I know I have a tendency to rip off in a direction that doesn’t have anything to do directly with life insurance, but consider the potential to underwriting when further studies confirm that 1 in 50 cancer cases are caused by the over use of CT scans. Life insurance underwriting is all about assessing mortality risk and if your medical records show, for whatever reason, that you have had multiple CT scans, the underwriter knows that you are at a higher risk of contracting cancer, aka, a higher mortality risk.
So why, we ask, are doctors ordering so many CT scans that can potentially give you cancer when they can get the same, or better, imaging from magnetic resonance imaging, MRI. With MRI’s there isn’t any radiation at all so there isn’t any health risk. Better quality! No health risk! It’s all about the money my fellow test monkeys. MRI’s cost more and therefore insurance companies encourage the use of CT scans by paying a higher percentage of their cost. Even when they pay a higher percentage on the CT scan it is less expensive than MRI.
And to make it even more unscrupulous, as if putting your life at risk isn’t enough, studies show that most CT scans aren’t needed at all, but when the machines are owned by a hospital and hospitals need to make money, well, why not just double check that obvious fracture showing on the x-ray by performing an unnecessary CT scan?
Bottom line. Scott Haig in a Time article summed up the decision making process about CT scans like this, “CT is absolutely necessary with head trauma and acute abdominal conditions. Minutes can make a difference in these cases — if, say, there’s bleeding around your brain and you can’t get an MRI — and the speed of a CT scan makes it worth the risk. But in most other situations, it’s wise to let the doctor convince you it’s worth it, before consenting to the scan. Ask your doctor what decisions he or she plans to make with the information from the scan. What other tests could yield the same information? Would an MRI be better? Ask why the CT scan is necessary right now. Make a phone call, ask a specialist. Ask how confident the doctor feels about your diagnosis without the scan. If a good surgeon really thought I had appendicitis, I’d go straight to the OR — not to the scanner.”
November 24th, 2008
With all the ongoing financial drama, television networks are falling all over themselves to interview experts on this and that and what the heck we should do to protect our retirement. Just by the sheer luck of the draw I ran into three Suze Orman interviews within the past week.
Personally I think the advice she gives on the economy and investments is either stolen from someone else or worse yet, made up on the spur of the moment from her own, very original, lack of expertise. But, let’s just accept for the minute that she is clueless on financial matters and move on to something where she is on a level playing field with all of the other advice givers today. None of them understand why people buy life insurance.
They all have an opinion on term insurance versus whole life, universal life versus variable universal life, etc, but I honestly don’t think they understand that the reason people buy life insurance is because……some of them don’t live as long as we think they will. As they provide advice on this tactic or that tactic of how to salvage as much of your 401k as possible and flip out advice about “as long as you have 15 or 20 years”, they are all avoiding the subject of life insurance and how it can keep this economic car wreck from turning into one family’s personal train wreck.
This is precisely the time when they should be inserting into every interview the need, the urgent need, for people to have adequate term life insurance in force not only to replace lost income if someone dies prematurely, but also to replace the investments that may never have a chance to come back with the breadwinner out of the picture. They should talk about the need for stay at home parents to have adequate insurance because if things get worse, going forward the surviving parent may not have the luxury of just working one job and may need the life insurance proceeds to pay for child care and school.
Bottom line. The world is full of good advice and it’s also full of people that BS for a living and personally I think Suze deserves a plaque in that particular hall of fame. If you don’t know what life insurance is for, don’t give advice on how to buy it.
November 22nd, 2008
In the past I’ve gone off on the whole idea that people over age 65 or 70 should have to complete a cognitive skill test as part of a life insurance exam. It is insulting and as many times as I’ve looked at the questions, I still fail to see the relevance.
So, if you’re “elderly” and applying for life insurance and the examiner tells you that you need to complete a cognitive skills test, get in the first punch. Tell the examiner that you have an examiner cognitive skill test that is required before you allow even your family doctor to check you out. Since your exam was scheduled, you can have your computer on and tell the nurse that it should only take them two minutes. As soon as they finish you’ll be happy to do their test.
Bottom line. You may still have to put up with the test, which by the way is rapidly losing popularity for obvious reasons, but if you do you’ll get to have a little fun first.
November 22nd, 2008
We’ve been hitting them out of the park on type 2 diabetes underwriting for quite some time, but that pot at the end of the rainbow, fair underwriting for type 1 diabetes, that we never have been able to get to is finally coming within reach.
Given certain guidelines, we now have a company that is willing to be more aggressive than anyone in the past on early onset type 2 diabetes and juvenile onset type 1 diabetes. Three months ago we couldn’t find anyone that would jump on board that wagon, but as the world spins…….
So, some guidelines. I know it’s not going to be the answer to everyone’s wishes, but it’s a start in the right direction.
First let’s talk about type 1 diabetes. Type 1 is aka insulin dependent diabetes, aka juvenile onset diabetes. Type 1 by definition is your inability to produce insulin at all. This has historically been a tough underwriting challenge just because in the absence of the willingness and ability to closely monitor and control the issue, complications are plentiful and damaging.
What this company is saying is that they are willing to approve business on people whose diabetes is diagnosed as early as age 10 with a track record of reasonable control and no complications for as much as 20 years. I’m hearing people scream foul because that makes the person 30 before they can get life insurance, but tell me the last time you heard of a 30 year old type 1 diabetic paying less than $1000 a year for $250,000 of 30 year term insurance or $600 for a 20 year term. It may not be all that everyone wants, but it’s a home run for those that fit. I am still fighting the fight
on those younger type 1 diabetics and will keep you posted on that.
The company is saying that as the age of onset increases, the number of years of control and no complications will decrease and the rate class will improve. Underwriting treatment for type 1 diabetes diagnosed after age 20 will be very similar to that of type 2 diabetes. So let’s talk control and complications.
Control will be measured by an hbA1c under 7. We were told that it could be above 7 (as in under 7.5) but that all other risk factors had to be good. No complications!! Type 1 diabetes complications run the gamut from heart disease and kidney disease to neuropathy and eyesight problems.
I would leave everyone wondering if I tried to outline all of the different possibilities, but suffice it to say that there are possibilities today for type 1 diabetes life insurance coverage that didn’t exist even a few weeks back. And then there are the changes in the underwriting for type 2.
That same 30 year old with type 2 diabetes, no other risk factors or complications could get $250,000 of 30 year term insurance for as little as $630 a year and a 20 year term for under $400 a year. I have often referenced the underwriting being much harsher than that on type 2 diabetes onset before age 50 and definitely before age 40. Home run!
Bottom line. If you have diabetes it’s time to do some shopping. Yes, it’s an A+ rated company and yes the rates are guaranteed level. Good control, no other risk factors and no collateral health issues and you can be knocking it out of the park too.
November 20th, 2008
Being in the life insurance business and having been on the business end of passing on checks for death benefits, I have a real sense of just how much life insurance is needed by the families that receive it and a real passion for helping others understand that buying life insurance isn’t about expense, it’s about peace of mind.
In the years that I have been posting this blog, the world according to Ed, I’ve been a bit rough on men. Maybe not rough enough though. Men have this real thing about life insurance. They seem to think it’s all about them and the money that they will have to spend to ensure that, even if they don’t, their spouse will make it to retirement financially OK. They think it’s betting against themselves. They think they would be better off just putting that money in investments so that they can enjoy it, never considering that there are significant odds against them seeing retirement.
When I say significant, let’s put that into betting context. I know people who buy multiple lottery tickets every month with a 1 in a bazillion chance of winning, or those who buy scratch tickets every payday with a 1 in 250,000 chance of winning anything other than the money you’ve blown through the years on all the losing ticket. So, what are the chances that life insurance will be needed between young adulthood and your mid sixties, what we used to fondly think of as retirement time.
Well guys, if you knew that those fairly small life insurance premiums were covering a 1 in 6 chance would it become something worth thinking about? 1 in 6 men who make it to 25 in our country don’t make it to 64. For women it is 1 in 9. That isn’t betting against yourself but rather doing the prudent thing to cover a very real risk for those who are dependent on you.
And the cost! I know everyone is rethinking how they spend money these days. Is there any chance that we have an inordinate amount of our income going to play and toys? Is it possible that with just a little creative thinking we could divert a bit of that play money to peace of mind money?
Bottom line. All of us know someone who has died far too young in a car accident. You are in a serious minority if you don’t have a family member who has died prematurely from cancer or a heart attack. And consider all those around you for who obesity is an ingrained part of life and that with that lifestyle comes the risk of diabetes and so much more. What part of life insurance doesn’t make sense?
November 19th, 2008
Impaired risk, an industry term that refers to life insurance on people with significant health issues, cancer, diabetes, heart disease and such, is an area that we have focused on for some time. While the masses and the giant internet agencies flock to the healthiest clients they can find in a feeding frenzy on the easily insured, some of us have found a niche that most agents would prefer to steer away from.
Because of the path we’ve chosen I often get solicitations from different large agencies to help handle our impaired risk shopping and administration. While I have used Special Risk Services out of Denver for as long as I can remember because they really are the best, like any other business we still get offers.
Most blow right through my desk and on to the trash can. One today caught my eye and because it was so bizarre I thought I would share it. This came from a series of six ideas about how to handle impaired risk cases, a lot of industry mumbo jumbo for the most part until you come to idea number six.
Number six has to do with what we should suggest if we find a client who truly is not insurable. It suggests, seriously, that you find a surrogate insurable person to take out insurance in your client’s place. So, you’re too sick to get insurance and therefore your beneficiary won’t get anything when you die, but you talk someone else into taking out insurance with, for instance, your wife as beneficiary, and when they die your wife finally gets the insurance you weren’t able to provide her.
So, I’m explaining this to my wife. “It’s like this Pam. I’m too sick to get the $1,000,000 of insurance we need to replace the income you will lose if I die, so we turn to my nephew who is healthy and get him to take out $1,000,000 with you as beneficiary. There is a downside though. He is younger and very healthy and will likely outlive me by 20 or 30 years. So, in order to make this work, my last act as a devoted husband will need to be to shoot my nephew so you can collect the money you need to get on with life.”
Bottom line. Good chuckle. The good news is that with proper preparation and shopping, very few cases are uninsurable. Call an independent agent to work on quotes for you today, but steer away from idea number six.
November 19th, 2008
Following quickly on the heels of the obesity epidemic has been the type 2 diabetes epidemic that is sweeping the country. With $billions being thrown around like dimes these days I was surprised that a headline with $billions even caught my attention. The estimated annual cost of type 2 diabetes in our country is $218 billion.
I would like to throw out a little different view of that staggering figure. Type 2 diabetes and all of it’s associated collateral health issues such as heart disease produce a substantial mortality experience in our country. I think someone would have to bury their head in the sand pretty seriously to not understand that diabetes and its’ complications are responsible for an astounding number of deaths each year.
When you consider that in the context of the number of people who are uninsured or under-insured, when those deaths occur families are going to be left with health care debt that will bankrupt many of them. Life insurance may be the only thing that will prevent that financial disaster from occurring.
The good news is that for many with type 2 diabetes life insurance is very affordable. The key of course is to get insurance while the diabetes is well controlled or in the early stages and hasn’t yet caused any other health issues. Here is just a quick review of the points that an underwriter looks at when reviewing a diabetes file for insurance.
Age of onset is part of the equation. After age 50 is optimal. Before age 50 will cost more, but the higher rate class is often offset by the lower cost for age. Control of the diabetes as measured by a blood test of glycated hemoglobin, the hbA1c, is critical. Well controlled diabetes tends to be less detrimental to the body. An A1c of less than 7 is good, less than 6.5 is optimal. Finally, whether their are related health issues, a measure of how far the diabetes has progressed is taken into account.
Bottom line. With $200 billion plus being racked up each year in costs associated with diabetes, the financial fallout for the families can be a terrible cost. You know me and my belief that if you have a family you should have had life insurance in force all along, but if you don’t and you have diabetes, apply for life insurance now.
November 18th, 2008
There isn’t any question that given the clear choice between suffering a potentially fatal heart attack and having the artery opening procedure called angioplasty, the prudent thing to do is to stack the deck in your favor and open those arteries.
But there is a serious question about the use of angioplasty as a preventive measure. In other words, if you are not in imminent danger of a heart attack and arteries that have begun to clog are treatable with medicine, is the risk of an invasive procedure still prudent and reasonable. Recent studies have shown that there appears to be enough inappropriate recommendations for the procedure that the American Heart Association and others will be releasing new guidelines within a few months regarding when an angioplasty should be set aside for treatment through cholesterol lowering and clot busting drugs combined with exercise.
Medically this is a huge issue. From a life insurance standpoint it can make the difference after the diagnosis of how soon a person can get life insurance and how much they will pay. If a person is found to have blockage that is successfully treated medically and those results can be substantiated on a subsequent stress test they could be looking at standard rates, possibly better, within six months. If they have an angioplasty, whether it was needed or not, it will be at least a year and a good stress test and then the rates will generally be higher than standard rates.
The good news is that, given a good stress test, either way you would be insurable. The bad news is that an over zealous doctor might do more damage than just handing you a large cardiologist’s bill.
Bottom line. Second opinion, second opinion, second opinion……unless you are having a heart attack.
November 17th, 2008
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