Archive for March, 2009
I finally got my wife to look the other way while I jumped out of an airplane for my 54th birthday. She’s always so nice about asking me what I want for my birthday, and for the past 5 years I had
been telling her I wanted to try skydiving and that would be a href="http://www.mile-hi-skydiving.com/tandemEx.php">great present. She steadfastly refused, not wanting to be a party to my smashing demise on an airport runway. So, having paid for it myself and knowing that my life insurance was all current, it’s a perfect example to discuss how life insurance companies feel about you taking up risky hobbies after you already have insurance in force.
The whole thing hinges on a simple question. Were you actively planning on doing the activity when you took out the insurance? Hoping to do something at some point in the future is not actively planning. Hoping for it, dreaming about it and asking for it for your birthday don’t constitute actively planning. Having a date set to jump out of the airplane is actively planning. If you weren’t actively planning when you took out your life insurance policy, you’re covered.
A current client is a good example of this. He travels all over the world in his business and we divulged all of the places he travels or has plans to travel to on a questionnaire that went with the application. The policy was approved, but before he put it in force he called and asked, “Will this policy cover me if I start traveling to places that weren’t on the foreign travel questionnaire?” Since he doesn’t have any current plans to do so, the answer was yes.
This question has been brought up by a number of my private pilot clients. In many cases they were ready to dump life insurance policies that they had taken out prior to becoming a pilot. So my question to them was, “at the time you took the policy out, were you actively planning to start training as a pilot? Had you signed up as a student pilot?” If the answer was no, their old policy covered them. They also ask about future changes in their aviation activities. If, down the road, they get an opportunity build and fly an experimental airplane, as long as it wasn’t planned at the time the insurance went in force, they’re good to go and fully covered.
From an insurance company point of view, when they underwrite your policy there is an assumption that people with bad habits will stop them and people without bad habits will find some. I have had clients that started smoking after they had insurance in force as a non smoker. They were fully covered even if they died from a smoking related cancer death. It is not uncommon for a recreational scuba diver to take up wreck or cave diving after a while. As long as they didn’t plan on doing wreck or cave diving when they took out a policy, it’s covered.
As for me and my 54th birthday flight of fancy, I was covered. And it was awesome.
Bottom line. Insurance companies don’t assume your life will remain static after they approve your policy. Before you run out and look for new insurance because of a lifestyle change, have your policy reviewed by an independent agent. You may be covered already.
March 31st, 2009
I recently had a person email to tell me they had been declined for life insurance because they had a successful gastric bypass surgery three years ago. They wondered if, since this had come at the hands of a reputable company, they were just saddled with the fact that they were uninsurable no matter what.
They were uninsurable when morbid obesity would have been a kind way to describe their situation and among other health issues they were also dealing with type 2 diabetes. Now, three years later their weight is stable and very respectable and they are no longer diabetic and they are being told that they are still uninsurable. What gives?
Gastric bypass has been on an underwriting roller coaster for the past several years. At first companies were accepting the new weight of an individual one year after the weight had stabilized. So, if you lost 100 pounds in six months and leveled off, at 18 months out from surgery you could get insurance that was based on your new weight. Then some companies jumped clear off the deep end and wouldn’t consider someone until 5 years post bypass. Most recently the trend has been toward two years post bypass and at least one year of stabilized weight.
The problem from a consumer perspective is that there are companies that have stepped off the ride at different points and because of that, without the guidance of an informed independent agent, a person can inadvertently, innocently pick the wrong company and get mowed over like the gentleman I described above.
The good news is that there is good news for those who have chosen to undergo a gastric bypass procedure in order to get their lives back under control. Life insurance companies recognize that the procedure has risk, but many of them also recognize that there is great reward and a new life once the risk has passed.
Bottom line. Gastric bypass has survived the stigma of being the easy way out and is now recognized as a life changing and life saving decision. With life insurance the key is finding a company that supports that idea.
March 30th, 2009
It’s just a bad feeling when a life insurance company declines to offer you coverage. They don’t want to accept the mortality risk!! Do they think you’re dying? Is there something your doctor isn’t telling you? Will you ever be able to get life insurance, or are you black balled now?
I can’t tell you how many inquiries come through our website that start, “I’ve been declined by XYZ company due to whatever”. That person’s thinking is that they may never be able to get life insurance for their family’s protection. My thinking is that this is a good place to start! We know who declined the person and we know why so the mission is pretty simple. We need to find a company that doesn’t share the same underwriting philosophy, or figure out if the case was just presented poorly and needs a more complete presentation to put an underwriter at ease.
Supposedly there are about 2000 companies that write life insurance. For many it is just a product they have because they wouldn’t want to miss any chance to make money from you. You certainly don’t think life insurance when you hear State Farm, Farmers or Farm Bureau, but they are licensed to sell life insurance. The only problem is they really don’t care if they do and for that reason their underwriting is definitely anti-approval unless you’re in perfect health and even then their prices stink.
That thought aside, for a minute let’s just assume there was a way to apply with all of the companies at once, all 2000. If you had well controlled high blood pressure you might be approved by
most of the companies, but once you got past the top 100 you would find the rates rather unattractive. If you had a history of asthma I suspect you might be declined by 25% of those companies and the rates after the top 50 would be rather painful to look at.
If you had well controlled type 2 diabetes with no other risk factors I suspect you might get 50-100 approvals and the 10 best rates would be the only rates that didn’t grab your gag reflex and get it going. If you had a history of a low stage and grade prostate cancer you might get 20 approvals and 2 or 3 of those might have a price worth considering. If you have very well controlled bipolar disorder
you might get 5-10 approvals and 2 of those might be workable.
All companies have drawn a line in the sand on just about every health issue you can imagine. That is the bad news. The good news is that for almost any health issue you can imagine there are companies, albeit only a few in some cases, that understand it and as long as treatment is successful, are willing to accept it as a risk.
So why do I consider a decline as a good starting point? Consider the numbers I just presented and consider the odds that your decline came from the wrong company. Declines very often have almost nothing to do with you and almost everything to do with a particular company’s underwriting philosophy.
Bottom line. The chances of turning a decline into an approval are actually very good if you have a knowledgeable independent agent working on your behalf. Don’t take no for an answer.
March 30th, 2009
I’ve been accused of recommending term life for every need and while I maintain that 95% of all needs for the average person are well served by term, there are valid reasons to consider permanent insurance in your portfolio.
Before any jumps on that statement and thinks I’ve change my mind about whole life, I haven’t. Whole life is still the wrong choice for permanent in my often argued with opinion. Why would anyone tied up excess cash when it buys less insurance and doesn’t have a better guarantee? Again, for those reasons I am about to concede are permanent, use a universal life with a no lapse guarantee. No whole life. No traditional universal life. No variable universal life.
Let’s start simple. Personally I think that a small final expense life insurance policy is a valid need and a valid use for permanent coverage. Simply put, unless you have, say, $25,000 lying around in your checking or savings account for the express purpose of taking care of final expenses such as medical bills, burial and legal fees for finalizing your estate, a $25,000 life insurance policy makes a lot of sense.
Since I mentioned finalizing estates, a policy for estate tax purposes is certainly not something that you would want to tackle with term insurance. With the rare exception of the recession we are currently experiencing, estates that are large enough to be taxed tend to continue to increase in value and never get to the point where term is the answer, a need that resolves itself with time.
Charitable giving is not a temporary need. A policy to leave a specified inheritance to grandchildren is not a temporary need.
Bottom line. Having admitted that there are permanent insurance needs, let me be very clear. The fact that a UL with a no lapse guarantee is the best product, whether an individual or second to die insurance, is without question. The fact that the product as we know it and love it is changing as we speak should be a concern to anyone considering adding or considering replacing a permanent product in your portfolio. What one of us has missed a chance to lock in a mortgage interest rate and over the ensuing years paid thousands or ten of thousands more than we needed to. Don’t make the same mistake with life insurance. It won’t come around again.
March 29th, 2009
Amazing to me that when I ask someone with diabetes what their most recent A1c was, the response is very often, “What’s that?” or “I don’t know, but my blood sugar this morning was 128.” or “My doctor says I’m doing fine”.
So, let’s start out with why your A1c is important. From the standpoint of your personal health it is a measure of how well your glucose levels are controlled. The hbA1c test, rather than taking a one second snapshot like a glucose test, can actually provide you with an overview of a 2 to 3 month period and what your average glucose was around the clock during that time.
Most with type 2 diabetes, unlike type 1 diabetes, that monitor their glucose get into a habit of doing it the same time everyday and usually, because they know the numbers are better, that is done before meals. But let’s be honest. You know that just because your glucose is 128 before a meal almost every day doesn’t mean that it is 128 after you eat or when you mess up and do something you know you shouldn’t. The hbA1c uncovers all of those readings and averages them with all of the good readings and gives a true picture of control. From the article above this chart gives you an idea of what your A1c equates to in average glucose readings.
HbA1c and Blood Glucose Levels
6.0% 120 mg/dl
7.0% 150 mg/dl
8.0% 180 mg/dl
9.0% 210 mg/dl
10.0% 240 mg/dl
11.0% 270 mg/dl
The other reason, other than your health, that the A1c is important is to a life insurance underwriter. That underwriter knows this chart and he knows that even if you have a glucose level of 108 on your insurance exam, if you A1c is 7.5 then your average glucose is really 165. Putting that further into context, if when you are good your glucose is 108, and the average is 165, then there must be plenty of times that it is 200 or over. Dangerous territory.
If your A1c is over 7.5 and your doctor tells you that you are doing great, ask him or her why you are doing great if your glucose is really all over the map and occasionally at dangerous levels.
Bottom line. For many of us we think the best we can do when faced with something like diabetes is to find a good doctor and get treated. Too many of us don’t take the opportunity to educate ourselves about our health issue and know what’s really doing Ok and what’s not. Always get copies of the labs you have done. Always ask about anything that isn’t in the normal range and honestly now, don’t accept the answer that it’s OK when it clearly isn’t where it should be. Take charge of your future.
March 27th, 2009
There are times when it’s obvious that life insurance agents just really don’t believe that service is important and then there are times when the avoid service or drag their feet on a task as a way avoid talking about what’s really going on with your policy.
The latter is the case with a client I am currently working with. Early on in the process I suggested to the client that they get a current in force illustration of their variable universal life policy. I told them just a quick call to their current Hartford agent should produce that document for them in just a few days, a week at the most.
Now, understand that this is a policy that was grossly underfunded and being variable has no guarantee. This is a policy in huge trouble. It started with a single premium that generated $1.6 million of life insurance coverage. Today, as near as we can tell, it would provide a death benefit of less than $500,000. So after two weeks of not receiving anything I suggested to the client that they call the agent and tell them that they were considering moving their insurance to a new company and that if this agent wanted to be considered for keeping the business he needed to produce the in force illustration.
Two weeks later they received a two page letter from the agent explaining the history of the policy and how it appeared to be going down the tubes and suggesting some possible alternatives. All of this in the narrative, none in actual illustration form and certainly not a Hartford generated in force illustration. There was absolutely nothing that the client could hang his hat on. There was nothing substantive enough to be helpful in making a decision.
Understand that if you have a life insurance policy, whether term insurance, whole life or universal life, companies need to provide in force illustrations to you in a timely manner if you request it. The only conclusion that can be drawn by this agent’s actions is that he knows the business is in trouble and he is hoping to drag this out to the annual renewal date and then suggest that they ride it out one more year. He either never requested the illustration, or he requested it, received it and the news is so bad that he doesn’t want to show it to his clients.
At this juncture I suggested to the clients that they pose some questions to the agent concerning the tax viability of making a change in the policy or moving the policy and using a 1035 exchange to move the cash value. 10 days later the agent answered the questions.
Bottom line. Service isn’t about the agent. Service is all about the customer and if, by providing the service, the information, that a client needs, the client finds a better deal somewhere else, well, you did that client a service. It might not feel good to lose a customer, but it’s all about their family and their money and not about the agent.
March 27th, 2009
I have written several posts on the subject of beneficiary rights if a claim happens during the incontestability period. This is a little talked about subject that can truly cause problems for those who are engaged, are life partners, have used life insurance as collateral on a personal loan or for some who own business life insurance such to fund a buy/sell agreement.
Just to review, during the two year incontestability period the company will routinely investigate the claim including acquiring relevant medical records. The problem occurs when the beneficiary doesn’t have legal standing to sign an authorization to release those records to the insurance company. Unless a family member steps forward to help the beneficiary is likely to have to go to court in order to obtain a limited medical power of attorney. This takes time and money.
In the case that started the dialogue on this subject, the death occurred last August. The family wouldn’t cooperate with the insured’s fiancee because of some greed issues. She got the court ordered medical power of attorney in February and the claim was settled and paid today. It’s a good day when claims are paid, but agents and insureds need to both be aware of this pitfall so those good days aren’t unnecessarily delayed.
Bottom line. There are those who aren’t married yet as in engaged. There are those who probably won’t get married, life partners. There are those who can’t get married, gay couples. There are those in business who can be at the mercy of a family. All are reasonably chosen beneficiaries and the life insurance companies don’t have a problem cutting the check, but during that first two years there has to be a plan in place for acquisition of records.
March 27th, 2009
My last post was my 911th and like most of us when I see those numbers I flash back to 9/11 and the horror of that day.
I got a lot of calls from clients in the following few months asking basically the same question, “does my policy pay if I die due to an act of war or terrorism?” The answer was and is yes, you are covered.
I can remember a time when life insurance policies did have an “act of war” clause that got the insurance company out of having to pay death benefits. It was meant to protect the insurance companies from the inordinately high mortality rates that occurred during World War II and the Vietnam war. I don’t remember exactly when it happened, but I’m sure some conscientious legislator somewhere decided that insurance companies ought to just suck it up and do the right thing.
Bottom line. There are no more war clauses in modern day policies and even if you had an antique policy with a war clause, the likelihood that an insurance company would try to get out of paying the benefit is unlikely. Bad press!
March 26th, 2009
Well, if the last post didn’t hit on anything else important, everyone should at least know that smoking cigarettes can change your life expectancy, and not in a happy way.
If you do smoke cigarettes and need life insurance, let me be very clear about this. You need to shop with gusto. Usually there are just a couple of companies that will have rates that are as good as it gets for a smoker. From there the rates get ugly and by the time you are down to the 10th best company it’s like those rates got hit by a whole forest full of ugly sticks. There are fair rates out there given the mortality risk that smoking produces and understand that they will be about double what a non smoker will pay, at best, and also consider it a wake up call and a good reason to consider quitting. Once you haven’t used any tobacco or nicotine products for 12 months you can cut those rates in half or buy twice as much insurance or double the term length.
But what about cigar smokers? Or chew or snuff? Depending on the extent of your use, how heavily you smoke or chew, the rate classes you can qualify for can range anywhere from standard plus non smoker to the best rate class, preferred plus non smoker. The determinant of how heavily you use these things is first, your own statement as to use, and second a lab test that can determine if you are in fact an occasional user or an everyday user.
There are plenty of companies out there that will give great non smoking rates for cigar smokers if you truly don’t smoke daily. The most liberal actually says that you can smoke as many as one a week, but you have to test negative for nicotine. A little tricky. Most companies lean more toward the “occasional” use as acceptable, more like 1 a month or 4 a year. If that is your habit and you don’t smoke one shortly before your exam, a negative nicotine reading should be no problem.
Then there are a few companies that will offer non smoking rates, even with positive nicotine levels, as long as your nicotine use does not include cigarettes. Pipes, cigars, and chew are all acceptable at non smoking rates.
Bottom line. Big difference between cigars and cigarettes from both mortality and life insurance price views. Again, if you smoke cigarettes get an independent agent and shop carefully. If your nicotine habit is other than cigarettes, get an independent agent and shop carefully.
March 26th, 2009
I can tell you that this is a bell that I never get tired of ringing simply because it has ended an often insulting journey and given new hope to someone who carries the stigma of having bipolar disorder.
I got an email within the last hour of approval on a life insurance application for a client whose name tag had earned him rebuke from life insurance agents without even considering an application and declines from a few companies that really should admit that they are in the auto and homeowners business and they are not, seriously, in the life insurance business.
To make it even better, after underwriting and review of his records, the company approved his term insurance at a better rate than we were told to expect. Now that’s never hurt anyone’s feelings!
The truth is that while bipolar can be a disabling and life dismantling mental problem, like all disease and disorders, not everyone suffers the same. There are a huge number of people out there with bipolar disorder whom the people working with them and under them, don’t have a clue that they have anything going on. We have helped CEO’s of companies, school superintendents, doctors and nurses, and working single mothers all who have one thing in common. Their bipolar experience is well controlled and they fit this list.
1. Someone who has not been hospitalized for bipolar disorder other than for diagnosis?
2. Someone who has not attempted suicide or had bouts with suicidal ideations?
3. Someone who is compliant with their treatment, both medications and regular followups?
4. Someone who is leading a stable family life or social life?
5. Someone who is exhibiting a stable work life?
6. Someone who is not on disability for bipolar and does not have issues with drinking or drugs? If there’s a problem here, then the answers to 3, 4 and 5 are no.
Bottom line. I don’t have a study in my back pocket to prove it, but based on what I’ve learned I would say 50% or more of those who have bipolar disorder meet the criteria of that list and therefore meet the criteria for getting life insurance at reasonable rates.
March 25th, 2009
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