I was just tallying up the life insurance companies that hadn’t jumped on the rate increase bandwagon the other day and was pleased to see some of our best impaired risk companies holding firm. Lost one today though.
Banner Life and their New York cousin William Penn announced rate increases on their term insurance portfolio. To lock in their current rates applications need to be in the home office in the next two weeks. Again they are going with the no lead time approach, so if you are considering Banner quotes you might want to think a little quicker. They didn’t build any foot dragging time into this change.
As with other companies who have either done away with or increased rates just recently, there are a couple of things to keep in mind. First, these increases don’t impact anything you already have in force. Those guarantees are still guaranteed. The other thing to keep in perspective is that while rates are going up, the increases are modest. I would certainly recommend taking advantage of the current rates if you’re in a position to do so, but don’t trip over the dog trying to get to the phone to apply.
I thought it was particularly interesting the Banner endeavored to spread the bad news a bit by keeping the rate increases modest and decreasing the agent’s commission by a modest amount also. Not being a big commission watcher, I don’t have a problem with that approach. I know agents who will probably move business to other companies because of this even handed approach to Banner’s needs to bolster their reserves a bit. As for me, it is and always will be what’s best for the customer.
What started in January as the tip of the iceberg with term insurance rate increases and rate changes on universal life with external no lapse guarantees has now become a pretty clear picture of the whole chunk of ice. I predicted at the first of the year that this would impact most of the top companies by summer and it would appear that we are on track for that.
Bottom line. If you are in the market for term insurance or for permanent coverage, this is a good time to consider moving on that. While the increases may be modest, as discussed before, a modest increase over a 30 year guarantee can add up to some serious money.
May 20th, 2009
A person contacted me a few months back looking for a policy to replace his current universal life which is going up in price on every anniversary date. He has been paying on the UL for about 15 years and just two years ago he received notice that the policy no longer had sufficient cash value to support the death benefit. He either needed to lower the death benefit or pay a significantly larger premium if he wanted to keep it in force.
The first time this happened he assumed it was a one time adjustment and he paid the extra premium to keep the policy in force. This year brought another large adjustment. It was now at a point where he couldn’t afford the coverage. He called me because he needed a policy at a rate he could afford, he needed that rate to be guaranteed to be level, and he had a history of prostate cancer.
We shopped the case and in spite of his Gleason grade 7 prostate cancer we were able to get a trial offer of standard from Lincoln National on a term insurance policy. The 10 year term fit well with his plans as he will be retired by then and his assets will allow him to self insure. All of the other companies offered either very highly rated policies or a decline so he indicated that he wanted to move ahead with Lincoln National. But he wasn’t quite ready. He still had a few months left on his UL that was paid for and he didn’t want to pay for double coverage. I encouraged him, in spite of the extra cost of double coverage, to take advantage of the Lincoln National offer sooner rather than later.
The next time we talked he was calling from the hospital. He had blood clots in his lungs, likely caused by a seasonal asthma that his doctor treated with prednisone. He is now on coumadin to prevent any further clotting, but Lincoln National now wants to put him off another 6 months so they can be assured that the clotting issue is under control.
So he is trapped by the universal life policy with another price increase on the way and unable to switch due to essentially being uninsurable for the next six months. I wonder what the long gone insurance agent that sold him that UL based on nothing more than assumptions would say to him today. How can an agent look someone in the face and explain what he had done to them so many years before based on the assumption that the economy would always be just peachy? The answer is they don’t. Those agents that do what his did have a way of disappearing when things turn sour.
I have encouraged the client to keep his policy in force on a monthly basis to minimize the out of pocket disaster and Lincoln has indicated that if everything is OK with the blood clots they will be willing to entertain a new application in November.
Bottom line. If you have a universal life or whole life policy that has a surprise price increase, move immediately to do something different. Almost without exception, once a policy jumps in price it will continue to do so at each opportunity the company has. And, if you have a good offer, don’t put it off until your old policy comes to another due date. Things can and will change.
May 20th, 2009
