Archive for June, 2009
There is a misconception about the life insurance underwriting stance on applications during pregnancy. For the most part, at least during the first two trimesters companies don’t have any issues with approving applications.
The tricky part comes in the third trimester and companies are kind of split on whether they will accept and process applications for women at this point. Some say no and their stance is based on pregnancy complications and also, because of the hormonal war going on, whether they can get lab results that have a close enough relationship to normal.
The companies that will process third trimester applications are generally more comfortable with the lab issue, knowing that there will be some fluctuation and it can be weighed against labs prior to or at least very early in the pregnancy. Generally their only caveat is that there can’t be any current complications and usually they don’t want to see any history of complications in previous pregnancies.
One issue that can come up is weight and if your weight in the third trimester moves you into a different rate class based on the company’s build chart. Some companies will work around the weight gain based on historic weight and not penalize you. Other companies will approve you based on your current weight and allow a reconsideration with a weight check a year later.
Bottom line. Make sure your agent does their homework before having you take an exam so they don’t send an application to a company that will postpone approval and tell you to wait until after the birth. Be sure to note on the application and to the examiner that you are pregnant and when the due date is.
June 30th, 2009
In researching a post written a few weeks ago on how to bind a life insurance application I failed to find any companies still using the tool of choice from the past, the Conditional Receipt. All of the companies I found in my original sweep were using the far friendlier Temporary Insurance Agreement.
I know it probably sounds like I should take up something exciting like jig saw puzzles, but I spend quite a bit of time just cruising life insurance applications to see what questions they ask, how they ask them and how they structure their application. Always on the hunt for an advantage for clients! There are a lot of companies that couch questions in such a manner that it is obvious they are using the infamous “don’t ask, don’t tell” approach. They intentionally leave an opening for lenient underwriting.
But, back to my previous post and my application cruising. Yesterday I finally found a company still using a Conditional Receipt. It was like a blast from the past, a document that should come with warnings and disclaimers abounding if an agent is truly doing their job. Western Reserve Life has yet to join the majority of companies in replacing this relic. In my mind a conditional receipt is so fraught with loopholes as to be almost useless in providing temporary insurance.
Conditional receipts are infamous, not for their binding ability, but rather for the conditions that run a muck in the document that allow the company not to pay in the event of a death during the application process. They mince no words in their initial shot across the bow, “No coverage will become effective prior to the delivery of the policy applied for unless and until all conditions of this receipt have been fulfilled exactly.
Standard in the Temporary Insurance Agreement and the Conditional Receipt is that all checks should be made out to the company and not to the agent. Western Reserve’s conditional receipt goes a step further and states that if you “leave the payee blank…you may jeopardize the insurance for which you have applied.”
The conditional receipt defines the effective date as “the later of application date and the date of the last medical examination, tests and other screenings required by the company.” This is distinctly different from the TIAA in that completion of exams and testing isn’t required in all of them. But the implications of the effective date really come with the conditions. The conditional insurance is only in effect so long as, and I will paraphrase, the conditions are met.
1. If you die during the application the company will continue to underwrite as if you were alive. You have to be found to be insurable exactly as applied for. If you applied for preferred and they found that you would be approved at standard, too bad for your beneficiaries. No insurance.
2. All statements and answers in the application must be true. This may not seem like an untenable threshold, but it is much stricter than the material misrepresentation threshold used for the two year incontestability period. If I were going to put all of my confidence in a conditional receipt for my family’s future, I would have an attorney review the application with me.
3. This one is no big deal. Basically says the company has to receive a check with the conditional receipt that doesn’t bounce.
4. All medical exams, tests and other screenings have to be completed. This can be a problem. It is fairly common for initial lab results to require a new test. Can’t do that new test if you’re dead. The company might see an abnormality on your ekg that is the fault of the examiner and if you die before they can get a new ekg, too bad for your family.
5. Shouldn’t be a big deal requiring that “all parts of the application, supplements, questionnaires, addendums and amendments” are signed, but remember you are dealing with a human agent and in a 20 or 30 page application missing one form is fairly common.
And then they summarize, “if one or more of the Receipt’s conditions have not been met exactly, the company will not be liable.
Bottom line. If you have the need to bind a life insurance application give careful consideration to the document used. As discussed the TIAA is a much fairer avenue than a conditional receipt. I would go so far as to say, as I have to many customers in the past, that unless there is an absolute need to attempt to bind insurance, don’t even both with a conditional receipt. In today’s market if there was a need to bind I would recommend going with a company that has a very open ended temporary insurance agreement.
June 30th, 2009
Just recently I was helping a client with bipolar disorder get life insurance for his young family. He had been declined before and told me that he wanted $500,000 of term insurance.
After shopping the case we got an offer of potential preferred best rates from one company. Based on their potential good rates I also quoted him $1,000,000 of 20 year term. The price was actually very close to what he expected he would have to pay for $500,000, if he got approved at all.
Once the approval came through at the best rate class I again gave him the option of how much insurance he wanted to have issued and, even though the difference was fairly minor in monthly outlay he and his wife chose to accept the $500,000.
You should know that I never, ever suggest that someone put a budget buster in force. If I know anything for a fact in this business, I know that life insurance somehow becomes expendable in a tight budget. It’s almost like when the bill comes due and it doesn’t look like it will be a good fit with this month’s budget, they check their pulse and decide they are immortal for a while and drop the insurance.
But in this case both amounts of insurance were easily budgeted. They said the reason they didn’t choose the higher amount was that they believed they wouldn’t need the higher amount down the road. And maybe they do and I didn’t fuss with them about it, but here is my advice if this situation comes up for you.
If there truly is very little difference in cost between one half and one million in coverage and it is easily budgeted, take two $500,000 policies and down the road if things really work out the way you expected them to, drop one. If things don’t go as planned, kind of the way it did for almost everyone in the country last year, you have the extra coverage at an excellent premium.
Bottom line. Value can come in a lot of forms. When presented with a true value, consider whether doing the minimum is truly prudent.
June 29th, 2009
In an article called Generations at Risk in a recent trade publication called insurancenewsnet magazine, LIMRA, an industry research organization divided the generations and laid out some interesting facts about our take on life insurance and where we buy it.
Probably the most important fact was that, whether Boomers, Gen X or Gen Y, we still remain under insured in relation to the financial loss that would occur upon death. Fully one third of adults in our country carry no life insurance at all. One in four men overall don’t carry life insurance, while two thirds of men 18-24 don’t insure themselves or don’t have insurance in force carried by their parents. For women it is one in three overall and half in the 18-24 group.
Most adults who do have life insurance get it through their workplace in the form of group insurance. Those who carry only group insurance on average carry the lowest amount compared with other adults.
The difference in buying habits is no surprise with us Boomers still tending to buy life insurance in a traditional way, while Gen X and Y are more likely to purchase via the internet. The sad part for us as Boomers is that the youngsters probably have it right on this subject. I know. Kind of kicks my gag reflex too, but the fact is that the traditional agent is generally not a well equipped and versatile independent agent.
On the flip side of that is the fact that Boomers tend to be more life insurance savvy and are less likely to be taken by some of the on line mega agency nonsense.
Bottom line. Generations will always do things in different ways, but the thing that is remaining constant is the under insured picture.
June 26th, 2009
Reliastar has come up with a new approach to rate changes reminiscent of last fall’s presidential campaign. Their word to agent’s, Change is Good!
They show the good side of their announcement, that some of their rates in a few selective places will actually be coming down very slightly. Others, which they don’t show, will be going up.
Bottom line. Chalk up another change in the term insurance world. It keeps on churning and and looking less and less like the term insurance free fall of the last 15 years.
June 26th, 2009
It took an event like the current recession for many people to finally recognize the importance of life insurance in financial and retirement planning.
Financial planners have always advocated the use of life insurance to cover the “what ifs” in your overall plan. “So, everything is going as planned and you’re meeting all of your investment objectives, but what ifyour husband dies prematurely and you don’t have his continued income to keep things going in the right direction?”
Well, what if a recession comes along and wipes out half of your life’s savings and then your husband or wife dies and leaves you without their income to help make up the loss? Well, what if you carry enough life insurance to make up the loss until the loss is made up? Then if your husband or wife dies you will only have a tragic emotional loss to deal with and not a financial catastrophe. I hope I don’t come across as callous about this, but one thing you don’t have any control over and the other you do.
So, if it makes sense to protect against that uncertainty during a recession, the same logic rings true during more normal times. Whether it’s a sudden loss due to an economic meltdown, or a loss that just gets worse each year due to the loss of an income, it’s still a loss.
Bottom line. Just in case there is anyone out there who hasn’t figured this out yet, even with recent term insurance price increases, term life is so affordable that it actually trumps the old saying, “if it sounds too good to be true……”. Life insurance really is that good a value.
June 25th, 2009
Life insurance is, always has been and always will be, about offsetting those financial losses that come with premature death. The problem that most people have with the concept is, that in spite of all of the evidence to the contrary, they seem to have a hard time believing that premature death is an issue.
Well, today we’ve all been witness to people that we knew, maybe not personally, but nevertheless, people we knew dying far too young.
We woke this morning to news that Farrah Fawcett had succumbed to long battle with cancer. At age 62, just 6 years old than me, she died. Women are supposed to live to 79 these days. She wasn’t supposed to die.
And then just minutes ago we found out that Michael Jackson passed away at age 50 apparently from a heart attack. There are plenty of opinions about how Michael Jackson lived his life, but there’s no turning your face away from the fact that three children just lost their 50 year old Dad.
Bottom line. There are plenty of days for being in denial about mortality. This wouldn’t be one of them.
June 25th, 2009
An ongoing discussion in this forum is the fact that for so many, the rates you end up paying for life insurance are higher than they need to be simply because you used the wrong agent who used the wrong company.
I just want to review a few scenarios where, if your agent doesn’t know the underwriting guidelines or doesn’t have access to the right companies, significant money can be spent unnecessarily. These are very common and are just the tip of the iceberg.
We’ll use me as the client. Age 56, male. I want $500,000 of 15 year term. What if both of my parents died in their 50’s, Mom from breast cancer and Dad from bladder cancer? With most carriers that would be a best case standard rate and the price would be $2210 annually. If you have the right agent/right company you could get preferred best because they don’t use family history of cancer and the price would be $1420 annually.
Let’s say hypothetically I am treated for high blood pressure which is well controlled. Most companies would approve that at preferred, annual cost $1600. Right agent/right company and that annual cost could be $1365.
What if you were a student pilot? Although companies are kind of all over the map on this, the average would probably be a preferred rate and a $3.50 per thousand flat extra making my annual premium about $3350. Right agent and right company would change that to $2320. What if I was already a private pilot, VFR rated? Most companies would be best case at a standard rate at $2365 annually but right agent/right company would get $1660 a year.
What if obesity was my middle name and I was 6′4 and tipped the scales at 415 pounds? Virtually all companies would not even consider me even if I had no health issues at all, but right agent/right company would get me the coverage I need for $6410 a year.
Let’s say I’m 60 and have had type 2 diabetes for 5 years. Even with very good control the best case with most companies would be standard plus at $3010 annually. Right agent/right company would get the same policy for $2070.
Bottom line. The list goes on and on. If your agent isn’t an independent agent that has access to whatever company it takes to get the job done, and doesn’t have a good working knowledge of the underwriting keys for those companies, you are more likely than not going to pay too much.
June 24th, 2009
Another agent just passed on to me a true story that just defies logic on so many levels. When a person shows up to do your life insurance paramedical exam and ekg, it would be nice to have some confidence that they know what they’re doing.
His client had an exam not too long ago and after the results got to the insurance company they declined to make an offer due to several abnormalities on the ekg done by the nurse working on behalf of an exam company. When discussing this with the agent he expressed some surprise at abnormalities since he gets regular checkups and nothing had ever been noted before.
He did however also relate what he thought might be an abnormality in the way the ekg was done. He said the nurse had apparently misplaced the adhesive used to hold the leads in place so the nurse used magazines and catalogs to hold the leads in their appropriate positions.
Obviously if a lead were to move at all during the ekg run it could cause an abnormal reading and if they are being held down by magazines the possibility of movement with each breath is fairly significant. Anyway, the abnormal ekg is now being replaced by one done by the client’s doctor.
Bottom line. If you’re having an insurance exam and the procedure just doesn’t seem right, put a stop to it right then and call your agent.
June 24th, 2009
There is skin cancer, the most common cancer in the United States with over one million cases annually. Not to trivialize, but most of those cases are basal cell or squamous cell carcinoma and are generally easily and successfully treated.
It is the third in the trio of skin cancers that can and often does change and end lives, Melanoma. Melanoma, while a skin cancer, is extremely aggressive and invasive.
As with most kinds of cancer, early detection and treatment is the key to winning the battle. Self magazine recently ran an article on the ABC’s of Skin Cancer and gave a 5 step list for self examination and identifying problems while still in the early stages. The real message from this timely article was not to get caught sitting and watching a mole change or grow.
From a life insurance standpoint Melanoma is a tough challenge. The real issue is stage and grade, how advanced is it and how deep is it. A melanoma in situ is the best case scenario. Fully encapsulated with very shallow margins, a melanoma in situ can be removed surgically without concern of spread. Generally shortly after successful treatment standard or better rates are available. The deeper the Clark’s level of the melanoma the tougher the underwriting. With higher grade cancers it can be as long as 10 or more years before you can get back to standard rates and it is not unusual, just because of the tenacious, aggressive nature of melanoma, that once you have had it, you might never do better than standard rates.
Bottom line. Vigilance is the key. Don’t poopah that mole. Get it checked out by a dermatologist and if it starts changing at all, run, don’t walk back.
June 23rd, 2009
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