Archive for October, 2009
Back in the day….In a much simpler time there used to be a stock answer to how much life insurance a person should carry. There was no real need for a drawn out needs analysis. Life was simple.
How much life insurance do I need? Well, ten times your annual income. The logic was that if you passed away your beneficiary could put that money away in an investment vehicle that allowed for withdrawals “that would produce at least 10% annual return”, so your beneficiary could literally live off the interest leaving the principal intact for emergencies or to pass on as a legacy to their beneficiaries.
Then came 2008 and that assumption somehow no longer seemed to make sense since your investments were losing money, not gaining at least 10%.
One of the problems for many people is that companies have “financial underwriting” guidelines that restrict how much insurance they will be a party to on an individual, based on a multiple of income. Those tables haven’t changed since the 80′s when interest rates were well into the teens and a person could certainly justify no more than 10 times their income as adequate replacement.
Just yesterday Prudential took the lead in addressing the fact that the old guidelines don’t adequately reflect today’s incomes and today’s economy. They were the first to say out loud that people have the same insurance issues they did three years ago in a healthy economy, but they have less income.
Bottom line. These new guidelines will allow us to provide insurance that more accurately reflects the insured’s needs without being restricted as much by the income/insurance ratio.
October 22nd, 2009
I recently shopped a term insurance case where the results were spread all over the spectrum of responses. Several companies declined to make offers. Some would only say highly rated at best.
This was a case where a 39 year old woman had a superior mesenteric artery dissection. Layman’s terms. A rip in the mesenteric artery. It’s rare and the votes on how to treat it are still out.
In the case of my client she was treated medically with Coumadin and the dissection resolved itself. She is no longer on Coumadin. The non invasive route worked for her.
Banner Life had originally quoted a table 2 rate, 50% above their standard plus rate, and compared to all of the other trial offers they seemed the lone voice of reason. We just got the approval today and they actually knocked off the 2 tables and approved the case at standard plus. In this case hats off to a company that didn’t run screaming into the dark because it wasn’t an average case and double kudos to the underwriter who made the right decision after a review of the records.
Bottom line. This is exactly the kind of case that can end up in disaster if it ends up sent to the wrong company. If the agent doesn’t do their homework it’s headed for the dumpster. Remember, if your agent can’t intelligently discuss your medical condition with you, chances are that they will not be able to present it well on an application. Right agent, right company, success.
October 21st, 2009
When we’re going through this whole thing of applying for and eventually putting in force a life insurance policy, often there is a very valuable talk with the beneficiary of that insurance that gets overlooked.
You can really start with the basics and believe me it is scary how often this is overlooked. Let the beneficiary know that you took out the life insurance. Think about it. If you don’t tell them the only way they’ll find out is if they are lucky enough to stumble across the policy after you’re no longer around.
Which leads to another great idea. Tell them where. No, show them where the policy is going to be kept and if you decide to change its’ location, include them in that information also. Don’t put it in a safety deposit box. Those are really cool safe places, but not necessarily easy to get access to upon your death.
Give them a business card from the agent who helped you put the policy in place. A good agent can and will take a load off the beneficiary by helping with claim filing and answering questions. Trust me. Your beneficiary will be grateful to have someone handle the details of the claim process for them.
If you have a plan in mind for how your beneficiary can best use the tax free proceeds, share your thoughts with them. If the money is to be left to minor children, there needs to be a trust set up so that a competent trustee can watch out for their best interests. This isn’t a bad idea for young adult children as well. A 22 year old with $100,000 and no restraints is a $100,000 party looking to happen. Help them use it prudently by having the proceeds administered by a trustee.
Bottom line. You’ve done a good thing by making sure that life insurance is in place for your loved ones. Finish the job by making sure they know what to do if you pass away unexpectedly.
October 21st, 2009
I have often talked about what a wonderful place I live. Generally that has been in the context of comparing the laid back life style compared to the stress of driving through Denver, Colorado for instance. It certainly seems a fair assumption that the stress level and the chance of having an anxiety disorder should be less 2 hours away from the big cities.
I have written close to 1200 blog posts on life insurance and how almost every malady known to mankind can affect it. Today is my chance to take a break from beating up on AARP and talking about how to get life insurance if you’re bipolar. Today I want to sell my house.
No, I’m not going anywhere. My wife and I will move about 2 miles. We will miss our beautiful home of the past 13 years, but we have an opportunity that we really shouldn’t pass up.
But that leaves a great opportunity for someone to pick up where we left off. The property is unique with a 3 BR, 2 BA home, an 1100 sq ft office, a barn built in the 1800′s and a pasture with lots of trees and the Little Arkansas river running through it. It’s in town but with 8.2 acres has amazing privacy and quiet. Close to everything without having to look at anything but mountains and trees.
Bottom line. Call my realtor, Jeff Post, at 719-539-6682 if you want to know more, or call me. I love to talk about it.
October 20th, 2009
We got a preferred rate approval on a client today. This is a client who had come to me after feeling, well, jerked around and lied to by Selectquote.
The Selectquote agent who worked with this client was all about banging out an approval and moving on to the next client. Even if you overlook the original bait and switch where he quoted Banner preferred plus rates, got the client to do an exam and then broke the news that it looked like it would more likely be standard plus rates. Even if you overlook the fact that the agent lied and told him that the standard plus rate was really as good as it was going to turn out anyway.
Even if you overlook the fact that the agent admitted that Prudential could do better after being confronted with a quote through our office and then ran an application through them, on September 1 the agent sent the client an email that just really can’t be overlooked.
“Prudential gave you a Preferred rate but Banner and Genworth will not. JLT”. The same agent inferred that it was unethical to run a third application for this client, “Ethically I cannot submit yet a third application on your behalf and promise you better pricing. Based on the underwriting thus far (cholesterol medication and the use of Paxil) through the first two applications and my experience with Genworth that carrier will not deliver a Preferred rate.”
Ethically this agent ought to know the companies he represents and their underwriters well enough to know that Genworth was the company to go with in the beginning. He ought to be familiar enough with Genworth underwriting to know that cholesterol medication has no impact at all on the rate (preferred best is OK with cholesterol medication) and that treatment for situational depression with Paxil is preferred at worst with Genworth.
Genworth did approve preferred. JLT with Selectquote was wrong on this case from beginning to the end where his client sought an agent that would shoot straight with him.
Bottom line. Something I’ve contended for a long time is that an agency like Selectquote who hangs their hat and their future on volume sales can’t really humble themselves to service before, during or after the sale. Having worked for a few years at a Selectquote clone I can tell you that it is all about fast selling and hopefully placing whatever the outcome is. When you tell a client that it is unethical to try a third application, what JLT was really saying is that their business model doesn’t support doing whatever it takes to do right by the client.
I left that clone agency because they refused to service clients. I’ll never place anywhere close to 100,000 policies a year and that’s OK.
October 20th, 2009
A little over a week ago I wrote a post about my email conversation with West Coast Life concerning their decision to do away with fully guaranteed conversion products.
I was a bit put off when I got an out of the office email from the marketing vice president explaining that he was out of the country for a company convention. Hmmm! Can’t afford to guarantee products for your current policy holders but you can afford to use their premium dollars to have overseas conventions. You really have to love the priorities of these companies.
Anyway, I actually got a return call today now that he is back and recovered from his policy owner paid jaunt abroad. In a nutshell he blamed the pull back to practically worth less non guaranteed products on the reinsurance companies. He claims that reinsurance carries all of the paper on conversion policies and that the cost of reserves is too high to make it profitable to carry fully guaranteed policies. He didn’t have an answer as to why the company doesn’t just step in a carry part of the insurance burden on those policies.
He also couldn’t adequately explain why they would dump this whole load on loyal paying customers when it could be spread over insured and those to be insured. He did say that they are working on it (which doesn’t help the customer I showed conversion options to last week) and that they hope to once again be able to offer a fully guaranteed conversion option in the future. He couldn’t explain why they didn’t keep the good options in place while they worked on it.
Bottom line. We are currently taking a close look at our book of West Coast business to see who is still young and healthy enough to change to a company that isn’t turning their backs on those paying the bills.
October 19th, 2009
Life settlements, for the life insurance industry, is kind of like when you’ve been whacked in the face and it hurts, but the swelling and discoloration of the black eye hasn’t shown up yet.
Life settlements or viatical sales of life insurance policies has been around for 20+ years. Cloaked in some pretty lame arguments, life settlements, the selling of your life insurance policy to a third party for an immediate cash influx, are just about as smart and honorable on the part of the life insurance industry as sub prime mortgages were for the banking industry.
You know something is shady, something is wrong, when the folks that sell life settlements don’t include the beneficiaries, the family of the insured in the conversation. I’m not saying that beneficiaries have some innate right for Mom or Dad to hang on to the life insurance so that they can become enriched upon their parent’s death. What I am saying is that most people who are considering life settlements are being preyed upon by agents that know how to take advantage of someone who is financially challenged.
Why bring in family or beneficiaries? Because in most situations the financial challenge can be met by family, leaving the life insurance in place to do what it was designed to do. In most cases the decision to buy a life settlement is based on the emotion of wanting to take care of financial challenges with bothering anyone. Agents who specialize in life settlements know all about these emotions and they know all too well how to be there to help.
Now life settlements have become big investor news as your life insurance policy, now owned by someone else, is being bundled into funds that are being sold as investments. Forgive the gag reflex, but how sick is that? What has our country come to when we have hedge funds for people to invest in whose profit depends on people dying? How can investors really feel good when they see their return on investment go up, knowing that what that means is that more people died than expected?
And forgive my often expressed cynicism about life settlements, whether individual or bundled into funds, but this is America and capitalism is all about profit. Really, when you think of some of the big companies that have gone down beginning, let’s say, with Enron, what if they had large investments in life settlements. Do you think, I mean do you really believe that companies with all the moral conscience of a purse snatcher wouldn’t start paying say $1000 to have life settlement portfolios closed out by an untimely death? If a company could quietly spend $1000 with an almost instant $1,000,000 return do you really think that there wouldn’t be any consideration of taking that back alley? Folks. This is the same country that is throwing people out of their homes and cutting people’s jobs and all the while making sure that the corporate checking account is full enough to give some sick excuse for a CEO a bazillion dollar bonus.
I guess what amazes me is that this is just now becoming big news just because Wall St (another pillar of social conscience) is allowing hedge funds to be built around life settlements. It was bad news when they first hit the market back at the beginning of the AIDS epidemic. It has been bad news for decades as agents get filthy rich talking people into buying life insurance they don’t need just so they can turn around and sell it. It’s been bad news since they figured out how to finance that purchase for those who couldn’t come up with the money to buy large policies they couldn’t afford.
Bottom line. Life settlements are a black eye on the life insurance industry and a another black eye on our socially lost country. I get calls every week or two from companies that want to know if I will get on board the life settlement train and when they hear my opinion, I think they hear the outrage that is at the core of the part of our country that hasn’t given into sick greed.
October 16th, 2009
Sometimes when I ask the medical questions that are part of the first interview with prospective life insurance clients I get the feeling that I should have gone through them twice, or three times.
Each time I should say something like, “Now when I go through the questions this time I want you to carefully think about each one, reflecting on whether your answer represents the medical facts or just your opinion. What I need are the facts”.
Really. When I ask “Have you ever been diagnosed with or treated for chest pain, high blood pressure, heart murmur, heart attack, stroke, cholesterol or any disorder of the heart or circulatory system”, how can a person answer no when they have had mitral valve prolapse all of their adult life? I know in the whole scheme of cardiac issues it certainly isn’t a big one, but they know they have it and even if they don’t equate it to a heart murmur (which they probably should), it has to fall into the catch all at the end asking about ANY disorder of the heart.
So, in this case the difference between a yes and a no answer to the question is the difference between preferred and standard rates. In many cases that is enough for a client to get in a huff and decide they don’t want the policy after all or that they are going to find some agent who can figure out some way for them to get the best rates even though they don’t qualify. And it’s all about being honest to a fault when answering health questions. I wonder if it would change if they had to answer the questions under some kind of oath?
Bottom line. Do yourself and your life insurance agent a favor and just answer the questions honestly. If you’re not sure if your answer should be yes or no, explain the situation to the agent and at least give them a chance to include the information in their thinking, or if it really isn’t important, to throw it out.
October 15th, 2009
Ahh, the less than perfect approval on your life insurance application. The temptation to take your bat and ball and go home and never play again. The desire to get back back at the company by not purchasing life insurance and not providing protection for your family.
Even though most agents are savvy enough to make clients understand that their quotes “based on the information you have provided and are subject to full medical underwriting and are not guaranteed until final underwriting approval”, most clients don’t prepare themselves for the fact that under the scrutiny of blood and urine labs and an analysis of their medical records, they may not end up perfect. They may not have what it takes to get the best rates or the standard rate or whatever rate they were quoted.
Now I’m not saying there isn’t justification for a little anger if you tell the agent you are 5’10″ tall and weigh 240# and they quote you the best rate class. That is either stupidity or bait and switch. They knew that was a standard rate when it came out of your mouth and they just didn’t want to break the news to you then for fear you would run away looking for a second opinion.
But what I’m talking about is when you believe you are healthy and no doctor has told you anything to the contrary (probably because you haven’t been to one) and your cholesterol is 278 on the labs or your blood pressure is 142/95 on the exam. You’re still going to get approved, just not at those juicy rates you had your eye on.
So, don’t get mad. Do the right thing and buy as much 10 year term insurance as you can based on the approved rate class to keep the price down. Then do the right thing and get your cholesterol or blood pressure under control. Then apply again and get the rates you’ve always dreamed of, replace that first policy and come away from the experience smarter and healthier.
Bottom line. Don’t take your bat and ball and go home. Your family needs you to do the right thing whether you like it or not. And remember that you were approved and not declined. A single is better than no hit at all.
October 14th, 2009
There used to be a lot of companies that had published crediting systems that they would use to determine the final underwriting outcome of a life insurance application.
Credits could be earned by anything from exceptional, as opposed to just satisfactory, lab results, or for rewarding those who proactively get annual physicals. Life style and family history also played into those crediting systems allowing an approval possibly a rate class better than what a person might otherwise qualify for.
United of Omaha came out a few months back with what they call a “Fit test”, essentially a crediting system based on medical history and lifestyle. It was designed to reward those who for one reason or another might be in a rated category with a normal approval. The fit test can be used to reduce a table rating by as much as two tables (50%). If a person qualified for a table 2 otherwise due to, for instance, bipolar disorder, the Fit test could effectively reduce their approved rate to a standard rate, a huge savings.
And we’re not talking about Superman criteria to get these credits. Out of 11 questions, 3 yes answers can reduce your rate by one table and 5 yes answers can give up to two table..
Under lifestyle the questions are:
1. Regular preventative medical care and compliant followup?
2. Minimal alcohol use. No more than 2 drinks a day?
3. Life time non smoker?
4. High income or net worth?
5. Preferred or better driving record?
Medical questions:
1. Family history – No deaths from any disease in immediate family prior to age 70?
2. Cholesterol/HDL ratio under 5.0?
3. A negative cardiac workup?
4. GXT exercise performance over 10 METS?
5. Blood pressure treated or untreated below 130/80
6. Preferred or better build?
This is a gold mine. I just shopped a case for the CEO of a company where bipolar was the issue and almost all companies came back at best case Standard table 2, including United of Omaha. The client answered yes to 10 of 11 of the Fit test questions and should get a standard rate, 50% below table 2.
And the unique thing about United of Omaha is that they are disclosing their crediting method to be used in field underwriting (quoting by agents). There is no question going in whether the credits will help or not.
Bottom line. Crediting has always been the right thing to do. Rewarding someone for a good lifestyle and a proactive approach to their health just makes good sense.
October 14th, 2009
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