Archive for December, 2009
Every time I run into the financial justification issue for a home maker I just want to scream. Most insurance companies still hold the stance that a home maker can only be insured for up to half of what the primary bread winner is insured for.
Companies have never been able to make a good argument for why one half is appropriate. They have guidelines for people who generate income that dictate how much risk they are willing to underwrite for someone at a given age. For example most companies would allow up to 20 times annual income for someone in their 30’s. Someone in their 50’s might only get 10 times income.
But, for the sake of many of my clients, most of them having some kind of impairment, let’s assume for a minute that the primary breadwinner is also a heart attack survivor. He had all the underwriting gargoyles glaring at him because he was only 43 (early onset CAD), was a type 2 diabetic (early onset diabetes) and had battled obesity all his life and had a family history of heart disease. He was a practical person and wanted to get life insurance in force because he sensed his mortality clock ticking, but he also had a budget. He knew if it cost too much it wasn’t going to stay in force so he had to make a choice of how much life insurance he could buy based on a set budget.
Because of all of his health issues and their early onset, let’s assume that although he could qualify for $1,000,000 based on age and income, his budget will only allow him the luxury of putting $250,000 in force. So does that mean that the life insurance company is going to allow insurance on the stay at home mom for only $125,000?
The good news is this fight can be won. The bad news is that the companies make it a fight every time. Some companies get so buried in their own illogical guidelines that it makes more sense to just apply for the full amount wanted on the homemaker and split it between two companies. It shouldn’t have to be that way.
Bottom line. Don’t hold your breath on the end of the dark ages with most companies. If you determine that you need more than the 50% allowed by their guidelines, work hard on the justification and if they don’t buy it, apply with two companies.
December 31st, 2009
The House of Representatives passed a bill extending the current estate tax levels and exemptions on December 3, a move to quash the impending 2010 complete repeal of estate taxes (at least for a year).
However, the Senate killed the bill, unable to garner enough support for a continuance of the $3.5mm exemption. Too many of them were in favor of raising the exemption to $5mm and in all the fuss and maneuvering they ended up not doing anything. Personally I think it made them look like Bozos because it was a simple easy fix, it kept in place a long overdue break that was started in 2001, and they weren’t locked into it. Isn’t politics just great?
So, does this mean that it is now open season on a good time to die? Remember that the way the law reads right now, estate taxes are repealed completely in 2010. If nothing changes and a person of substantial net worth dies next year, their family wins and the government loses.
One person I talked to today suggested that there are those that think they really have until September of next year to get something in place. This is a takeoff on the fact that the government allows up to 9 months to pay estate taxes after death. I’m not an attorney, but I know I would be hiring a very good one if a death in my family opened up the estate tax question and we did a timely filing for the estate showing no taxes due. Make reinstatement of those taxes retroactive and watch the tea partys go crazy.
I will be doing several posts and hope to have a guest post on this over the next several days. This is a big deal for those with taxable estates who have worked hard to make sure their estate remains solvent, generally with life insurance, to deal with the inevitable.
Bottom line. I think we will see a much quicker decision and resolution than 9/09. That’s just asking for more trouble than Congress really wants.
December 30th, 2009
I was working with a client on quotes the other day and he was telling me about a friend who had decided not to even pursue life insurance because he was convinced that he was probably not insurable.
You know it’s kind of like that old saying, “The only stupid question is the one you don’t ask”. Well, the only sure way to get declined for life insurance is to just not apply. The client went on the explain in quite a bit of detail what his friend’s heart issues were and the truth was that he was, in all likelihood, insurable at a standard or maybe a slightly rated premium.
I would be the last one to claim that I can get traditional insurance for anyone that wants it. The truth is that there are folks that are only eligible for guaranteed issue life insurance. But don’t ever declare yourself uninsurable without putting in an honest effort to see what might be available. What most people find is that life insurance companies aren’t nearly as brutal as one might think.
In the recent past we have placed pleasantly surprised clients with a history of heart disease, diabetes, obesity, certain types of cancer, sleep apnea, mood disorders including bipolar disorder and people who have undergone gastric bypass surgery, angioplasty, and other heart procedures such as ablations to stop arrhythmia.
Many of these people had been declined by one or more companies before we were able to successfully get them coverage. So, don’t ever declare yourself uninsurable and don’t assume that all companies will view you the same or that all agents will know where to take your business in order to be successful.
Don’t take agents at face value. If an agent listens to your health history, especially a challenging one, and then just shoots a quote from the hip, they’re either very, very good or foolish. And I would go so far as to say that they would probably all be foolish shooting from the hip. The very, very good agents don’t want to waste your time, their time or paperwork by not getting it right the first time, so they will ask you to wait a few days while they informally shop your information and get multiple underwriting opinions. They may ask you to provide documentation to help with that process.
I routinely ask for copies of labs for diabetes, copies of stress tests for heart issues and copies of sleep studies when shopping sleep apnea cases. It’s a much better and more rewarding process when done right the first time.
Bottom line. Don’t be afraid to find out the truth about where you fit into the life insurance picture. I know I tend to make things bigger than they need to be when I don’t know where to turn for help. Seek out an independent agent who seems to truly understand your health issue, spell out your goals and do all you can to work with the agent. In most cases success will follow.
December 30th, 2009
I got a call from the daughter of a man who had asked me to send him an application for life insurance back in 2003 today. She wanted to know if I could help her track down the policy as he had recently passed away and the application they had found in his paperwork showed her and her mom as primary beneficiaries.
Like 1 in every 6 men between the ages of 25 and 64, he checked out early. At the time he contacted me 6 years ago he was in good health and insurance at his then age 46 was cheap, but he got the application and did a gut check and decided he was immortal. And true to being a guy, he never got back to it.
Now I hate to bad mouth a guy after he has just gone and died prematurely, but this guy’s wife and daughter have been hit hard by his debt and the horrible financial times we’ve been through. It would have cost this guy peanuts to have a half a million in term insurance. What a cruel joke to leave behind a clue that he might have really cared about them but was too lazy or self centered to actually do anything about it. What a cruel thing to take on the responsibility of being a husband and a father and then make those left behind go on some kind of hurtful scavenger hunt because you’ve left a clue behind that you might have had life insurance.
I see guys scrape and work hard to get some amount of life insurance. Especially those who have been hit hard by health issues like cancer or heart disease. They just want something. They’ve had a glimpse of their own mortality and they want to make sure, even if it’s not as much as they would like, they leave something behind for their family to get restarted. And then I see perfectly healthy guys blow it off even though they all know plenty of people who have checked out way before they should have. They know it happens and they still don’t take the next step.
Bottom line. You can’t license a car without car insurance. You can’t finance a house without homeowner’s insurance. For my money you shouldn’t be allowed to get married or have children in or out of wedlock without getting life insurance.
December 28th, 2009
Life insurance underwriting is kind of like sand dunes. You can take a picture at the beginning of a year and it can be absolutely clear where every grain of sand lies. The exact same picture taken at the end of the year could easily have been taken on another planet.
One of the greatest opportunities of 2009 in term life insurance came from United of Omaha with their “Fit test” life style crediting that allowed clients who could have been rated as high as table 4 to better their approved offer by 2 to 3 tables. This is an underwriting tool that has been used with universal life in the past by a lot of companies, but with no real sound logic attached to it. U of O ties it very logically to life and health style questions that reward those who are doing the kinds of things that really to impact mortality in a positive way.
One of the greatest opportunities in permanent insurance remained the universal life insurance with a no lapse guarantee. Life insurance guaranteed for life without the burden and pitfalls of cash value accumulation. While we have started to see some pullback from the really great deals of 2008, early 2009, there are still companies with products out there that would warrant a complete evaluation and overhaul of a permanent life insurance portfolio. Now that it is clear that the federal estate taxes aren’t really going away, and state death taxes never were, it’s time for high net worth families to get serious about covering that tax burden with one of the best deals in permanent insurance ever, the no lapse guarantee UL.
Another breakthrough is the addition of several companies that are taking a new look at mood disorders and deciding that, from mild depression to bipolar disorder, there is room to separate out those who are taking their treatment seriously and may actually be coping with society better than many of those who choose to just gut it out without any help.
I think one of the biggest missed opportunities of 2009 is the continued failure of companies to recognize the importance of HDL in the cardiac risk factor. They continue to hang their hat on total cholesterol if it’s higher than their guidelines allow, even in the face of high HDL (good cholesterol). There are few, if any, companies out there that will underwrite a case with a total cholesterol of 280 and an HDL of 40 (ratio of 7.0) any differently than a total cholesterol of 280 and an HDL of 80 (ratio of 3.5). Medically there is a huge difference and since life insurance underwriting in this area is all about concern over an impending cardiac event, from a life insurance standpoint customer #2 present a much lower risk than #1. They should get a lower rate, but sadly another year has gone by and nothing has changed.
Another missed opportunity has to do, not with companies, but with those agencies and organizations that offer life insurance. Another year has gone by with AARP still holding fast to its’ stance that the seniors it purports to be “the advocacy group” for, don’t deserve to be offered a fairly priced, meaningful life insurance product. They have the ears of tens, maybe hundreds of millions of seniors in this country and are wasting that opportunity by partnering with New York Life in an obscene life insurance scam.
Selectquote, the self proclaimed largest internet life insurance agency in the country, still continues to advertise on TV in borderline bait and switch manner, quoting 10 year term prices for a couple with toddlers, and now they have added their ridiculously useless text a quote feature, designed more for corralling the masses than meaningful information sharing.
Bottom line. Life insurance underwriting will always be a work in progress and it is important to note that independent agents are at the forefront of positive change. They are the driving force behind competition and with that competition comes change.
December 28th, 2009
From a life insurance perspective. Heck, from just about any perspective this has been one crazy year. But the sky didn’t fall and I think it’s time we put it all in perspective and move on.
Term life insurance prices have been in something of a free fall for the last 12 or 13 years. At times the fight to be at the bottom of the prices was so intense that companies would have rate changes as quickly as they could get them approved, sometimes decreasing rates in successive months. It was great for the consumer and I suspect because it opened up affordability to so many new clients, good for the companies also.
Then came 2009. In a post a year ago I talked about a shift in that trend. It started slowly, but has picked up to the point that I think it could be definitively said that the downward trend in term insurance rates has stopped. I’m still not willing to say that it’s going to be the start of a trend in the other direction as some key companies are holding on, but downward is a thing of the past. The good old days when you could buy life insurance and then buy it for less 10 years later are gone. Those who thought they were beating the system by taking the Selectquote 10 year term insurance cheap way out are going to find they should have chosen the appropriate term to start with.
The good news in all of this is that, even though the downward trend is gone and there have been some rate increases, fully guaranteed term life insurance products are still the best value out there for 95% of the life insurance needs that exist.
Bottom line. Term insurance and no lapse guarantee universal life rates are still at an all time low. It is a great time to review your portfolio, or create one.
December 23rd, 2009
The standard guideline for life insurance underwriting of gastric bypass surgery has generally been two years out from surgery and one year of weight stability.
In other words most companies don’t really want to participate in your mortality post surgery, especially during the dramatic weight loss period. This is the period that most complications occur. And the second half, one year of weight stability is simply to make sure you don’t learn some stomach stretching exercise and overcome the surgery through shear will power. It apparently isn’t an easy thing to do and most bypassees are heavily invested in the results staying positive, but over the years I have worked with a few clients that have managed to overcome their new, tiny stomach.
I recently, kind of back to back, worked a couple of cases where those guidelines were lost with a new logic by one of the companies that has always been good with obesity and gastric bypass issues. One case was 7 months out from surgery and another was at 1 year. Both had achieved maximum weight loss and had been stable for only two months. This company decided to treat both of them as if the weight had been lost through diet and exercise by adding half of the weight loss back in and basing the rate class on that weight. This ended up with one client being tentatively quoted at preferred plus and the other at standard plus, phenomenal compared to the postpones or highly rated offers they got from all the other companies I shopped it to. Being skeptical I sent both offers back for another review and confirmation, and they were confirmed as likely outcomes.
It’s too early to declare this as the new standard for gastric bypass underwriting, but there seems to be a crack in the ceiling that’s worth beating on.
Bottom line. For me there is the lesson that I keep learning over and over. Every case is worth shopping. You never know when a company is going to change their stance on some impairment.
December 14th, 2009
I have been working with a physician who has bipolar disorder and we were declined on our first life insurance application through Transamerica. Trans has pretended to be more aggressive or creative or whatever, on their trials than they actually are on formal applications, but at least for a few paragraphs that isn’t the point of this post.
I’m often asked what impact a decline has on the next attempt to apply for life insurance. People are naturally concerned that if one company doesn’t like them the word will spread and they might be completely out of the game. Actually, nothing could be further from the truth.
A decline, while frustrating and a bit humbling, gives a good agent and you the ammunition you need in order to succeed the second time around. When a company declines an application, while they are hardly ever specific about the reason, they will generally give you a good idea what they didn’t like. For instance, “confidential information contained in Dr Smith’s records 2008″. The next step is to go through Dr Smith’s 2008 records line by line and see what jumps out as being potentially annoying from a mortality risk point of view.
Assuming it wasn’t a mention of homicide or suicide or some other egregious act of uncivility that would lead to an across the board decline, the next step is clear. Shop the case using the exact language from the records and admit in the request for offers that Trans declined the case. A knowledgeable agent will have enough background with the companies he or she represents to know if an offer is likely.
The good news using this approach is that any offers that do come through are pretty unflappable. They already know the bad news. In my experience about half of the time the approval comes back better than the trial because you gave them all the bad news in the trial and when they get the complete records they get to see the good news that comes with the package.
As to Transamerica, it seems that they are trying to wiggle back into impaired risk competition by giving aggressive trial offers. Based on the experience of my first two cases of bipolar that we ran Trans applications on I would say that they are more conservative than they are letting on. Not sure what is gained by that, but it is what it is. Both cases were placed with other companies. This most recent case was approved by Banner Life.
Remember, the criteria that needs to be there in order to get a reasonable approval with bipolar disorder:
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.
7. Best case would not include treatment with anti psychotic drugs.
Bottom line. One company’s decline is another company’s next approval. If your agent gives up in the face of a decline, get another independent agent.
December 11th, 2009
How to find someone the best life insurance rates in the business really isn’t rocket science, but it seems to be an ability that doesn’t come easily to most life insurance agents.
This bodes well for me as an agent because there are a lot of customers out there that aren’t getting what they should or finding what they need. They want the best possible deal. Of course this can also put me on occasion in the position of being an unpaid consultant.
It isn’t often, but it happens more than I would like, that I will shop a case for someone and really work a case hard and they take the results to their local agent and buy my results from someone that didn’t have a clue how to get from point A to point B. I don’t find a lot of solace in the fact that, given the agent didn’t even know how to find the best deal, they will be hard pressed to appropriately service the business going forward.
Oh, the joy of being used! There are also those customers who will take the great offer I was able to garner for them and use it as leverage with their current life insurance company. “I’ll take my business elsewhere unless you can match this offer” type of deal. Most companies will stick to their underwriting guidelines, but their are those that will bend and make the deal to save a block of business.
Bottom line. Can’t whine I guess. I win far more than I lose and as long as the customer wins, at least they are insured and at least it’s at a fair price.
December 9th, 2009
For those who were really thinking that the government would allow the estate tax repeal to continue into 2010, the year that estate taxes would simply disappear, it’s time to exhale.
The House of Representatives has voted to keep the current estate tax exemption and taxation levels in place permanently. That bill has been forwarded to the Senate. While there isn’t a clear consensus in the Senate for keeping the proposed Congress parameters, there does seem to be a resolve to at least pass a band aid bill that would keep the current rates in place for another year, allowing time for debate.
With the current levels being a $3.5 million exemption and a 45% tax, there is a growing bipartisan support, since their fix will likely be at least called permanent, to raise the exemption to $5 million and lower the tax rate to 35%.
What would happen if the Senate didn’t act would be a complete repeal of estate taxes in 2010, making it as the financial adviser jokes goes, “a good year to die”. In 2011 the estate tax would return to 2001 levels with a $1 million exemption. You can rest assured that the government doesn’t want to let that happen.
Bottom line. With the repeal on its’ way out of the picture it is once again time for those with larger estates to evaluate the need for estate preservation 2nd to die life insurance. Given the brutal payment rules on estate taxes and the generally large amounts of tax to be paid it simply makes financial sense to have life insurance in force to pay the tax.
December 8th, 2009
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