Archive for January, 2010
I went for a drive yesterday. The mountains are all snow packed and it was just one of those wonderful post storm days when, well, you just feel blessed to live in the Rockies.
I sometimes (almost all of the time) get locked in my own little world in my office. Not being an “across the dinner table” kind of life insurance agent I don’t get to meet a lot of people face to face. A little unpractical anyway when you have clients in all 50 states. But yesterday was a rare treat. I got to meet with a client and a potential client at their office in Longmont, CO about 3 hours from where I live.
I was interested in meeting these two because of what they do. They are estate planning attorneys. They’ve been partners in their firm for about two years now and while they initially sought me out to help with life insurance needs of their own, I quickly found out that their was some definite depth to their knowledge on estate and asset protection. They were able to help me address questions that a client of mine had and like I always try to do, I turned around and shared my new found knowledge with anyone that wants to read it.
I was impressed with the thought that has gone into their business model. Like me, they have decided that trying to be all things to all people is not as important as being the best possible person for some people. Like me, they would rather refer someone to the right person than drag them through my learning curve just so I can make a buck. They seem to truly believe that service is the base of any good business.
Anyway, without getting too gushy, I believe they are genuine and conscientious and the success of their practice speaks to the quality of work they do. Estate or asset protection problems? Clear Wind Law.
Bottom line. I can’t even begin to count the number of times I’ve discussed how bad advice can ruin an attempt at getting life insurance protection at an affordable price. Wrong Agent! Wrong Company! The same goes for estate protection. While I can provide life insurance designed to help an estate defray taxes, that should always be the second step after a good plan is in place, a plan that will stand the test of time and if need be, a test in a court of law.
January 30th, 2010
So many life insurance companies have come so close, but none have ever stepped off the edge and done it. Preferred plus rates with no extra charge for private pilots who don’t have an instrument rating.
ING Reliastar came out with their preferred plus and a $.48 flat extra per thousand and got everyone’s attention for a while until it kind of blended in with the fact that several other companies were offering preferred rates. When you did the math the premiums were often lower at preferred than ING’s lure with preferred plus. But now……
An A+ rated carrier announced yesterday that they will now underwrite VFR pilots with 100+ solo hours and 26-150 hours annually at what are arguably the most competitive preferred plus rates on the table today. The underwriting applies to term insurance and universal life and can go up to $10,000,000.
Just to put that in perspective I have a client who has $4,000,000 of term insurance in force. He fits all of the criteria above and currently has his policy with North American at preferred paying about $4800 annually. We just discussed this and ran rates with this just announced underwriting and it would reduce his premium to $3700 annually.
This really can’t be overstated. VFR pilots simply haven’t been offered these kind of rates before. Obviously you would have to qualify for preferred plus rates in all other aspects, but generally speaking health issues are not a big factor with pilots, some of the most annually examined folks there are.
Bottom line. If you are a private pilot with life insurance you shouldn’t pass up this opportunity to shop your coverage and jump on the savings. If you don’t have insurance and have always been envious of those best rates you see advertised, here’s your chance.
January 28th, 2010
I just completed a conversion of a term insurance policy for a client who truly didn’t have any other options. Having shopped the world, due to a particularly aggressive prostate cancer, we weren’t able to wrote a new policy for him.
His term insurance was through Phoenix Life, a company that has steadily declined over the years and as it sank lower and lower, it thought up ways to strip away guarantees and help ensure that what money was coming in, didn’t go back out as death benefits. In the case of Phoenix Life they targeted the conversion options on their term policies and made even their very best option, well, pathetic.
What they offer their loyal customers is a universal life policy with a whopping 5 year guarantee. In this case the client truly had no other option and for business purposes had to take this slap in the face.
I have recently been lambasting West Coast Life for squishing their conversion option down to a 10 year guarantee. I’m sorry, but I think it is immoral for a company not to offer a lifetime option, even if it costs more, for conversion. I have been assured by West Coast Life that they are on track to re institute a fully guaranteed product as a conversion option. I stand ready to applaud when that’s done.
Bottom line. Conversion is one of those components of a term insurance policy that make it the great value that it is and people expect that they will be able to convert to a lifetime guarantee. That’s what it’s supposed to be.
January 27th, 2010
Just like any life insurance policy, a policy that is taken out for the purposes of charitable giving, whether it’s for your church or your university, has to be reviewed annually.
Too often there’s a big commotion around setting up a trust and getting a life insurance policy in force and making sure that all of the IRS i’s are dotted and t’s are crossed, and then it’s left alone to work the way it was planned, or in far too many cases, not work at all.
Most charitable giving is done with permanent life insurance, either through whole life or universal life insurance and therein lies the reason for remaining vigilant. Far too many permanent policies implode due to lack of guarantees and/or cash value, a problem that can be resolved if a policy is monitored on a regular basis.
That’s not to say that by monitoring a poorly constructed policy on a regular basis you can keep it from falling apart, but if, through annual reviews, you see the early stages of collapse, replacing it with a healthy, fully guaranteed policy is much easier.
A classic case in point was a Mass Mutual whole life policy a client came to me with. He was paying $89,000 annually for the $5 million policy and was sure that it was good forever. At that point it had $1.2 million in cash value.
When we pulled an in force illustration it showed that starting the very next year the cash value was going to start decreasing and that by age 92 his premium was going to be $500,000+ and rising every year. We were able to put that cash value into a fully guaranteed to age 121 UL and his annual premium went from $89,000 down to a guaranteed level $32,000. Estate planning attorneys should push clients to demand this kind of service from their life insurance agents. Being party to sticking a finger in the hole in the dike like the one just described will go a long way toward letting a client know that their best interests are second to nothing else.
Whether it’s for charitable giving or as in the case above, for estate tax purposes, the absence of an agent to keep an eye on the trend of the policy and it’s possible demise, is a real problem. Left unchecked this guy would have put nearly $2 million into this policy when it imploded and left him with nothing. No insurance and no cash value.
Bottom line. There is no substitute for service on at least an annual basis. You should expect it from your agent if you have a $50,000 term insurance policy or a $10,000,000 universal life policy.
January 26th, 2010
A client of mine asked me an interesting question over the weekend about the status of whole life insurance cash value as an asset. His question was whether it was protected from lawsuit judgments?
This question came because he had been approached by an agency that purported to represent large numbers of doctors from India. They highly recommended that all doctors have large amounts of whole life insurance as a way to protect at least some of their assets from possible malpractice suits. My initial take on this, that the cash value was a safe haven, was that it sounded like a good sales pitch but that with the huge variance in state laws it was doubtful that one size would fit all.
Let me tell you what really smells right up front on this. If the cash value is what is shielded from lawsuit garnishing, then to be significant in planning there would have to be large amounts of cash value stuffed away in the policy. Unless you can strategically plan on not being sued for 20 years or so, the only way to have significant cash value accumulation is to over fund the policy. In layman’s terms, pay way too much for your policy so the excess goes into the cash value.
I have feelers out to several advanced planning departments and independent attorneys on this question and hope to be able to pass on more than just my opinion this week. What I have found so far is that if this situation were in Colorado, which is a pretty typical state from an asset protection standpoint (according to Russ Lombardy with Clear Wind Law), up to $50,000 in cash value would be sheltered from attachment.
Bottom line. There’s probably only one thing that would make a whole life prone life insurance agent salivate more than just an average over priced sale. That would be talking someone into over funding a policy, thus driving the policy cost, and more importantly the commission on the sale, through the roof. More on this soon.
January 25th, 2010
Medical records should be an accurate account of each visit, test or procedure and nothing else…emphasis on accurate.
The problem is that there really is no appreciation in the medical business for just how much damage can be done from medical record inaccuracy. When is the last time you looked, I mean really reviewed, your medical records for say the last five years? If you found something that wasn’t really true would you demand that it be corrected?
I’ve had a couple of classic instances this week. A person I was helping with a life insurance application had a weight on their insurance exam of 234. This seemed reasonable to me since they were a long time client and five years ago their weight on their application was 228. Three days after the most recent exam they were weighed at the doctor’s office and the weight recorded in the records was 260, a 26# difference in three days.
This was brought to the doctors attention but no note of the discrepancy was entered into the records, no reweigh was done, and there was nothing done to change the obviously erroneous weight in the records. This person just shook it off and went on with life. When the exam and records hit the insurance company, even though it was obvious one of the two weights was in error, with no way to tell, they just averaged the two weights bumping this client’s rates up by two tables, 50%.
The other instance is probably one of the most common, a carryover of social history without updating the information. This is where things like family history, smoking, drinking, drug use and so on are noted. Most doctors will ask those questions the first time they see you and note them under social history. Then they never ask again, and even if there is a change that is discussed, the next time you see them the old social history is drug forward onto the current page.
This came to light with a client who has not had anything to drink in a very long time. They quit and have been a clean and sober member of AA since then, but their social history still said “drinks occasionally”. Well, that is a show stopping decline when it comes to life insurance. A member of AA that still drinks isn’t going to get approved for life insurance. Fortunately for this client the doctor was willing to enter a rebuttal of that entry in his records. That’s rare though. Most doctors don’t want to admit they’ve been in error.
Bottom line. Review your records. Much is made about the need to review your credit report because of all of the misinformation that can be contained there. The same holds true, and can be just as damaging, with your medical records.
January 23rd, 2010
I was considering just re-posting some old information about life insurance underwriting of diabetes, but let’s just hash our way through it. There is new information and new opportunities that wouldn’t have been there even a year ago.
Let’s save type 1 diabetes for another day and focus on just what it takes to get good life insurance rates with type 2 diabetes. The good news here is that one company broke through, albeit in a limited way, and now offers their best rate class for type 2. So, what does that take.
A quick rundown is this. The applicant needs to be over 60 and has to have been diagnosed within the last 5 years. They have to have good control exhibited by an A1c of 7.0 or less and they can’t have any other risk factors that would normally bump you out of the best rate class, so no obesity, high blood pressure, and no history of heart problems to name a few.
But as I said, a narrow window of opportunity. For the average client what underwriters would like to see for approvals in the standard to standard plus range is onset after age 50, an A1c of 6.5 or less and of course a lack of risk factors that would otherwise knock you out of the rate class you’re applying for. In other words, if you have the first two but poorly controlled blood pressure, you’ll pay what the blood pressure drives the rate to. If you have the first two and you’re 5/10, 280#, you’ll pay what the weight drives the rate to.
But here’s the thing. Most life insurance companies will decline you if you are a type 2 diabetic no matter what the rest of the story is. There are a handful, maybe 20 companies that really have an open mind to underwriting the whole picture. This is one of those classic cases where if you pick the wrong agent who uses the wrong company you lose. If you think your Farmers agent is going to get you life insurance, forget it.
How do you know you’ve found the right agent? Ask questions. If they don’t understand type 2 diabetes. I mean if they really don’t know the difference between that and type 1, move on. If they don’t know what questions to ask concerning medication, age of onset, A1c history and other risk factors, they don’t know how to find you good rates and if they aren’t willing to educate themselves, they don’t deserve your business.
Bottom line. There are more people with type 2 diabetes that can get reasonable life insurance rates than people that can’t. The problem is they hear from people that don’t know, that they can’t get it. And they use agents who don’t know how to get it.
January 22nd, 2010
I got a letter (bulk rate) from Garden State Life today. I had inquired some time back just to find out how bad their “no exam” life insurance offer was. I like to keep abreast of the hardly ever changing difference between what life insurance will cost if you take an exam and if you don’t.
They sent a sample check that could go to my beneficiary. They told me all the reasons I needed the insurance. The check was for the maximum amount available, $125,000, and they explained, “it’s a check that will have to last your family a long time, and cover a multitude of expenses…like the mortgage or rent, car payments, the monthly household bills, food, clothing, school…and everything else you now provide for them”. Since I estimate my current life insurance need at a million plus $, I was a little disappointed in the size of the check,
And if I buy it at “pre-birthday rates”, that $125,000 will only cost me $82.75 a month……AND that’s a guaranteed rate for 7 years, excuse me, “7 full years”. Well, what the heck am I thinking passing up an opportunity like that? OK, I know I’m just busting their chops because they make it real easy to buy overpriced life insurance, but really, if I don’t do it, who will?
REALITY CHECK!! For the convenience of not taking an exam here is all you get. 1. The convenience of not taking an exam.
That’s it. They still have the right to check the Medical Information Bureau and get medical records. They can still reject you if you answer yes to any of the health questions. So, what’s the deal with this exam they are getting you out of? Well, for that small amount most companies would have someone come to your home or business and get blood and urine specimens, check your height, weight and blood pressure and ask you all the same medical questions that Garden State does. Takes about 15 minutes and for most people it’s the only real good workup they get unless they’ve got insurance that will pay for annual physicals. AND IT’S FREE!!!!
So, what’s the deal if you do the exam? Most people get approved somewhere between preferred and standard rates. For the sake of comparison with Garden State we’ll use standard rates. Just to put standard in context, you can get standard if you are 5′10, 250#. You can get standard if your cholesterol is 300. You can get standard if you have well controlled type 2 diabetes. You can get standard with well controlled bipolar disorder. Standard is not that hard to get.
So, because on Garden State has a 7 year term insurance policy, I’ll compare it to a 10 year guaranteed level premium. Garden State is $82.75. Savings Bank Life is $45 a month and the guarantee is 3 years longer. For a 15 year guarantee it would be $60 a month and a 20 year guarantee would be just slightly more than the Garden State 7 year guarantee at $88 a month. And all of that is assuming you are only able to qualify for a standard rate.
Bottom line. Take the exam. Quick, painless, free and you probably need it anyway and…..you can save a ton on your life insurance. Don’t bite for the sake of convenience.
January 21st, 2010
The reversal in direction and trend that started at the first of last year is continuing with West Coast Life being the most recent to announce that term insurance rates will be increasing.
I’m not overly concerned about the term rate increase but I do continue to have concerns about the West Coast conversion option. I wrote in October of last year about the fact that the only option they were offering for conversion was a non guaranteed product, not exactly what a loyal paying customer wants to hear.
I wrote an email to Greg Zabel and cc’d the company president expressing my feelings about their treatment of the customers that had put their faith in West Coast…
“Greg,
As I work with client on a potential conversion I am really struck with the blow that West Coast has taken in the area of being a 100 year old trusted life insurance company, part of the Protective Life group.
Conversion has always been that golden egg hidden in term policies, the savior of insurance and insurabilty for families. And, let’s be honest. It’s been a cash cow for companies like West Coast.
For West Coast to now offer only non guaranteed (no, I’m not impressed with a 10 year guarantee) options is a slap in the face to loyal customers. When the company continues to offer lifetime guarantees on new issues and relegates loyal customers to second hand products, well, it’s just wrong.
Whether it is a more expensive product is not the issue, although I fail to see how the company can break trust with current contract holders by offering better prices for new business. The issue is guarantees. I simply keep coming up short of a word other than immoral to describe how I feel the company is treating the clients that have made and kept West Coast alive and viable for so long.
I know we’ve never talked but the amount of WCL business on my books, I believe, puts me in a position to voice my outrage on behalf of my clients, and ask that someone respond, preferably someone as high up in the company as you can shove my concern. Thanks in advance.”
He called after returning from a company trip overseas and explained that because of reserve requirements put in place by reinsurance companies on guaranteed UL’s, they had to go to non guaranteed products…..but they were working on it.
I emailed him again today. “Greg,
I had emailed back in October concerning West Coast’s stance on bagging guarantees on conversion products. You called when you returned from your customer paid jaunt abroad and explained that it was the fault of the reinsurance companies, that their requirements for reserves were too high to offer guaranteed products.
You also assured me that it was something that West Coast was working on and hoped to be able to again offer guaranteed products in the not too distant future. In light of their impending term insurance rate increase I wanted to get an update on where the company is with offering guaranteed conversion options?
Since we spoke in October I have lost three more opportunities to convert policies because of the pathetic option West Coast seems to think is good enough for now.”
I got another “out of office” reply. Not sure where he is spending the customer’s premium dollars this time, but I will share his response when he returns.
Bottom line. I believe that life insurance companies have an obligation to offer a guaranteed permanent product to convert to. It is what has been held out as the standard for as long as there’s been a conversion option and anything less is putting people at risk of coming to a point where they still need insurance and not having it.
PS – Just received a response. Maybe something positive to report from West Coast.
“Ed,
We are working on a possible term solution that may also take care of the conversion problem. Can’t say much more. I won’t have much to report to you for another 30 days or so. Thanks for your email follow up.
Greg”
January 21st, 2010
I just spoke with a prospective client who applied for a term life insurance policy through a friend of a friend….He had been to my site before but had decided to give this agent a try.
His only issue is that a parent died from cancer at age 59. With the exception of Prudential that starts beating up on family history prior to age 70, most companies will bump you two rate classes for an immediate family death due to cancer or heart disease prior to age 60. It’s an underwriting rule that stretches completely out of reality the chance for a genetic link between you and your parent in most cancers.
There are of course some cancers that have genetic pass through predispositions, such as breast cancer. But let’s stay in control. When a woman has a father who died of prostate cancer or a man had a mother who died of ovarian cancer, it really isn’t a factor.
Anyway, this client went to the friend of a friend who had him apply with Genworth Life and Annuity. Their family history underwriting guideline places him solidly in their third best rate class. No wiggle room. No negotiating.
With Genworth at their Select rate class this young guy’s $400,000 of 30 year term would cost $566 annually. With ING Reliastar their family history underwriting doesn’t involve cancer at all so he qualifies for preferred plus rates and should safely expect to be paying $353 annually.
The local agent he went through was simply inexperienced and thought that, well, family history is family history and he won’t get any better. I know for myself I make it a point to know which companies stand out on underwriting points and am constantly poking around to find out where there is some slack and which underwriters might be willing to bend a bit.
Bottom line. I would never say to avoid an inexperienced agent. Heck, if you do that we’ll never have any experienced agents to replace us old guys. What you can do though is let an inexperienced agent know that you intend to shop to make sure they are offering you the best advice. That will generally prompt them to ask a supervisor or mentor about whether they are likely to get beat.
January 20th, 2010
Previous Posts
I went for a drive yesterday. The mountains are all snow packed and it was just one of those wonderful post storm days when, well, you just feel blessed to live in the Rockies.
