Posts filed under 'conversion'
Of course that questions begs another question. Has common sense ever been a standard of life insurance underwriting?
The real answer is yes. Absolutely yes. Before the big changes that came with the shrinking number of reinsurance companies and before we were traumatized as a nation financially…..back in the good old days about three years ago, common sense was abundant. When the options for reinsurance began to disappear companies were forced to dance to the tune of whoever was doing reinsurance on their business. They were no longer free to wander on and off their own underwriting guideline pages, forced to meet someone else’s expectations.
I’ve talked a lot about United of Omaha’s Fit test credits on term insurance and how they have lowered premiums substantially on rated life insurance policies. Fit test credits are all about giving credit for life style, rewarding people for things like never having smoked or exercising regularly.
Now Banner Life has jumped on the bandwagon, but has extended the credits to the best rate classes and not just for help on rated policies. Their goal is to make sure that if someone is healthy in all aspects but one, they don’t get nailed for a 30% increase in rates for just that one thing. They’ve gone big in some of the most exasperating underwriting areas, build, cholesterol, blood pressure and family history. You can truly be a picture of perfect health and any one of these things not being perfect, under their old rules, would have knocked you down one or two rate classes.
As an example, a 47 year old guy with no health issues at all, but with a family history of his father dying at age 50 of a heart attack would normally pay $2225.00 annually for $1,000,000 of 20 year term. With their new underwriting this person would qualify for a rate of $1345.00.
If his father was still living and this client had a total cholesterol of 250 but lots of HDL (good cholesterol) and had a cholesterol ratio of 3.5, instead of paying $1615.00, he would again qualify for $1345.00 if the high total cholesterol was the only issue.
Bottom line. I salute companies that have the guts to use common sense and Banner Life is to be commended (and used) for these changes. Banner continues to be a leader in term insurance rates and they have just recently come out with a very competitive no lapse guarantee universal life, and unlike some companies they are offering this great new UL as a conversion option on their term products. 2010 is going to be a good year for Banner and those who get their insurance through them.
March 2nd, 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
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’ve often talked about the conversion option being the gold nugget hidden in term life insurance policies. Simply put the option allows you to convert all or part of your policy to permanent coverage without evidence of insurability.
I’ve also often talked about the fact that close to all life insurance needs are term insurance needs, not permanent. But what happens when you need your life insurance for a longer period than you expected? Usually the least expensive answer to that is to buy another term policy, but what if at that point, due to serious health issues, you can’t get approved for a new term policy? Your only option may be conversion.
I have a client that I have been working with for a couple of years now, a prostate cancer survivor. We applied two years ago and thought we were in a good position to get a new term policy approved, a policy he needed for a business buy/sell plan, but on the application exam his PSA was elevated again. He had undergone a radical prostatectomy and his PSA had been and should have been a statistical zero.
When our labs showed that his PSA was making a comeback, usually an indication in the absence of a prostate that some cancer had been missed, his oncologist recommended radiation therapy. Because of the original grade, a Gleason 7 and original stage 3 combined with the recurrence he was declined and we couldn’t find any other carriers that were willing to entertain a possible approval. At that point I suggested he consider a conversion of a term life insurance policy that he had that was approved back in 2000, pre prostate cancer, at preferred plus rates. He talked his partner into waiting to see if the radiation worked and what kind of offers he could get then.
It took most of the next two years to get his PSA back down. We just recently shopped it across a broad spectrum of companies and came up empty handed again. His PSA had only recently reached the statistical zero threshold again. with no guarantees that they got it all and it wouldn’t come back.
So, again I brought up possible conversion of part of his term policy. When I called the company I found out that his policy’s level term period was due to expire in just two weeks, also the end of his conversion option. It has now become a no brainer. He can’t get a new term policy and his old one, to carry it beyond the guaranteed period, will cost more than a converted policy. A lot more.
Bottom line. Conversion may be a planned event. You might plan to convert $50,000 or so to permanent coverage at the end of your need for term insurance as a lifetime final expense plan. Or, conversion may just be the golden egg that laid a brand new policy for you when all of your other options are gone.
January 19th, 2010
I’ve truly gotten a sense of what a love/hate relationship is all about with West Coast Life. They are, in so many areas, one of the best companies in the business for fair and flexible underwriting. I love that since most of my clients need above average underwriting.
On the other hand I am truly disgusted with their new conversion product that is only guaranteed 10 years. The whole idea of conversion is that it is the life raft that saves your rear when you become uninsurable. It offers you a way to keep life insurance in force on a permanent basis. It is the frosting on the term insurance cake that makes it work for so many and for West Coast to scrape the frosting off the cake and screw, yes screw their loyal customers is wrong on so many levels.
I had a client call today who wanted to convert her West Coast term insurance policy. She had a 20 year term and bought it 8 years ago. She is paying $77 a month for it. West Coast will convert that “without evidence of insurability” to a universal life policy that is guaranteed for 10 years for $260 per month. So she has 12 years at $77 or 10 years at $260. What bone brain thought that was a good way to structure their conversion program?
I’ve talked to people all up and down in the company and the excuses are just pathetic held up against the damage this can cause to their customers. It’s led me to warn term customers about the potential calamity down the road if they choose to go with West Coast Life or Protective Life, their parent company.
Bottom line. West Coast Life’s underwriting doesn’t suck, but if you stack them up against any other company out there with a conscience, well, they suck because they don’t have one.
November 24th, 2009
Term life insurance is a product that is sprinkled with gold nuggets that make it so much more than it appears on the surface. The great news is that the nuggets are part of the policy and are not added on at an extra cost.
One of those nuggets that I often take for granted that everyone is aware of is the fact that the death benefit, that $100,000 or $1,000,000, that you are insured for will be delivered to your beneficiaries income tax free. Unlike just about any other kind of cash windfall that a family experiences, the government keeps their hands off of it.
Even better, the company isn’t going to hang on to any unused premium. Say you are paying $1200 a year for your $250,000 term insurance policy and you pass away a month after paying that annual premium. The company is going to pay the death benefit and refund $1100, the unused part of the premium. In addition to that they are going to pay interest on the death benefit from the date you file the claim until they settle it. The interest thing is generally not that big a deal because most claims are settled in 7-14 days, but if the claim falls in the 2 year contestability period it may take a few months to settle and the interest can add up.
Another gem in term insurance is the conversion option. In a nutshell this option or privilege allows you to convert all or part of your policy to permanent coverage without evidence of insurability. Let’s say you take out a policy in your 40’s and are in perfect health, approved at preferred plus rates. Then in your 50’s you are diagnosed with and survive colon cancer. This would make the cost of getting a new term policy completely prohibitive, if you could get approved at all.
With the conversion option you are still a preferred plus risk if you choose to convert to a permanent policy. While the cost of the insurance, once converted, is going to be higher than your term insurance was, it is the magic bullet that will keep you insured when you truly can’t qualify for new insurance.
One last piece of gold in your policy is the accelerated death benefit rider. This allows you, if you are terminally ill, to take usually up to half of the death benefit prior to your death for whatever needs you might have. It could be to pay the mortgage because you aren’t able to work or pay medical bills. It could be to do something special with your spouse or family that you wouldn’t otherwise be able to afford. Upon your death the balance of the policy is delivered to your beneficiary.
Bottom line. Life insurance is all about lifting burdens from families that have suffered a major loss. The more gold nuggets you can pour out with that blessing, the better.
November 18th, 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
I am and always will be all about guarantees in life insurance. The job it is purchased for is simply far to important to leave up to the whims of the economy or the company.
In the absence of contractually guaranteed rates, the company has the right to change your premium to a higher one at any point.
I’ve often talked about the necessity of guarantees in both term insurance and permanent products. I’ve also talked plenty about the term conversion option. It is that conversion option that can keep insurability alive even when your health no longer warrants it. I can’t begin to tell you how valuable and comforting the ability to convert
“without evidence of insurability” has been to so many clients whose term guarantees, in the face of cancer or other life changing health events, have suddenly become too short.
It’s with those thoughts in mind that I sent the following email to a vice president of West Coast Life after they recently changed their conversion option to a product that isn’t guaranteed beyond 10 years.
“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.”
Bottom line. Their response will be shared and will determine whether I recommend them in the future.
October 8th, 2009
“In the beginning there came responsibilities and with that came the need for life insurance.” I get asked all the time when a person is old enough that they should seriously consider life insurance as part of their financial plan and the answer is clear, when you have responsibilities that would fall on someone else if you didn’t have life insurance.
Do I think students with student loans should have life insurance? Yup! Do I think a high school student that takes out a car loan, co signed or not, should have life insurance? Yup! Do I think a young married couple should have life insurance even though they don’t have children or a house? Yup.
We are a country that has somehow learned to look the other way from our responsibilities. Today, I was talking with an older client of mine. He’s 74 and lost his wife last year. He and his wife both carried policies because it was the responsible thing to do.
They did OK for themselves. All the bills are paid and they had a paid for house in Maine. He was asking my advice about his policy and whether he should convert it to a permanent policy. I reminded him about our conversations over the years about responsibility being the driving force behind life insurance and I asked, “With your wife gone, what are your responsibilities?”
Well, there really aren’t any was the end answer. His kids are doing great, he didn’t owe any money, and when we factored in that it would cost about 5 times as much for him to carry his term insurance on as permanent insurance, well it just didn’t make sense anymore.
Bottom line. The end is just the opposite of the beginning. It doesn’t make sense anymore when all of your responsibilities are taken care of.
September 21st, 2009
Last week I talked about a case with Met Life where a person was able to use the met-life-external-conversion program in order to convert to a policy that had an accelerated benefit rider. Their company didn’t have the benefit and the person was terminally ill so it was a home run for his family.
With the shifting landscape since the beginning of the year around term insurance and universal life with external no lapse guarantees, Met Life’s program may become a big player. In March Protective Life announced that they were no longer going to allow conversions to their very competitive no lapse UL. In its’ place they now allow conversion to a more traditional UL that doesn’t have the advantages or pricing of the more competitive product.
While the story above is a very poignant one, it is also going to be a rare case since most life insurance companies have policies that have the accelerated benefit riders. But more common will be cases where people want to convert some portion of their policy and they run into an option that frankly stinks, like the North American Life conversion option now.
It will also open up possibilities for those who want to convert but currently have their term insurance with companies that only allow conversion to whole life. Given the ability to convert to a fully guaranteed universal life can save huge amounts of money compared to converting to whole life.
Bottom line. This is a good program with plenty of valuable uses. We’ll keep you posted of any changes, but for now I wouldn’t recommend a conversion until a person checks to see what Met has to offer first.
May 6th, 2009
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