Posts filed under 'guaranteed issue life insurance'
To a guy this makes perfect sense. From my own experience I can tell you that most women, especially those married to guys that feel fine, don’t share that philosophy. Unlike us guys, they think doctors are serious about the importance of annual physicals and things like colonoscopies after age 50.
Well gentlemen, life insurance underwriters are from the same planet as our wives. Most companies, even though they do a full blood and urine analysis as part of the application process, will postpone an approval if you are over age 50 and haven’t seen a doctor in the last two years. There are a handful of companies that will hang in there and allow you to get by on your own medical advice up to age 60, and only one that I know of that will go to 65.
Let’s get real for a minute. We all (every one of us) knows someone who died too young and felt fine right up to the time they had a heart attack, or felt fine right up to the time they were diagnosed with colon cancer. Heart disease and colon cancer are a couple of good examples of the kinds of things that can be discovered early enough to save your life if you follow the standard doctor recommendations. It simply doesn’t take that much time or money to keep track of your health.
I had a potential client recently who refused to have a life insurance exam because “people find out bad things when they have exams”. So I explained guaranteed issue life insurance and that was more than she wanted to pay (yes guys, I said she). She wanted the best rate but didn’t want the insurance company to have a clue what her health was and even worse, she didn’t want to know what her health was. How stupid is that?
I’ve touched before on how underwriters feel about not following doctor’s orders. If a doctor has recommended that you have a test or a procedure and that hasn’t been done, expect your application for insurance to be postponed until you successfully define and do the word compliant. Maybe you’re not real keen on having a blood test or a colonoscopy or a digital rectal exam, but when your doctor orders it and hands you that slip to make arrangements to get it done, or simply asks you to drop your pants and bend over, it’s because he expects you will follow through. Underwriters have that same expectation.
Bottom line. The more you care about your health, the more likely you are to impress life insurance underwriters.
July 1st, 2008
Probably one of the most misunderstood parts of life insurance is the incontestability clause and what it really means. The question from clients is most often framed something like, “How long does the policy have to be in force before it pays?”
There are guaranteed issue policies that truly have a waiting period before they will pay a death benefit, usually 2 or 3 years, but that is different from the 2 year incontestability period in a traditional policy. The following attachment is the clause as it appears in most policies.
incontestability-clause
A couple of important things to note. Statements (or answers to questions) in the application can be used to contest or defend a claim. If you fail to mention something in the application that is relevant to the life insurance policy and how it was approved and issued, it can be used to contest payment of the policy if you die during the first two years. That is why I have stressed so often in this forum that you really can’t be too honest when it comes to sharing health history with your agent. It not only helps them find you the best rates, but protects your interests during the incontestability period.
The other thing that is important to note is the statement that the company will not contest the policy after it has been in force for two years.
It isn’t unusual for a person to honestly not remember every detail of their health history or to accidentally leave some small detail out. While this may ruin most people’s image of life insurance companies, they really aren’t looking for a way not to pay claims. They are protected from material misrepresentation through the two year clause, but the remedy if they find some inconsistency is not always to void the contract and not pay the death benefit.
Hypothetically let’s say a person gets approved for a $250,000 policy and its’ cost is $1000 a year. The person dies after a year and the company reviews all of his medical records and finds new information that wouldn’t have precluded them from issuing insurance, but would have moved them to issue the policy a higher premium, say $3000 a year. The company then has a choice. If they believe it was an attempt to commit fraud and the additional health information contributed to or caused his death, they might deny the claim. If, however, it was simply an oversight on the part of the insurance company during initial underwriting, or if the information would have led to a higher rate but didn’t contribute to the death, the other remedy the insurance company might use is to adjust the premium. In that case they would change the premium to $3000 for the year it was in force and deduct the difference from the death benefit making it $248,000.
I think it is also worth noting that suicide is covered after two years, not because I think people should buy insurance for that purpose, but because there are a lot of claims that go unpaid because beneficiaries assume companies won’t pay in the event of suicide.
Bottom line. Know your policy. Always tell the truth and don’t leave out even small details.
June 12th, 2008
I had an email from a potential client today that said “I am looking for reasonably priced life insurance where there are no health questions and/or physical exam. If your group can fullfill these requirements than you can contact me”.
There are a lot of people who think life insurance companies are too nosy. Consider people purchasing business life insurance where the company would like you to simply divulge every financial detail of the business. I actually share the business person’s concern that much of what the companies ask for is unnecessary to the life insurance company and rather confidential.
“No health questions and/or exam?” “Reasonably priced?” I’m thinking he wishes his mother would still do his laundry too.
Since all life insurance pricing is based on mortality assumptions, the more a life insurance company knows about the risk, the more reasonably they can price the product. If they don’t know anything about the risk, it follows that the only way to cover themselves and the risk pool they represent (that would be you), is to offer less reasonable rates and products to those who don’t want to talk about their health or be examined.
To meet his needs we’re really talking about a guaranteed issue product. Guaranteed issue, just as the name implies, will issue insurance to anyone with usually the only caveat being that they have to fall between 40 and 60 years old. How can they do it? First, it is a whole life policy, so the premiums are high. The death benefit is generally limited to $50,000, so the risk is held down. And lastly, they have a 2-3 year waiting period before the death benefit is activated, giving them some cushion before they really assume the risk. During that waiting period, if a death occurs, the company will normally return all premiums paid plus a modest amount of interest to the beneficiary. That’s what you get with no questions and no exam.
Another option is no exam but some questions. Usually call a simplified issue policy, it relies on the application and information from the medical information bureau. These policies can be applied for on line and issued within hours. They are generally at standard or worse rates no matter how good your health is and they are generally capped at $250,000 to $300,000. This is the type of product that is usually used to underwrite children’s life insurance.
Bottom line. The best prices for life insurance, whether term insurance, universal life or whole life, will come with a full medical disclosure and an exam. Make the company comfortable with the risk and they will reward you with the best rates.
October 30th, 2007
We’ve all heard some version of the story. A life insurance policy with an exclusion for anyone that dies if they are hit by a bus while wearing a green shirt on a Wednesday during August. Actually if the price was good, I would take that one. Don’t have a green shirt and no buses where I live, so……..
In all seriousness though, exclusions are a common question and a very real concern. Some time ago there were small policies that had odd exclusions and the concern has spilled over into a more sane and fair time in the life insurance industry.
Today’s life insurance is underwritten such that there are no needs fior exclusion as the pricing takes into account any “pre-existing condition”. It is not uncommon for someone with an impairment such as cancer or epilepsy to ask how long it will be before they are covered if they happen to die due to something that has to do with that condition. The answer is that there is no waiting period. The policy was underwritten to accept that risk so it is covered from day one.
There are generally only three exclusions that you will find in a life insurance policy. The first two are general and apply to all policies. They are the suicide and contestability clauses. Suicide is obvious and it states that if, during the first two years of the policy (one year in a few states), you take your own life, the company is not bound to pay the death benefit, just return the premium paid.
The contestability clause states that if you die from something that was materially misrepresented during the first two years of the policy, the company again is not bound to pay the death benefit. So, if you had actually been having chest pains, and had discussed it with your doctor but never really had it looked into, and you didn’t divulge that on the application, that would be material misrepresentation.
If you flat out lie about something on the application, that is fraud. There is no two year limitation on fraud and a company could refuse to pay if you died from something you lied about. Do people lie on their applications? Well, yes they do! Generally it is uncovered in the application process when their medical records are reviewed, but sometimes it can slip through. That is not a position you want to put your family in.
The last is an exclusion that private pilots occasionally take. A pilot who has aviation practices that are considered a higher risk such as crop dusting, aerobatics or bush piloting are often assessed a higher rate. They can choose to exclude aviation from their policy. Most private pilots get very good rates and don’t need to exclude aviation. This is really the only thing that most companies will allow an elected exclusion for.
One notable exception to what I’ve said is guaranteed issue life insurance. Anyone can get guaranteed issue. It is exactly what it says it is. They have a two or three year waiting period with no death benefit, only return of premium. That is their way of protecting themselves as anyone, with any health problem can get a policy, no questions asked.
Bottom line. Life insurance policies are very straight forward. When your policy goes in force you are covered with only the exclusions mentioned above. As we explain to clients, don’t lie on the application and don’t kill yourself and you’re covered fully from the day the policy goes in force.
September 7th, 2007
I think I’ve mentioned before that there is a real propensity in the life insurance business for agents to be so protective of a potential sale that they will actually tell a customer they are uninsurable, rather than admit they are the wrong agent for the job.
There isn’t a week that goes by without hearing from people who are desperate to find affordable life insurance. They have been told they are uninsurable because they had a heart attack. They’ve been told they will never get insurance because they’ve had breast cancer or because they are type 2 diabetic. I’ve had clients who are never called back by another agent because they admitted they had been through alcohol treatment.
Agents actually tell these people “you will never get life insurance”. In the whole scheme of things I get to talk to only a handful of these abused people. I can only imagine how many just give up and leave their family without protection because some lame excuse for a life insurance agent didn’t have the guts to just tell their client to seek out a more experienced independent agent.
I’ve always said that if you talk to an agent and they declare you uninsurable without running your information informally through several underwriters, they are either captive or incompetent. If they say they’ve shopped it and you are simply uninsurable and they don’t talk to you about guaranteed issue life insurance, they are captive or incompetent.
The bottom line is that agents very often declare you uninsurable because they aren’t knowledgable in your impairment or are too lazy to work an impaired risk case. No one said it’s easy, but quoting Rich Fuller from Special Risk Services, an impaired risk general agent for 30 years, “Anyone can write insurance on the super healthy, but the reward is placing much needed insurance for someone who has suffered severe health problems”.
Never, never take uninsurable as an answer without doing an internet search for an agent with the expertise you need.
June 1st, 2007
How often do we hear it? A friend or family member has had a heart attack or been diagnosed with cancer at an age that is just, well….wrong! We expect health problems and death when someone gets into their 80’s. It’s not nearly so common in their 50’s and 60’s, or even 70’s anymore. But there’s that once a year shocker where somone we know that is in their 30’s or 40’s has some serious health issue diagnosed. Quite often we hear about their death. The question is, if they knew it was coming, would they consider life insurance differently?
I’ve been there and understand that bomb proof, immortal feeling at that age. We see bad things happen to the wrong people at the wrong age all the time and, because we have a shield of immortality (or denial) around us, we think we are somehow living in a different world. Certainly it could happen to them, but not to us.
Consider for a minute that there is something that would cost less than a dinner out every month. Life insurance can be that inexpensive and in will ensure the future of your family in the event you happen to get being one of them. It can not only insure you now, but it can also guarantee, or lock in your insurability for later years when the chances of health problems increases. Wouldn’t it be great to know that you were still insuring your family’s future for the cost of a dinner a month when you had recently been diagnosed with type 2 diabetes, breast cancer or melanoma. Once you have that great rate, it can’t be changed just because your health does.
Maybe life insurance isn’t the most popular subject, but it’s one that should be discussed earlier rather than later. Better that business partners set up a buy/sell agreement and buy business life insurance when they are both healthy. Better that a husband and wife discuss the real needs and make a purchase that will ensure financial security while they are young. I personally think buying juvenile or children’s life insurance with a guaranteed insurability feature is a tremendous gift. One they may not understand for years, but one that can make a huge difference for them down the road.
Like I said yesterday…..it’s time to talk about it. Too much is left undiscussed and as a result, not acted upon. How about we have a very frank discussion for the forseeable future about this whole idea of pulling all of our collective heads out of the sand and taking a look a reality? I’m up for it!!
May 3rd, 2007
One of the life insurance “urban legends” has to do with the large jump life insurance rates take when you turn 50, and again at 60, and well, let’s not even talk about 70. The truth is that while the cost per thousand of life insurance does in fact increase with age, it doesn’t take any quantum leaps at any particular point. Rather, it is a gradual increase that just happens to be a little more agressive with each passing year.
The real swing issues, the one that can truly impact your rates rapidly and drastically, is health and lifestyle, not age. Here’s a clear example. Say my older brother is 65 and in perfect health. He gets regular exercise and always gets checkups either at the health fair or at the doctor. His cholesterol is in check and he’s never had high blood pressure. His height and weight are just where they ought to be. He qualifies for preferred plus rates with any company he wants to apply with, and for $250,000 of 20 year guaranteed level term insurance he is going to pay about $200 a month.
I’m 10 years younger and don’t much like my brother because he and I pay the same premium for the same amount of insurance and the same term length. We’re really identical except that I don’t exercise all that much and have really only had one good checkup in the last 10 years, the one I took when I got my life insurance. And really everything was perfect on the exam…….except my blood pressure was running a little high (always wondered why I got dizzy when I stood up). The average on the exam was 160/95. Seemed a little brutal on the part of the insurance company since it would have only taken an average of 135/85 to get my rate down to $70 per month instead of ‘$200.
The good news is that I took an exam and found out about the blood pressure problem and am now on medication which has brought my blood pressure down to a healthy, normal range. My independent life insurance agent tells me that if I show good control and compliance with my treatment, before long I should be able to get substantially lower rates.
OK. So I made the story up, but the facts are real. The truth is that a healthy 60 year old can get better rates than a 50 year old with a DUI within the past 2 years. A healthy 70 year old can get better rates than someone 60 who smokes. A 75 year old who sees a doctor at least annually for a physical can get insurance at good rates while a 65 year old who hasn’t seen a doctor in 15 years “because he feels just fine” probably won’t find anyone that will give him insurance at all. A diabetic who monitors and controls their diabetes can pay half as much as someone with diabetes who is kind of sloppy about the whole control thing. Someone who has had a heart attack and still smokes, if he can find anyone to insure him, will pay at least 2-3 times more than someone who got the hint and quit smoking.
And my final example, one that truly fits under the “you just can’t fix stupid” heading, a 60 year old who had colon cancer at age 47 and after having part of his colon removed, had never been back to any doctor at all. We can always use guaranteed issue insurance, but that is a good example of someone who could be paying standard rates for traditional life insurance if they had just taken care of themselves. Easily 5 times more insurance for the same cost.
April 8th, 2007
I don’t know if New York state employees have an exceptionally hard time in getting help with retirement planning. I hope for the rest of the country sake that their situation is an exception rather than a rule.
Recently a retiring state employee wanted life insurance quotes. Based on the cost of the life insurance it looked like it would be prudent to take the larger income at retirement and make up for the spousal survivor benefit cut back with the insurance. All they needed to do was meet with the retirement planner to finalize the direction they wanted to take. While I urged them to put the life insurance in force and then adjust it if need be after the fact, they insisted that the process wouldn’t take long so they would just hold off.
Seven months and two new sets of quotes later they called to let me know that they finally had their meeting and wanted the insurance now as their retirement was only a month away. The only problem was that he had had a severe stroke in the interim, so severe that all we could get him was a $50,000 guaranteed issue policy. Not enough coverage to take the retirement plan they wanted and too expensive based on their new budget.
If I’ve said it once, I know I’ve said it a lot of times. Don’t wait for some occurrence in the future to purchase your life insurance. Buy it now.. Buy it when you’re healthy. If you’re still healthy when you get to that occurrence you can always change the policy or replace it with one more appropriate. What you won’t be when you get there is uninsured and without options.
April 4th, 2007
Advocacy is defined in the dictionary as “supporting or promoting the interests of another”. There are several “advocacy” groups that promote life insurance to their members or to the group of people that they would suggest they are advocates on behalf of.
I have a particular problem with three advocacy groups that you would suspect would offer the best possible life insurance products to their members or audience, when in fact they offer downright bad deals and try to gloss it over by appearing to be your “friend”.
Let’s talk about Gerber. They may be pretty good at baby food, but I can tell you that the juvenile life insurance, or children’s life insurance they offer, is far from a good deal. They offer a guaranteed issue product, but from a price and benefit standpoint it pales in comparison to what can be found through an independent life insurance agent. Cute baby on the jar. Lousy advice on life insurance!
And then there’s the AOPA. For non pilots, that is the Aircraft Owners and Pilots Association. Go to their website and you will see how they purport to be advocates for private pilots in just about every area, including life insurance. Their recommended company is Minnesota Life. There are so many companies out there that can beat Minnesota Life for aviation covered life insurance, that if you weren’t depending on them to be your advocate, it would be laughable. If you search under life insurance on their website you will actually find where they admit that they get a kick back from Minnesota Life. They use the money to enhance their advocacy. Maybe Minnesota Life’s rates are high because they have to pay the AOPA to steer business their way.
And last but not least, being old enough to be a member, our beloved AARP. Claiming to be an advocate for us elderly folks and really not doing it is, well, WRONG!!!!!!!!!! AARP pushes a New York Life term product that is overpriced to start with, the price goes up every 5 years, and after age 80 it goes away. “One that supports or promotes the interests of another?” Now I don’t know if AARP gets a kickback from New York Life, but I do know that they don’t allow any other life insurance advertising in their periodicals or on their website.
You want an advocate? Someone who really provides what the definition suggests? Get your insurance quotes for your term insurance, universal life insurance or whole life insurance from an independent life insurance agent. Get unbiased advice from an agent that isn’t being an advocate to a specific insurance company or an organization, but to you.
March 28th, 2007
Just finishing up today and getting ready to drive to where my parents live. My father has bladder cancer and is meeting with the oncologist tomorrow to discuss what steps might be best. At his age 84, he of course has long since quit worrying about life insurance and neither the cancer or the treatment will impact him in that manner. Just say a prayer for him if you are so inclined. At his age the treatment can be extremely rough, almost as rough as the disease itself.
As I was wrapping up I got a call from a son looking for life insurance for his 48 year old father who has liver cancer and is still undergoing treatment. I explained that at this juncture there really was no option other than guaranteed issue life insurance, a whole life policy that is “graded”. What that means is that the death benefit doesn’t become fully “vested”, for lack of a better term, for two years, three with some companies. So, if his father were to pass away during that period all that would be paid to the beneficiaries is a return of the premium paid, plus interest.
The son, of course, wanted something with an immediate benefit and said he would just continue looking. Logic would of course lean toward the fact that if an insurance company was going to offer insurance with an immediate death benefit, and that person was in the throes of a potentially fatal cancer, they would have to charge a premium almost equal to the death benefit. Logic did not dissuade the son. He said he would keep looking.
I say all of this for two reasons. Most importantly, get insurance while you are healthy and keep it in force. Even if it’s only a small amount and term insurance. No one knows what is coming, or when……and immortality is just not part of the human makeup. Don’t leave your children scrambling for a way to come up with enough money to bury you.
Second. Don’t overlook guaranteed issue insurance unless you have been told that the person who needs the insurance won’t make it two years. Most independent agents will have access to this type of coverage. There is no magic insurance out there for situations like these.
Time to hit the road.
March 22nd, 2007
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