Posts filed under 'life insurance'
Historically life insurance used in estate planning has revolved around the issue of estate taxes, with the irrevocable life insurance trust being the stop gap to keep the government from draining off half the value in fairly liquid estates and sometimes completely gutting estates with very low liquidity.
With the downturn in the economy over the past year, the value of many estates that were borderline taxable has fallen to the point where some are considering whether estate protection is needed. Another thing that has pushed on that already leaning tree is the fact that congress appears to be seriously poised to lock in the estate tax exemption at next year’s already legislated level of $3.5 million.
Before you bag that life insurance there may be a few things you want to consider. First of course is the fact that economic downturns historically don’t last and value lost will likely be regained. And, while the new exemption limits may seem temptingly high enough to consider foregoing protection, a turn around in real estate and investments, coupled with a few right choices can put your estate right back in the governments hip pocket.
Another thing to consider for those estates that were borderline taxable at the lower exemption limits and seem safely padded if the exemption goes to $3.5 million, is the idea of keeping that irrevocable life insurance trust in place as a wealth preservation tool. It could be that extra million or two that makes your estate “economy proof” should you happen to suffer more losses or die during an economic slowdown.
Bottom line. That in force life insurance has value to your estate in several ways and they should all be considered before any firm decision is made to lapse something that may have huge value down the road.
August 18th, 2008
I am a graduate of Dave Ramsey’s Financial Peace University and a firm believer in his financial guidance and yes, his thoughts on life insurance. I believe that both his passionate belief that people should have life insurance and that for almost everyone it should be term insurance are right on track. But, after careful study I don’t understand his endorsement of Zander Life Insurance as the only agency in the country that a person ought to go to.
This past week I was talking to client about his insurance quotes and he mentioned that he was going to compare our quotes with Zander. That’ s fair. If I can’t earn the business, I don’t deserve it. So we pulled up Zander on the computer and ran quotes for him. While based on his personal health information there will be some adjustment, for comparison sake he wanted to run the quotes at preferred plus. His birthday is 1/23/49 and he wanted a quote for $500,000 of 10 year term.
Zander has an easy to use quote engine and we soon had a spreadsheet of quotes, zander-instant-quotes_files.We discussed these quotes and I explained why it was important to have access to a wide variety of companies due to the underwriting foibles of each company.
We than ran quotes on the Hinerman Group website and found a bit of a disturbing difference, hinerman-group-get-a-quote.
Please note Dave’s comments at the top of Zander’s quotes. And please note that while our websites agree on the best company at that rate class, Savings Bank Life, Zander has skipped over 5 companies in between Savings Bank and their second best quote, Transamerica. Did they skip them because they are not “top notch” as Dave suggests? I don’t think so. The missing 5 are all comparably rated to SBLI and Transamerica.
Is it because those 5 offer inferior underwriting? Again, I’m not seeing that. In fact, if you are 5′10 and weigh 202 pounds, you will not get that rate from Savings Bank Life, but you will from Prudential Financial (Pruco). Dave talks about pre-existing conditions. Weight is the most common rate changer in the life insurance business.
Bottom line. Agencies delete certain companies from their quote engines generally to drive their customers in the direction they want. I don’t understand Zander’s logic but I know from having a quote engine that you don’t accidentally leave companies out. There appears to me to be some reason that Zander wants to have a larger gap between the first and second best quotes than actually exists. What’s up with that kind action Dave?
August 18th, 2008
In previous posts I have touched on studies that have shown that the dramatic weight loss provided by gastric bypass surgery has proven to have much more value than just a matter of convenience in losing weight.
With the primary risk factor for type 2 diabetes being obesity, and two of the primary causes of heart disease being obesity and diabetes, there is a point where getting rid of the weight is a matter of life and death, and gastric bypass isn’t just a matter of convenience any more than stepping off the tracks when a train is coming is a convenient way to keep your clothes from getting messed up.
I spoke with a client within the past week who had achieved a 130 pound weight loss after gastric bypass. He was being treated for diabetes before the operation and weighed over 300 pounds. Within a few weeks of the surgery his glucose levels were lowered to the point where he was taken off medication. Even off medication his glucose levels never went back up. Now, three years later, at 187 pounds, he is cured of diabetes and has a new lease on life.
Life insurance underwriters are cautious when it comes to gastric bypass because there are some dangers and also, if a person doesn’t have the will to make the lifestyle changes, even gastric bypass can be overcome by slowly stretching the new smaller stomach back out. For this reason underwriters want to see a track record of stability in weight before they will call it a home run. Having said that, those underwriters are keenly aware of and ready to reward the new lifestyle and the risk factors that have gone away because of it.
Bottom line. Eliminating risk factors through life style changes is the right thing to do even outside the scope of life insurance. Quality life and a longer life are a blessing to share with your family.
August 16th, 2008
Life insurance exams have stayed pretty much the same for as long as I’ve been in the business, about 150 years now. On the lab side, the blood and urine testing, an occasional new test has come along and a few have gone down in extraordinary flames.
The industry has been deservedly dealt a few black eyes with great new ideas. Quite some time ago the industry decided it would be a great thing to be able to tell if someone had cancer even though there were no symptoms or diagnosis from a doctor. A lab came up with a tumor marker, dubbed TAA. It’s touted value was that it would have a high reading if someone had even an undetected tumor. The insurance companies jumped on it without real proof of its’ accuracy and it turned out to be a fiasco. In the end the test proved to be, to put it kindly, inaccurate and it resulted in completely healthy life insurance applicants being told they might have cancer and having to undergo expensive tests to find out that they didn’t, much to their dismay and the dismay of their doctors.
It is these kinds of underwriting screening tools that need to be proven before their actual use for the sake of the clients and underwriting credibility. Recently a new tumor marker has been proposed but so far the insurance companies have steered clear of the CEA test (carcinoembryonic antigen).
Other tests have come along that appear to have passed the validity test. Probably the biggest breakthrough has been the NT-proBNP. This test has afforded underwriters the ability to pinpoint impaired circulatory function. While most commonly tied to some level of heart failure, the test has proven very accurate in bringing to light the presence of cardiac damage from all pathological causes.
This test, in combination with other cardiac impairment markers can be more accurate than the old standards of checking cholesterol and doing an ekg. While some of the associated marker tests are still being reviewed, proBNP is in use by most companies. The issue of heart disease has been and continues to be taken very seriously in life insurance underwriting.
Bottom line. These tests are a two edged sword for life insurance applicants. While they might very well lead to an increased rate or even decline, they can also alert the applicant to a health issue that might be looming.
August 16th, 2008
I think I’ve been very clear over the years about unexplained information in medical records and how life insurance underwriters deal with it. They ask questions!
Sometimes the mystery information isn’t relevant once it is explained. Sometimes the information doesn’t even pertain to the patient. I think I’ve shared this before, but several years ago a client was declined after a review of medical records due to not admitting a history of heart disease.
After calling the client with the news, she was adamant that she had never had any kind of cardiac event and had never consulted a doctor for any potentially cardiac related symptoms. After speaking to the underwriter, he said that the records clearly mentioned the word angioplasty. He gave me the page number and said the word was circled. I passed this on to the client who pursued a review of her medical records. She and her doctor were finally able to nail down the reason for the note. It seems she had a friend who was going to undergo an angioplasty and she had asked the doctor to explain what it was. As he explained, he doodled and subsequently left the word angioplasty in the records of someone who didn’t even know what it was.
Doctors are notorious for doodling or writing down some thought with no further explanation. And generally I become the messenger, being shot on sight because the underwriter is asking for clarification. It means homework for the potential insured and while some don’t mind, most feel as though they are being asked to do the work that someone else should do.
This came to a head with one client the other day when I called and asked if she could get a letter from her doctor explaining why he had circled a certain condition on two separate visits, something not done on any other visits. Without clarification the company was willing to offer coverage at a higher rate than originally quoted. With an explanation we could likely have had a policy issued at the same rates originally quoted. She refused. She said it was obvious to her and if it wasn’t obvious to the insurance company, then they were just trying to gouge her for additional premium. The circled condition with no explanation needed clarification. She shot the messenger and withdrew her application.
Bottom line. Underwriters have to try to make sense of your medical records. If you think that’s easy, you’ve either never been sick or never looked in your medical records. If an agent comes back to you asking for clarification, it’s not because the insurance company wants to raise the premium, but rather because they are looking for an explanation that would help them avoid that.
August 14th, 2008
The question of return of premium term insurance has been viewed from a lot of angles in this forum, but today I think we need to switch our focus from the end of the term to the midpoint. There is, I believe, an assumption out there that a return of premium policy will return the premiums paid in no matter when you cancel it.
This assumption falls right into the same trap as most life insurance, the industry secret for why life insurance rates are so low. The reason rates are so low and the reason you need to truly think through the purchase of ROP term is that most life insurance policies don’t stay in force. Think about it. If all life insurance policies stayed in force, whether term to the end of the term (or converted), universal life or whole life, rates would have to go up to cover the increased company exposure to mortality.
The truth is that for a large percentage of life insurance purchasers, the whole idea kind of loses its’ luster when you’ve been paying for 5 or 10 years and nothing is happening. Especially for those who are still in great health, there is a tendency to start questioning the expense. My personal opinion is that those who fall into that mindset are selfish and need to simply get a grip (again), on why the life insurance is there and that the right thing to do is to stay insured.
Back to the ROP though. I was speaking a person today who was considering decreasing the amount of coverage they need in order to afford the extra expense of a return of premium. Their thought was to convert the policy in 15 years, halfway into the 30 year ROP and use the returned premium to help fund the conversion.
Life insurance companies build their products, prices and business models knowing that most people will cancel their life insurance before the end. I pointed out that in the early stages of the ROP term policy most companies don’t offer any return. It usually starts building slowly after the 6th year and usually doesn’t reach even 50% until the 25th year of a 30 year term. I think this illustration, return-of-premium-illustrated, will drive home what I’m talking about.
Bottom line. The only way to get 100% of your premiums returned is to keep the policy to the end. Considering the tax free status of the return, if you know you will keep it until you die or to the end of the term, the return can be ok especially given today’s economy. If you’re not sure, steer clear.
August 14th, 2008
It’s been a few weeks, but I wanted to bring an update on my Mom’s breast cancer process. As I’ve mentioned before, this isn’t really about my Mom, as she is past her life insurance buying days, but rather about the process and how her scenario might impact the quest for life insurance for a younger woman.
After a full body and bone scan it was determined that if any of the breast cancer had left the right breast and adjacent lymph nodes, it was an undetectable amount. This is good news knowing that it hasn’t traveled and set up shop (metastasized) somewhere else. This is not to say that cells haven’t migrated, but at this point as she starts treatment if there are cells that have migrated, they are random as opposed to organized.
Her oncologist has recommended 6 weeks of radiation therapy that will be aimed at the right breast and adjacent lymph nodes. She is about a week into that treatment and suffering no ill effects.
Because of her age, 84, the oncologist has put her on oral medication, Femara, rather than attempting to do a course of chemotherapy. Someone younger might do chemotherapy, but the oral medication at her age is considered adequate to hold any stray cancer cells at bay.
Life insurance underwriting in this case would be looking favorably at the apparent lack of metastasis. A woman would likely be able to start getting offers on life insurance about a year post treatment. The further out from the treatment with no recurrence, the better the offers will get.
Bottom line. With early detection methods continuing to improve and treatment options getting better all the time, early stage breast cancer is ultimately going to be much more insurable than it has in the past.
August 13th, 2008
I just held an impromptu contest in my head to determine what group of people have the largest number of life insurance quotes asked for compared to actual policies applied for.
The results are in and I’m not going to try to make any broad social implication out of the fact that the smoking crowd won the contest. They seem to have this need to know how much life insurance will cost coupled with a real lack of enthusiasm for purchasing when they find out that the mortality experience from smoking drives their price up to 2 to 3 times what they would pay if they don’t smoke.
Never mind that even at the higher rates, most people who smoke are spending more on their habit than they are willing to consider spending on protecting their families future. I am down playing somewhat how strongly I really feel about this issue when I say that if I were King, I would require all of my subjects who smoke and have families to carry life insurance. If they refused, their cigarette money would be garnished from their paychecks to forcibly buy the life insurance. If they tried to game the system I would have their heads chopped off and their families would be awarded the benefits from their life insurance anyway.
Bottom line. For all of you who smoke and have done the responsible thing anyway, I salute you. If you smoke and are still avoiding life insurance, off with your head.
August 7th, 2008
Gotta love that show Mythbusters. If I ever leave the life insurance business I could see signing on as a helper. So, let’s bust a myth about life insurance. The myth: You have to get your term insurance from a company that is highly rated. If you don’t they might go out of business and you will lose your life insurance!
First of all let’s address the rating issue. Most of the companies that you will ever be exposed to will be A rated or better by AM Best. This means they will be in the top three tiers of a 15 tier rating system. The truth is that when you get down into B and lower rated companies, the Swamp Life Of Vermont genre, you would actually be hard pressed to find one. They don’t have the competitive rates and they generally don’t have much in the way of advertising money.
So, assuming you are dealing with companies that are rated A-Excellent or better, they are financially sound and usually have a valuable block of business. Because of this, while the company may choose to get out of the business, there are hordes of other companies that will be more than happy to purchase that block of business. And the great news for you as a consumer is that by law, the purchasing company has to honor the contractual guarantees of the original writing company.
In other words it’s not unlike when your mortgage gets sold. The check may go to someone else, but the payment amount, loan length and interest rate remain the same. With the insurance, the death benefit, term length and guaranteed level premium remain the same.
Many of you have had the chance to participate in this process over the past 10 years. With each move on the chess board the group of clients has grown. Many of you may have had insurance with Federal Kemper. They were purchased by Zurich Life and became Zurich Kemper. Zurich soon decided there was some redundancy to that so they folded Zurich Kemper into Zurich Life. Chase Bank liked the looks of that block of business and purchased the whole thing. Then Protective Life came along and bought Chase Life from Chase Bank. And, if you had a long enough term to survive all of that, you now have a Protective policy with all the same benefits and guarantees you started with.
Bottom line. Steer clear of anything being sold in alleys and you should be OK. I’m not suggesting you ignore the ratings, but given that you have insurance with a reputable company, don’t lose any sleep over whether the insurance will be around when your family needs it.
August 7th, 2008
Assuming survival, which is a pretty good bet with prostate cancer, a life insurance underwriter uses a set of criteria to evaluate the mortality risk of any given cancer survivor. It is this assessed risk that is translated into a rate per thousand dollars worth of insurance that a person must pay to be covered.
Prostate cancer is the second most prevalent cancer in men with nearly 250,000 men being diagnosed each year. The good news is that only about 1 in 37 men actually die from the cancer. Since most prostate cancer is confined to the prostate gland, and the most common treatment is removal of the gland, the survival rate is very high.
Life insurance underwriters look at prostate cancer from a couple of perspectives, and each of those is given a different spin depending on treatment options chosen. Optimally, a man should be able to get standard or better rates in most cases a year after successful treatment.
Underwriters first look at the PSA (prostate specific antigen) at the time of diagnosis. It varies from company to company, but for the best underwriting the PSA at the time of diagnosis should be 10 or under. Under 4 is considered normal. A PSA higher than 10 usually indicates either a faster growing cancer or someone who has not actively monitored their PSA.
The other factor that is critical is the grade of the cancer as indicated by the Gleason score. For the best consideration the pathology report should indicate a grade of no more than 6. I’ve compared the Gleason grade to the Richter scale in the past. A Gleason grade of 6 is very insurable in most cases, a 7 only at very high rates and an 8 or above usually not at all.
So, assuming a diagnosis level PSA of less than 10 and a Gleason 6, the last factor underwriters look at is the post treatment PSA. With a radical prostatectomy, the surgical removal of the prostate, a PSA of 0 is the expected result. If after one year the PSA is still at 0, standard or better rates should be available. The other primary treatment is radioactive seed implant. Rather than removing the prostate, one or more radioactive seeds are implanted in the prostate effectively killing the cancer cells. With this treatment, since the prostate is still there, a PSA that has been at .5 or lower for at least a year is the underwriting goal.
Bottom line. Prostate cancer is highly survivable and is also very insurable in most cases. If you have had prostate cancer and are looking for life insurance, seek out a knowledgeable independent agent and come armed with the knowledge of the different factors that will be scrutinized.
August 6th, 2008
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