Life insurance underwriters have a tough job, determining mortality risk based on all the different health factors, assigning rates that are fair to the customer and the company. But sometimes they don’t want to deal with something, so they jumble it up and throw it back at us agents.
Before I get vague, let me just tell you some realities about life insurance companies and beneficiary designations. The companies want to be sure there is financial justification for a policy. That is to say that they want to know that the insurance they are providing is there to take care of a financial loss, and not for the purpose of creating wealth where there isn’t any. They also want to know they are not opening themselves up to adverse selection, offering insurance in a dangerous situation. I don’t have a problem with that.
Let me offer a few examples of how insurance companies look at financial justification. If there is a husband and a wife, they simply justify the amount of insurance based on a multiple of the husband’s income. If the wife is employed, insurance on her is figured the same way. If the wife or the husband is a homemaker, unless there is additional justification, they can get half as much as the employed spouse. By the way, insurance companies don’t ask how long a couple has been married, how they’re getting along, or if it is an abusive relationship.
Next, let’s say we have a man and a woman living together.Â If we put the woman down as girlfriend or domestic partner, some insurance companies will want to know what common debt they have and generally question the validity of insurance, even when a couple has been together for 20 years. If they happen to be engaged and have only been together two months, no questions. Insurance companies somehow feel that the financial justification is solid if there is an engagement, knowing full well that not all engagements make it to marriage and marriage has a survival rate that is far worse than most types of cancer.
Ok, let’s step off the deep end. Two women living together who have shared a household for 10, 15, 20 years. They are domestic partners. Insurance companies want to know what common debt they have, what percentages each of them pays, what the beneficiary’s occupation is and what her income is. They also want to know if the beneficiary carries an equal amount of insurance in reverse. They question it to death even though they know the answer should simply be replacement of income. If one dies, the common household will be minus the income from the deceased.
So why am I fussing? Life insurance companies are discriminating, which, actually, they can do. It’s OK for them to give better rates to someone that is healthy as opposed to someone who is not healthy. But they are discriminating against homosexual couples and using the guise of financial justification. Again, legally they can discriminate, but they won’t come out with a company stance that they don’t want the business, or that the maximum they will allow for domestic partners, is say $250,000. They leave it up to agents to dig into their private lives and discuss why they have to meet threshholds that no one else does.
So, am I pro-homosexual? No, I really am not. Morally and spiritually I don’t agree with it. I am also morally and spiritually against divorce, living together outside of marriage, people who lie and people who own businesses that are immoral. So, should there be a sin question on life insurance applications? Should anyone who is sinning or plans to sin in the next three years be excluded from buying life insurance?
So, back to financial justification.Â “Insurance companies want to know that the insurance they are providing is there to take care of a financial loss, and not for the purpose of creating wealth where there isn’t any.” So, just because a couple is same sex, is it adverse selection. I don’t think so. Is there financial justification? Probably as much as with most couples.
Bottom line. Some days insurance companies just tick me off. In case you can’t tell, this would be one of those.