Sheltering Assets With Life Insurance?

Using the tax free death benefit of life insurance for estate protection sure isn’t a new idea, but consider the challenge of a widow that has too much income, not as rare as I thought. I am working with a woman in her early 70’s, a retired company CEO, who has a great retirement income from her 401k and social security. Everything is paid for and her excess cash is held in investments that periodically generate even more taxable income. What she has decided to do, since she doesn’t need the investment money, or at least not all of it, is to purchase single premium life insurance and put the money into a tax free pre-purchased benefit for her heirs.

Her challenge is that she was diagnosed with type 1 diabetes at age 40 and even though she is a poster grandmother for how to control diabetes, she has been declined by a few of the less creative life insurance companies out there. She has been controlling her type 1 for over 30 years and is probably the best example I’ve seen of the kind of compliance and control life insurance underwriters want to see in any health issue. She took the situation seriously from the start, found a daily routine that worked and has been compliant with that routine all this time which has kept her A1c at or under 7 for over 30 years. She hasn’t had any collateral health issues such as proteinuria, kidney issues or retinopathy. She just simply controls it by getting up every day and deciding she is in charge.

I’ve not run into a l0t of type 1 diabetes life insurance clients in their 70’s, so, given her previous declines I was interested to see how the life insurance underwriters I use would react when I shopped it. We’ve had amazing good fortune finding good life insurance rates with well controlled adult onset type 1 diabetes in younger clients, and with juvenile onset type 1 in adults, again well controlled younger clients. Compliance and control. Compliance and control.

So far every company I represent has offered to approve the policy, just waiting a few more to see who wants this client’s life insurance business the most. I know I sound like an 8 year old broken record but I’ve beat this drum since I started the blog. Life insurance companies are not all created equal. Most life insurance, and I mean more than 99%, don’t want to accept risk that isn’t preferred or better, or standard and priced or guaranteed so everything is completely in favor of the company. Yes, I know that all life insurance companies underwrite in their own favor, but when one company declines and another company offers standard or better, understand that your chances of finding the right company as an impaired risk consumer are not good without the right agent. Especially when all of the life insurance companies whose names are most recognizable fall into that 99% that don’t want your impaired risk business bad enough to treat you fairly.

Bottom line. Type 1 diabetes doesn’t have to be a show stopper for adults wanting life insurance. Compliance and control are the key. And using paid up life insurance to shelter money for your heirs? It appears that a worst case for this client will be a death benefit that is double what she pays in. If you have questions or have run into the wrong company with your well controlled type 1 diabetes, call or email me directly. My name is Ed Hinerman. Let’s talk.