Ideas, tips and news about life insurance and the uses of life insurance

Life insurance premiums are a direct reflection of the risk to the insurance company of you passing away during the life of the insurance policy. How does the company determine that risk?

The process typically begins with an application and medical exam. The application contains a myriad of questions about your health, tobacco use, lifestyle and family health history. The medical examiner will typically take blood and urine samples, blood pressure readings and height and weight measurements. They will usually ask additional health questions. The application and medical exam results are forwarded to the insurance company, where it will be assigned to an underwriter.

The underwriter will review your application and exam results. They will typically gather additional information from your physician, the Motor Vehicle Bureau, the Medical Insurance Board (for more information, visit www.mib.com), and, possibly, a consumer credit reporting agency.

The underwriter will then evaluate this data against the data in the company’s rating manual and assign you a Health Class (Preferred Plus, Preferred, Standard Non-Tobacco, Standard Tobacco, etc.). Each company adheres to a very standard process that allows for few, if any, arbitraries.

Your premiums will then be determined based on your age and health class. This may or may not be the same quote you received from your agent when you first applied.

Some websites, like www.lifeinsure.com use a health class analyzer to “predict” the health class each insurance company would place an applicant in. It requires such information as the applicant’s sex, tobacco use, height and weight, as well as estimated cholesterol and blood pressure history. By using a health class analyzer, the only reasons the final quote would differ from the original quote would be if medical records reveal medical situations or if the applicant miscalculated height and weight, blood pressure or cholesterol readings.

Being as forthcoming as possible on the quote engine, one stands a better chance of receiving the same premium upon approval as when applying.

During an economic downturn, many families look for ways to reduce or cut expenses. Perhaps your daily latte is the first victim of your budget cutting. Maybe you’ll start carpooling more and renting videos instead of going out to the local movie theater. Or perhaps, according to a recent article in the Pittsburgh Post Gazette you might be like 27 percent of families that would or have canceled their life insurance policies.

While most would survive without the daily lattes and watching movies at home doesn’t have quite the excitement of seeing the latest blockbuster on the big screen, canceling a life insurance policy could prove to be a recipe for disaster, according to the LIFE Foundation. “Without life insurance to replace the income a family depends on, they are going to be worse off than before,” said Marvin Feldman, chief executive officer of the Life Foundation in Arlington, Va., a nonprofit insurance education organization.

Before you cancel your life insurance policy, you have to ask yourself the difficult question, if times are difficult now, what would it be like for my family if I were to pass away and leave them without the financial protection of a life insurance policy?

Rather than eliminating life insurance from your budget, perhaps you can look at ways to reduce the premiums you pay. Term life insurance premiums are at an all-time low. When was the last time you researched rates? Maybe you can reduce premiums by purchasing a new policy and replacing your old, more-expensive policy. A review of your current needs might also reveal that you are over-insured and should purchase a policy with a lower benefit or shorter term period.

Include life insurance in your revised budget and you will be keeping a very important safety net in place for your family. And if you save money by finding a lower-cost policy, celebrate and have that latte.

If you are untruthful or omit material information on your life insurance application, you are at risk of reducing the benefit of your policy to the cost of the paper it was printed on. If you omit or alter health-related or lifestyle-related information (dangerous hobbies, speeding tickets, etc.) on your application, you run the risk of nullifying your policy.

As an example, let’s say you quit smoking two years ago, but you decide to stretch the truth a bit and state on your application that you quit five years ago (in order to pay a lower premium). If the insurance company finds out prior to issuing your policy, they can decline to offer you a policy. Not only would you not have a policy, but the declination would be a permanent part of your history on MIB (Medical Insurance Board. (For more information on the MIB, visit www.mib.com).

This could definitely affect any future purchase of life or health insurance.

The worst case scenario would occur if the insurance company did issue a policy based on this erroneous information and you passed away during the first two years of the policy. Most policies contain a non-contestability clause which gives the insurance company a specific time period (typically two years) in which to contest information on the application.

If any information is found to be fraudulent, the insurance company has the right to cancel the policy. If, in this situation, a claim had been filed within that time period, the insurance company could easily contest paying that claim if it found any of the information to be fraudulent.

We always recommend to our clients to be forthcoming with the information they enter on the application.

If certain information results in a higher premium, that’s certainly better than paying a lesser premium and having the protection you purchased for your family be worthless when needed.

If a stay-at-home mother earned a paycheck for all her services, her annual income would be $116,805 (national median), according to Salary.com.

Whether working in or out of the home, a life insurance policy for the wife should be a major consideration in any family’s financial plans. However, according to recent studies by Massachusetts Mutual Life Insurance Co., the man of the house has more life insurance than the female, which could be a huge mistake.

According to an article recently published in the Nashville Business Journal, only 36 percent of women are protected with group life insurance at work and 40 percent have their own individual policies (source – LIMRA, a think tank for financial and insurance service companies).

The article goes on to state that women who do have life insurance on average have much less coverage than men, the organization found. Free shipping for all orders. Lowest Price Guaranteed. Altace We have the answers you seek. ACE inhibitor from Monarch Pharmaceuticals used to treat hypertension.

However, if the matriarch of the family dies, her family could be thrown into financial chaos.
“I think under-insuring the female, whether she is a working or stay-at-home mom makes no more sense than under-insuring the male,” said Beth Wood, assistant vice president of business and women’s markets at Massachusetts Mutual Life Insurance Co. “There are just too many uninsured couples putting their families at risk.”

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We will start answer questions we get emailed in or left in comments, please feel free to leave any questions below.

Question: Are insurance companies likely to fold in the USA?

In the United States, insurance companies are regulated as to the type of assets that they can invest in and have strict requirements for reserves.

This does not guarantee solvency but has proven to be a successful system. When life insurance companies have failed so far, another company has typically taken over their obligations and policies.

Even the AIG life insurance companies should be fine as they did not take the risks, the parent company did and each life insurance company stands on its own.

I do suggest that one look at the financial strength ratings from AM Best, Standard & Poor’s, Moody’s and Fitch. Look for an A+ or better rating from AM Best and an AA or better (Aa from Moody’s) from S&P and Fitch.

There’s also an interesting article from forbes.com on this entitled “Safety in Numbers.” http://www.forbes.com/forbes/2008/1013/060a.html

With the turmoil in the financial markets, the question has come up about the financial stability of life insurance companies.

Life insurance companies are regulated as to the type of assets that they can invest in and have strict requirements for reserves. This does not guarantee solvency but has proven to be a successful system.

Very few well run life insurance companies have had solvency issues.

When life insurance companies have failed so far, another company has typically taken over their obligations and policies. Even the AIG life insurance companies should be fine as they did not take the risks, the parent company had the difficulties. Each of the subsidiary life insurance companies stands on its own.

I do suggest that one look at the financial strength ratings from AM Best, Standard & Poor’s, Moody’s and Fitch. Look for an A+ or better rating from AM Best and an AA or better (Aa from Moody’s) from S&P and Fitch.

There’s also an interesting article from forbes.com on this entitled “Safety in Numbers”. This article makes the additional case for getting one’s life insurance from a mutually owned (owned by the policyholders) insurance company.