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

Have you reviewed your life insurance policy recently? I recommend doing so annually for the following reasons:

• Your needs may have changed since you purchased the policy. Maybe your income has increased and you need to supplement your current policy with another one to bring the benefit more in line with your new income.
• Perhaps you have changed jobs or careers (not unlikely in the current economic environment) and you’ve lost your group coverage.
• Your health may have improved since you purchased your policy. If you quit using tobacco, you might be eligible for non-tobacco rates. If you’ve lost weight or lowered your cholesterol or blood pressure (even with medications), you might be in an improved health class, resulting in lower premiums.
• Your new age might make you eligible for less stringent underwriting guidelines. At older ages, insurance underwriters expect your blood pressure and cholesterol to be slightly higher (varies by carrier) and might bump you up to a better health class. Another very good example of this happened to me today when looking at quotes for a new policy for me. As I recently turned 60, one insurance company might now allow the best health class for me, something I have never had due to my father passing away from a heart attack prior to age 60.

If your insurance agent doesn’t contact you annually for a policy review, call him/her and tell them you want to review your current policy to see if it still meets your needs. If you need additional coverage, you can either look at adding a new policy to supplement your current one, or in some cases, replace it altogether.

Okay, you are applying for a life insurance policy and you have been told the insurance company requires a medical exam (paid for by the insurance company). The exam typically consists of blood and urine samples, blood pressure readings, height and weight measurement and a medical questionnaire. The health class the insurance company assigns you will determine your rates. Information from the medical exam will be used by the insurance company to help determine your health class, so it is important that you get the best results possible.

The following tips are to help you attain the most favorable and accurate exam results possible:

• If you can, it’s best to fast for a period of at least eight hours prior to the exam. This will result in more accurate blood test results. Early morning appointments may be appropriate.
• If you must eat prior to the exam, no heavy meals and little or no caffeine on the morning of the exam. Decaffeinated coffee and a light breakfast would be best.
• Stay off salt for 3-4 days prior to exam. This may have a beneficial effect on your blood pressure.
• No alcohol for 24 hours prior to the exam, as alcohol tends to elevate blood pressure for 12 -24 hours.
• Get a good night’s rest before the examination.
• If you smoke, don’t smoke within 30 minutes of the exam. Smoking tends to constrict artery walls and elevate blood pressure.
• If you have an acute illness (i.e. the flu), you should consider rescheduling the exam as some acute illnesses affect the urine and blood tests.
• (For females) You should tell the examiner if you have your menses as this affects the urine and a notation can be put on the lab slip.

I hope this helps.

If you’re like me (e.i. male, married), you’re probably going through the “Valentine’s Day is coming fast and I have no idea what to get for my wife” syndrome. I was in the local card store yesterday and I was the only male looking at Valentine’s cards. Most men will probably wait until the last minute and will pick up any remaining card with the slightest resemblance to the desired sentiment. If it says, “For My Wife” on the cover, grab it before the gentleman standing next to you does. The last day in the card section can be brutal.

Okay, the card has been secured and now it’s gift time. What to buy?  She doesn’t like flowers because she doesn’t like the idea of killing flowers and considers it a waste of money. If you buy her a box of chocolates, she might accuse you of enabling her addiction. If you’re thinking of sexy lingerie, forget about it. The last three undergarments with hearts you bought for her are still sitting (with the tags intact) in the bottom of her drawer.

Here’s a novel idea. What’s one of the most selfless acts can you do for your wife that shows her you love her? If you thought about cleaning the house for her or washing the dinner dishes more often, you get a few points, but neither would have the same impact as you saying to your wife, “Honey, I love you more than you know and if anything should ever happened to me, I wouldn’t want you to be saddled with any financial burdens.” Then, you pull out the card and you hand it to her. When she opens it, she finds a new life insurance policy you recently purchased.

Not very romantic, you say? I guarantee you will get a great reaction from her (it will definitely be much better than her reaction to the blender you bought her last year). Serve it up at a candlelight dinner with her favorite bottle of wine and you might find out this was one of the most romantic gifts you ever gave her.

When you apply for life insurance, the insurance company wants to know what the risk is of you dying during the period of your policy. The underwriter will take into account various health and lifestyle factors to determine your health class, which will determine the premiums you have to pay for your insurance.

The risk classes for non-tobacco users are (different insurance companies may use different terms) Preferred Plus, Preferred, Standard Plus, Standard and Sub-Standard levels. Each insurance carrier uses actuarial tables to determine your risk and it’s fairly cut and dry. If the cholesterol level for Preferred Plus is 220 and your cholesterol is 222, they would probably place you in the Preferred class. There are times when we can debate something like this with an underwriter (if everything else is perfect), but for the most part, the underwriter will stick to their underwriting rules.

I have had many clients who have experienced the cholesterol example above, or had close calls with other risk factors (weight, blood pressure, liver function tests, etc.). In most cases, they have been bumped to the next lower health class. Not many people are happy about being demoted from perfect health and I am usually the first to hear about such displeasure.

When this happens, I often hear comments, such as “my doctor says I am perfectly healthy.” That may very well be true, but understand that the insurance underwriter is basically looking at how you fit into the insurance company’s well-defined risk matrix. You might, as your physician told you, be extremely healthy overall, but if you don’t fit exactly into this matrix, you might not be approved at the health class you thought you deserved. In such a case, the underwriter and your physician might both be right.

If you’re like most people, reading an insurance policy can be downright confusing. It’s not the easiest read in the world for me and I’m in the business. Fortunately, all policies include definitions of the terms. Unfortunately, the definitions are often written in “insurance speak,” so now you are left with terms and definitions you don’t understand.

In an effort to assist you in understanding your policy, I offer the following simple definitions:

• Death Benefit – The amount payable to your beneficiary upon your death.
• Beneficiary – the person or persons who will receive the death benefit upon your death. You can name primary and secondary (or contingent) beneficiaries.
• Secondary Beneficiary – the person who receives the death benefit if the primary beneficiary is no longer alive.
• Premiums – the amount of money payable to the insurance company on a regular basis.
• Lapse – the cancellation of your policy when premiums have not been paid.
• Term Insurance – insurance for a specified period of time.
• Permanent Insurance -“ insurance that is as guaranteed to pay a claim as death is to happen.
• Health Class – a classification system used by insurance companies to determine the risk you present to the company.- The better the health, the lesser the risk.
• Insured Person – the person whose life the policy covers.
• Policy Owner – the person who owns the policy.- The owner and the insured are not always the same person.

I hope this helps.

If you have shopped for or own a term life insurance policy, you might have heard the term Conversion Policy. Simply put, most term policies have a provision whereby, during the term of the policy, you can convert from a term policy to a permanent policy (universal or whole life).

Understanding the Benefits

• Permanent life insurance policies offer premiums that remain the same throughout your lifetime (as opposed to term insurance, which increases at the end of each term).
• A permanent life insurance policy may also build cash value, which may be withdrawn or borrowed against during your lifetime.
• By converting a term policy to a permanent policy, you can lock in your health class for the rest of your life while you are healthy.
• The conversion policy will be underwritten at your age at the time of conversion, so the earlier you convert, the less expensive the premiums will be.

While I don’t believe conversion is an option for all term policy owners, it is definitely something many should be reviewing with their life insurance advisor from time to time.

In insurance a rider is a supplemental agreement attached to and made part of a policy, usually to expand the coverage of the policy. Typically these riders require additional premium to be paid
These are the most common riders that can be attached to a life insurance policy:

Accelerated Death Benefit Rider

This rider allows the insured person to use (a percentage of) the death benefit if he or she is diagnosed with a terminal illness that carries a prognosis of death within a year. If benefits are paid in this manner, the death benefit will be reduced by the amount of accelerated death benefit paid. Some insurance companies charge no extra premium for this rider.

Please note that receipt of benefits received in this manner can have a negative impact on any potential Medicaid or Social Security benefits.

Accidental Death Rider

This rider pays out an additional amount of death benefit due to an accident which was the direct cause of death. Normally, the additional benefit paid out upon death due to an accident is equivalent to the face amount of the original policy, which doubles the benefit. This is often called double indemnity when the additional benefit equals the face of the policy.

Child Rider

This rider provides a death benefit for children up to a specified age. Coverage can include multiple children with a maximum benefit for each (up to $20,000). Once the child attains the maximum age of the rider, the term plan can typically be converted to a permanent policy (usually up to five times the original face amount).

Waiver of Premium Rider

With this rider, the future premiums are waived if the insured becomes permanently disabled for a specified period of time (typically six months). While disabled, the insured is exempt from making premium payments. The definition of “totally disabled” can vary from one insurance company to another.

Conclusion

Riders allow you to modify your life insurance policy according to your needs. When purchasing a new policy, discuss these options with your advisor to see if they fit your needs. Adding riders can significantly add to the cost of your policy, so it becomes an economic choice as well.

We often receive calls from distraught spouses attempting to find out information about their recently deceased spouse’s life insurance policy. Quite often, in searching for information, they find us on the Internet and call us, hoping that we are the insurance company they are looking for (we’re usually not, as we are an insurance brokerage).

When it’s time to collect the proceeds from a life insurance policy, most people are not in a state of mind conducive to this kind of exploration. Being prepared before the event can save your family from compounding their grief with aggravation and frustration. Here is some great advice on how to organize your life insurance information to prevent this from occurring (from the Insurance Information Institute’s website – www.iii.org):

For each individual life insurance policy on your life, you should record the following information:

• The full name of the life insurance company that issued the policy
• The city and state of the home office of the company that issued the policy
• The name and U.S. headquarters of the group, if the issuing company belongs to a group of companies
• The policy number
• The date the policy was issued
• The amount of the death benefit
• The name and address of the agent/broker who sold you the policy
• The type of policy (e.g., term, whole life, etc.)
• The location of the original life insurance policy

You might have life insurance automatically from your employer. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from your union or trade association or other group you belong to (such as a college alumni association or an automobile club). For each of these life insurance benefits, you should record the following information:

• The name of the employer or group that sponsors the insurance
• The office or person to contact when it’s time to file a claim
• The certificate number (comparable to the policy number under an individual policy)
• The date the insurance was started
• The amount of the death benefit

You’ve protected your family financially by purchasing a life insurance policy. You can also protect them from the pain and suffering from having to try to find out the answers to these questions in the event of your death.

I frequently receive calls from people interested in taking out a life insurance policy on a friend, parent or distant relative. The first question I typically ask is, ‘what is your insurable interest,” as this is a question the insurance companies will always want an answer to. This can be a confusing term to some, so I am going to briefly discuss it here.

According to the Insurance Dictionary, Life & Health Edition, Insurable Interest is the interest arising when one person has a reasonable expectation of benefiting from the continuance of another person’s life or of suffering a loss at his or her death.

In life insurance, a person generally is considered to have an unlimited insurable interest in himself or herself. However, a person must have an insurable interest in another person at the time of application in order to insure the other’s life. Where no insurable interest exists, policies obtained by one person on the life of another are not enforceable by law since they are considered contrary to the public policy.

Who has an insurable interest? A spouse would certainly qualify, as would dependent children. A business partner would have an insurable interest, as would a business owner taking out a policy on a key employee. The test is would you suffer a financial loss if the insured person were to die? If the answer is yes, then there is most probably an insurable interest.

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.