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

When people call our office for life insurance quotes, we typically do a quick health assessment to guesstimate the health class of the prospective client.  Even though a quote is subject to change upon the completion of underwriting, we attempt to base the quote on a few underwriting guidelines – height/weight ratio, family history of heart disease or cancer, cholesterol, blood pressure and driving record, medications and any health history of note.  The more information we have, the closer our quote will be to the final premium issued by the insurance company at the completion of their underwriting process.

Most of the time, our prospective clients give us the information without hesitation.  Sometimes, it is a little rougher, such as this recent conversation I had with a gentleman looking for a quote for life insurance for his father.  I will call this person “John” to protect his identity.

Me:  How old is your father?

John:  He’s 52.

Me:  How is his health (I normally start with a general, non-intrusive question)?

John:  He’s in excellent health…strong as a bull.

Me:  Does he take any medications?

John:  Yes

Me:  What does he take?

John:  Let me go get the bag (rustling in the background).  Okay, he is on Insulin.

Me:  So, he has Diabetes Type 1?

John:  Yes he does.

Me:  What other medications is he taking?

John:  He is on pain-killers.

Me:  What is he taking pain-killers for?

John:  He’s still in pain from when he had both legs amputated last month.

Me:  As a result of his diabetes?

John:  Yes.

Me:  What’s his height and weight?

John:  Before the amputations, he was about 6′ 5″ but now he’s probably 6′ 0.”

All this from someone who claimed his father was in excellent health.  My intention here is not to poke fun at John, but to demonstrate what not to do when discussing a health profile with your insurance agent.

If you Google the terms life insurance or life insurance quotes, you will have literally hundreds, if not thousands of websites to choose from.  How do you know which website is going to give you the best quotes?  Here are a few tips for getting the best term life insurance quotes on the Internet:

• The website does not need your name, address, phone number or email address to give you a quote.  They are collecting this information to either sell your information as a sales lead to insurance agents who are willing to pay for the information or to contact you to attempt to sell you a policy.  Some websites will sell your information to multiple websites, resulting in numerous phone calls to you.

• Regarding lead-generating sites mentioned above, you can often tell these websites by the multiple companies listed on their home pages.  They will not be involved with finding you the best rate.  Instead, they will list several companies on their website and charge each website a fee for all the times someone clicks on that name and redirects to their site.

• If the website doesn’t require any health information, the quotes will most probably be lower than you will pay.  Any quote you receive is not necessarily the price you will pay for the insurance – that will be determined during the underwriting process, which will take into account your medical history and medical exam.  The most accurate quotes will be based on multiple health factors:  height/weight, tobacco use, family history, blood pressure, cholesterol and driving record, to name a few.

• Sometimes an insurance company will give you a quote on their website.  However, as most insurance companies use agents and brokers to sell their products, your information will most probably be passed on to one or more agents.  The rates are not less expensive if accessed through the companies’ sites directly.  If you want to compare these rates to other companies, you will need to continue shopping.  This can be time-consuming.

The best websites to visit for quotes are those that provide quotes from multiple companies (without having to enter your personal information), base the quotes on a basic health profile and, if you want to apply for a policy, act on your behalf as a broker to assist you in purchasing the policy.  There are only handful of life insurance websites (including this one) that fit this profile.

Your decision to purchase a life insurance policy is a good one.  Make the best of it by following these tips.

The Fourth of July weekend is traditionally a weekend of fun, family, fireworks and, unfortunately, a higher number of  fatalities than any other weekend period.   As a life insurance agent, I prefer my clients to outlive their policies.  Therefore, I offer these three Fourth of July safety tips:

• Don’t drink and drive.  This should go without saying, but the National Highway Traffic Safety Administration reported in 2008 that 43% of the 491 traffic fatalities were alcohol-related.

• Drive defensively – 4th of July weekend has the highest incidence of auto accidents than any other weekend of the year.  You might be an excellent driver who is paying attention to the road, but the person in the car next to you might have had one too many beers at the barbecue.

• Leave the fireworks to the professionals.  The U.S. Consumer Product Safety Commission (CPSC) reported 7 fireworks-related deaths in 2008.  As there are thousands of injuries due to fireworks reported each year, 7 deaths may sound like a low number.  Tell that to the 7 surviving families.

Celebrate responsibly our founding fathers’ dream of the freedoms of  life, liberty and the pursuit of happiness and take a moment to reflect upon what they endured to give us those freedoms.

This is a question we are asked quite often, typically when we are doing  annual policy reviews with our clients.  Unfortunately, the answer is always “no, the term is set when the policy is issued, after which time it cannot be extended.”

When discussing a new term life insurance policy with a client, especially when they have received life insurance quotes on our website, we always show the premiums for various term lengths, from 10 to 30 years.  In most cases, unless there is a specific need for a short term period (e.g. 10 years to cover a short term loan), we will recommend the longest term available (30 years for most age groups).

We realize there are budgetary concerns, especially in the current economic climates, but we will usually show a client that it will probably be less expensive in the long run to go with a longer term.  Additionally, the rates can be significantly higher after a shorter term if the client’s health class changes due to deteriorated health.

My advice now is, as it has always been, if you are purchasing term life insurance, purchase a policy with the longest term available for your age.

I sometimes have clients who are looking to pay all the premiums of a cash-value type policy (whole life, universal life, etc.) up front in a single lump-sum premium.  While I don’t always agree with this strategy, in some cases, I don’t believe it’s a bad idea.

One of the benefits of a cash-value policy is the favorable tax treatment given to cash withdrawals and policy loans.  In many cases, one can access the cash portion of the policy on a tax-free basis (please ask your tax professional for the specific details).  However, if the premium is paid too quickly (as in one lump sum), these advantages disappear.

Changes to the Tax Laws in 1988 resulted in insurance policies that were funded too quickly (generally one lump-sum payment) being classified as modified endowment contracts (MECs), eliminating any of the tax advantages of a cash-value policy.

I have recently recommend a few clients to purchase universal life insurance policies with Lapse Protection (or secondary guarantee) with a single premium.  As we typically don’t recommend this type of policy for cash-value growth, turning this policy into a modified endowment contract will not have a negative effect on the client.  There is one positive effect, however.  As one can lose the lapse protection if the premiums aren’t paid on time, paying with a single premium will essentially guarantee that the lapse protection will stay in force, as will the guaranteed death benefit of the policy.

If  you are looking into one of these policies, find out how much the single premium would be.  It might just make sense for you.

Consumption of alcohol is common in American society.  For the majority of drinkers of alcoholic beverages, there is little risk to health or longevity.  It is only when alcohol consumption becomes excessive does it have any effect on life insurance underwriting.

There are many studies suggesting that alcoholism is genetic, while other reports suggest social causes.  This is a discussion for another venue.  My intent is merely to relay the effect excessive alcohol consumption has on life insurance underwriting.

According to Prudential Life Insurance, there are several complications arising from excessive alcohol consumption that are significant to life insurance underwriting:

• Cardiac:  Atrial fibrillation, cardiomyopathy, hypertension
• Nervous System:  Blackouts, seizures, delirium tremens (DTs), peripheral neuropathy, tremors, brain damage, psychosis, balance and gait impairments.
• Gastrointestinal:  Fatty liver, hepatitis, cirrhosis, pancreatitis, gastrointestinal bleeding due to gastritis, cancer, diarrhea.
• Bone marrow:  Abnormal blood counts including anemia.
• Miscellaneous:  Aspiration, pneumonia, accidents and trauma.

The good news is that if the individual is able to successfully stop drinking alcohol without relapse, after 7 to 10 years, the mortality rate approaches that of the general population.

There are as many opinions about life insurance as there are life insurance agents and brokers hat sell it.  If you ask 100 insurance professionals their opinions about which type of policy is best for you, you will get that many varying viewpoints on the subject.

Captive agents who only represent one company’s products, will naturally tell you that the XYZ Company’s “TrueLife Policy” is the best choice for you.  An independent agent or broker would be free to tout the benefits of assorted policies, but he/she will probably have a very strong opinion as to which is best for you, based on his/her education, training and experience.

Opinions are running rampant, but how to you find the “truth” about the best choice for you?  I would recommend speaking to several knowledgeable independent life insurance brokers.  Look at various policy types and ask the agent/broker to explain the differences and costs of each type of policy.  Do your research and avoid anyone who says their way is the only way.

Dave Ramsey, a financial “guru,” who often makes a lot of sense with his financial advice, has a column called The Truth about Life Insurance. While I respect Mr. Ramsey’s advice quite often and I do agree that Term Life Insurance is very often a great choice for most folks, I think his column should probably be titled My (Very Strong) Opinion About Life Insurance. And that’s my opinion!

I have been seeing more applicants lately who have been diagnosed with sleep apnea.  What is sleep apnea it and how does it affect life insurance underwriting?

Apnea is cessation of breathing.  There are three types of apnea that occur during sleep:  obstructive, central and mixed.  According to Prudential Life insurance, obstructive sleep apnea (OSA) is the most common type, affecting approximately 4% of men and 2% of women, but it is greatly under-diagnosed.  Common symptoms are excessive daytime sleepiness (EDS) and loud snoring.  In addition, the sleep partner often reports the cessation of breathing.

The dangers associated with untreated sleep apnea, and those of interest to life insurance underwriters, are hypertension (and other cardiovascular impairments), obesity and the risk of motor vehicle accidents.

Underwriting rating for sleep apnea is determined by the severity of the disease, as measured by the number of apnea episodes per hour and the degree of hypoxia (low blood oxygen level).  Type of treatment, age and co-existing disorders such as heart or lung disease are also considered in the final assessment.

With sleep apnea, we will often get multiple offers for our clients, as underwriting results for this disease can vary significantly.  Your agent or broker should be able to get multiple offers through an informal or inquiry application.

This information is intended for insurance informational purposes only and should not be used for personal medical advice.

Unlike the consumer electronics industry or wireless industry, life insurance products don’t change frequently…that is, until recently.  In the past, the choice of life insurance products was fairly limited – you could choose whole life, universal life or term life.  In recent years, we have seen the insurance industry invent innovative products to meet the needs of the consumer.

Within the last several years, we have seen the birth of Return of Premium Life Insurance and Universal Life Insurance with secondary guarantees (lapse protection), to name a few.  Recently we have seen the “creation” of another new product – I’ll call it “Term UL (Universal Life),” for lack of any other name.  One insurance carrier recently replaced their term products with Term UL.  This product is basically Universal Life Insurance with a guarantee for a specified “term,” be it 10, 20 or 30 years.  In essence, it works just like a term policy – you have a death benefit for a specified number of years and at the end of the “term,” the policy is “done.”

The advantage of this product is that you can choose to pay more premium to extend the guarantee at any time during the term period.  If, at the end of the term, you decide you still have a need for life insurance, you pay a specified premium, and the policy will continue.  The rates are guaranteed when you purchase the product, so you know from the beginning what you will pay if you extend.  With a term policy, you can always renew the coverage at the end of the term (on an annual basis), but the premiums are usually cost-prohibitive.  You can also convert to a Universal Life policy, but you won’t know the rates or policy details until you do convert.

I have already place a few clients with this product, where I thought it was appropriate and will continue to check its appropriateness with future clients.  It looks like some other companies will be releasing a similar product soon, so competition should keep the premiums within a reasonable range.

Life insurance underwriters go by the “book” for the most part.  In the case of life insurance underwriting, the “book” is based on actuarial experience of many years.  The underwriter lives and breathes by the “book” and establishes a health class and rates for an applicant based on information attained therein.

There are times we look at underwritten case results and can tell the underwriter went strictly by the book and allowed no flexibility in the rates.  If it makes sense to us, we usually won’t question the underwriter.

However, there are other times we look at the results and have to go back to the underwriter because the “book” just didn’t make sense.  Case in point, we recently had a policy approved at Standard Plus (third highest class for this carrier), based on the client being underweight, according to the “book.”  Our client contested (and we agreed), so we went back to the underwriter.  After reviewing the case again, the underwriter came back with the same results.

Our client then got a letter from his physician stating that he was healthy and his weight had been stable for as long as he was a patient (6 years).  We sent the letter into a more senior underwriter, who agreed with us (and the doctor) and approved the policy at Preferred Plus (the carrier’s best health class), resulting in a significantly lower premium.  Needless to say, our client was quite pleased.

I’m not saying that this is the norm and we will always be able to get better underwriting results by contesting them, but when it makes sense, a good agent should never accept underwriting decisions where the “book” seems misguided.