I think I’ve made my position pretty clear when it comes to where the best values on life insurance can be found and the fact that your local auto and homeowners agency is not that place. I feel the need to expound today.
You see advertisements all the time with the lead “save up to 70% on your life insurance”. That would be great if you knew that you could really find those kind of savings. Seems like one those just a little too good to be true things, doesn’t it? Well, if you have your life insurance through Farm Bureau, based on the last several cases we have written to replace their product, it appears that you are paying over 100% more than you need to.
Their hook is of course that they will offer you a discount on the auto or homeowners. As a consumer I often question why, if they can offer a discount, shouldn’t they just sell the auto and homeowners at better prices to start with. And then they offer you a discount because you have turned around and purchased another grossly overpriced product from them. This can only be construed as a win/win situation if you want Farm Bureau to be both winners.
I know I always look at these kind of numbers skeptically, so be skeptical. These are the results of some very recent Farm Bureau replacements. A Florida executive with health issues had $1,000,000 of 20 year term insurance with Farm Bureau for $12,000+ per year. His rate with West Coast Life is $6085.00. His wife had the same amount with Farm Bureau for just over $3000 per year and is now paying $1005.00 through Western Reserve. Some young friends of mine with two young children had $100,000 of 10 year each through Farm Bureau which was running $54 per month. They now have $250,000 of 20 year term each with Banner for a total of $31 per month.
Bottom line. What is Farm Bureau thinking? I may be wrong, but I think that they think they will make a huge profit if they can find people to buy their overpriced life insurance. Don’t fall for that discount nonsense. If they can afford to discount their auto and homeowners, rest assured that it is for sale somewhere else, straight up, at that discounted price. Seek out an independent agent today.
August 19th, 2008
WE have been blessed with great success in getting good, competitive life insurance rates for those with bipolar disorder and really had another success on the way, but the client derailed it. Fortunately this is a rare situation because, frankly, working as hard as we do to get good rates where good rates are not easily available really requires the full cooperation of the client. It is a team effort.
I won’t dwell on this particular case but I do want to point out one sure way to nuke your chances of getting the rates you want. In this case there were a few notes in the records that the underwriter wanted clarification on. Most underwriters don’t ask for clarification, but rather put a worst case connotation on the notes and make an offer based on that. This underwriter did make that offer, but said they would consider a better offer, the rate class originally quoted, if the client got a letter of clarification from the doctor. The client refused.
This action meant there was no chance for the better than standard rates originally quoted. And the client refused to accept the other offer which, by the way, was $1000 a year under the offer I was tasked with beating. Ok, no dwelling!!
This still doesn’t change the fact that we have been very successful in placing affordable life insurance for those with well controlled bipolar disorder. Just a quick review of the points that underwriters look for in order to qualify for those rates.
1. No suicide attempts
2. No hospitalization for bipolar in the last 10 years other than for the purpose of diagnosis.
3. Compliant with treatment. No taking meds when you feel bipolar and slacking when you don’t.
4. Stable work history. You can’t be on disability for bipolar. That is not a stable work history.
5. Stable family/social life.
6. No alcohol abuse.
7. Cooperate with the underwriter in clarifying any information they ask about.
Bottom line. The rates are there. The underwriters are willing to approve them, but keep in mind that they represent companies that are putting hundreds of thousands, if not millions of dollars of life insurance on you. They certainly have the right to ask whatever questions they want in order to make sure they are not subjecting the company to an adverse risk.
August 19th, 2008
Historically life insurance used in estate planning has revolved around the issue of estate taxes, with the irrevocable life insurance trust being the stop gap to keep the government from draining off half the value in fairly liquid estates and sometimes completely gutting estates with very low liquidity.
With the downturn in the economy over the past year, the value of many estates that were borderline taxable has fallen to the point where some are considering whether estate protection is needed. Another thing that has pushed on that already leaning tree is the fact that congress appears to be seriously poised to lock in the estate tax exemption at next year’s already legislated level of $3.5 million.
Before you bag that life insurance there may be a few things you want to consider. First of course is the fact that economic downturns historically don’t last and value lost will likely be regained. And, while the new exemption limits may seem temptingly high enough to consider foregoing protection, a turn around in real estate and investments, coupled with a few right choices can put your estate right back in the governments hip pocket.
Another thing to consider for those estates that were borderline taxable at the lower exemption limits and seem safely padded if the exemption goes to $3.5 million, is the idea of keeping that irrevocable life insurance trust in place as a wealth preservation tool. It could be that extra million or two that makes your estate “economy proof” should you happen to suffer more losses or die during an economic slowdown.
Bottom line. That in force life insurance has value to your estate in several ways and they should all be considered before any firm decision is made to lapse something that may have huge value down the road.
August 18th, 2008
I am a graduate of Dave Ramsey’s Financial Peace University and a firm believer in his financial guidance and yes, his thoughts on life insurance. I believe that both his passionate belief that people should have life insurance and that for almost everyone it should be term insurance are right on track. But, after careful study I don’t understand his endorsement of Zander Life Insurance as the only agency in the country that a person ought to go to.
This past week I was talking to client about his insurance quotes and he mentioned that he was going to compare our quotes with Zander. That’ s fair. If I can’t earn the business, I don’t deserve it. So we pulled up Zander on the computer and ran quotes for him. While based on his personal health information there will be some adjustment, for comparison sake he wanted to run the quotes at preferred plus. His birthday is 1/23/49 and he wanted a quote for $500,000 of 10 year term.
Zander has an easy to use quote engine and we soon had a spreadsheet of quotes, zander-instant-quotes_files.We discussed these quotes and I explained why it was important to have access to a wide variety of companies due to the underwriting foibles of each company.
We than ran quotes on the Hinerman Group website and found a bit of a disturbing difference, hinerman-group-get-a-quote.
Please note Dave’s comments at the top of Zander’s quotes. And please note that while our websites agree on the best company at that rate class, Savings Bank Life, Zander has skipped over 5 companies in between Savings Bank and their second best quote, Transamerica. Did they skip them because they are not “top notch” as Dave suggests? I don’t think so. The missing 5 are all comparably rated to SBLI and Transamerica.
Is it because those 5 offer inferior underwriting? Again, I’m not seeing that. In fact, if you are 5′10 and weigh 202 pounds, you will not get that rate from Savings Bank Life, but you will from Prudential Financial (Pruco). Dave talks about pre-existing conditions. Weight is the most common rate changer in the life insurance business.
Bottom line. Agencies delete certain companies from their quote engines generally to drive their customers in the direction they want. I don’t understand Zander’s logic but I know from having a quote engine that you don’t accidentally leave companies out. There appears to me to be some reason that Zander wants to have a larger gap between the first and second best quotes than actually exists. What’s up with that kind action Dave?
August 18th, 2008
In previous posts I have touched on studies that have shown that the dramatic weight loss provided by gastric bypass surgery has proven to have much more value than just a matter of convenience in losing weight.
With the primary risk factor for type 2 diabetes being obesity, and two of the primary causes of heart disease being obesity and diabetes, there is a point where getting rid of the weight is a matter of life and death, and gastric bypass isn’t just a matter of convenience any more than stepping off the tracks when a train is coming is a convenient way to keep your clothes from getting messed up.
I spoke with a client within the past week who had achieved a 130 pound weight loss after gastric bypass. He was being treated for diabetes before the operation and weighed over 300 pounds. Within a few weeks of the surgery his glucose levels were lowered to the point where he was taken off medication. Even off medication his glucose levels never went back up. Now, three years later, at 187 pounds, he is cured of diabetes and has a new lease on life.
Life insurance underwriters are cautious when it comes to gastric bypass because there are some dangers and also, if a person doesn’t have the will to make the lifestyle changes, even gastric bypass can be overcome by slowly stretching the new smaller stomach back out. For this reason underwriters want to see a track record of stability in weight before they will call it a home run. Having said that, those underwriters are keenly aware of and ready to reward the new lifestyle and the risk factors that have gone away because of it.
Bottom line. Eliminating risk factors through life style changes is the right thing to do even outside the scope of life insurance. Quality life and a longer life are a blessing to share with your family.
August 16th, 2008
Life insurance exams have stayed pretty much the same for as long as I’ve been in the business, about 150 years now. On the lab side, the blood and urine testing, an occasional new test has come along and a few have gone down in extraordinary flames.
The industry has been deservedly dealt a few black eyes with great new ideas. Quite some time ago the industry decided it would be a great thing to be able to tell if someone had cancer even though there were no symptoms or diagnosis from a doctor. A lab came up with a tumor marker, dubbed TAA. It’s touted value was that it would have a high reading if someone had even an undetected tumor. The insurance companies jumped on it without real proof of its’ accuracy and it turned out to be a fiasco. In the end the test proved to be, to put it kindly, inaccurate and it resulted in completely healthy life insurance applicants being told they might have cancer and having to undergo expensive tests to find out that they didn’t, much to their dismay and the dismay of their doctors.
It is these kinds of underwriting screening tools that need to be proven before their actual use for the sake of the clients and underwriting credibility. Recently a new tumor marker has been proposed but so far the insurance companies have steered clear of the CEA test (carcinoembryonic antigen).
Other tests have come along that appear to have passed the validity test. Probably the biggest breakthrough has been the NT-proBNP. This test has afforded underwriters the ability to pinpoint impaired circulatory function. While most commonly tied to some level of heart failure, the test has proven very accurate in bringing to light the presence of cardiac damage from all pathological causes.
This test, in combination with other cardiac impairment markers can be more accurate than the old standards of checking cholesterol and doing an ekg. While some of the associated marker tests are still being reviewed, proBNP is in use by most companies. The issue of heart disease has been and continues to be taken very seriously in life insurance underwriting.
Bottom line. These tests are a two edged sword for life insurance applicants. While they might very well lead to an increased rate or even decline, they can also alert the applicant to a health issue that might be looming.
August 16th, 2008
I think I’ve been very clear over the years about unexplained information in medical records and how life insurance underwriters deal with it. They ask questions!
Sometimes the mystery information isn’t relevant once it is explained. Sometimes the information doesn’t even pertain to the patient. I think I’ve shared this before, but several years ago a client was declined after a review of medical records due to not admitting a history of heart disease.
After calling the client with the news, she was adamant that she had never had any kind of cardiac event and had never consulted a doctor for any potentially cardiac related symptoms. After speaking to the underwriter, he said that the records clearly mentioned the word angioplasty. He gave me the page number and said the word was circled. I passed this on to the client who pursued a review of her medical records. She and her doctor were finally able to nail down the reason for the note. It seems she had a friend who was going to undergo an angioplasty and she had asked the doctor to explain what it was. As he explained, he doodled and subsequently left the word angioplasty in the records of someone who didn’t even know what it was.
Doctors are notorious for doodling or writing down some thought with no further explanation. And generally I become the messenger, being shot on sight because the underwriter is asking for clarification. It means homework for the potential insured and while some don’t mind, most feel as though they are being asked to do the work that someone else should do.
This came to a head with one client the other day when I called and asked if she could get a letter from her doctor explaining why he had circled a certain condition on two separate visits, something not done on any other visits. Without clarification the company was willing to offer coverage at a higher rate than originally quoted. With an explanation we could likely have had a policy issued at the same rates originally quoted. She refused. She said it was obvious to her and if it wasn’t obvious to the insurance company, then they were just trying to gouge her for additional premium. The circled condition with no explanation needed clarification. She shot the messenger and withdrew her application.
Bottom line. Underwriters have to try to make sense of your medical records. If you think that’s easy, you’ve either never been sick or never looked in your medical records. If an agent comes back to you asking for clarification, it’s not because the insurance company wants to raise the premium, but rather because they are looking for an explanation that would help them avoid that.
August 14th, 2008
The question of return of premium term insurance has been viewed from a lot of angles in this forum, but today I think we need to switch our focus from the end of the term to the midpoint. There is, I believe, an assumption out there that a return of premium policy will return the premiums paid in no matter when you cancel it.
This assumption falls right into the same trap as most life insurance, the industry secret for why life insurance rates are so low. The reason rates are so low and the reason you need to truly think through the purchase of ROP term is that most life insurance policies don’t stay in force. Think about it. If all life insurance policies stayed in force, whether term to the end of the term (or converted), universal life or whole life, rates would have to go up to cover the increased company exposure to mortality.
The truth is that for a large percentage of life insurance purchasers, the whole idea kind of loses its’ luster when you’ve been paying for 5 or 10 years and nothing is happening. Especially for those who are still in great health, there is a tendency to start questioning the expense. My personal opinion is that those who fall into that mindset are selfish and need to simply get a grip (again), on why the life insurance is there and that the right thing to do is to stay insured.
Back to the ROP though. I was speaking a person today who was considering decreasing the amount of coverage they need in order to afford the extra expense of a return of premium. Their thought was to convert the policy in 15 years, halfway into the 30 year ROP and use the returned premium to help fund the conversion.
Life insurance companies build their products, prices and business models knowing that most people will cancel their life insurance before the end. I pointed out that in the early stages of the ROP term policy most companies don’t offer any return. It usually starts building slowly after the 6th year and usually doesn’t reach even 50% until the 25th year of a 30 year term. I think this illustration, return-of-premium-illustrated, will drive home what I’m talking about.
Bottom line. The only way to get 100% of your premiums returned is to keep the policy to the end. Considering the tax free status of the return, if you know you will keep it until you die or to the end of the term, the return can be ok especially given today’s economy. If you’re not sure, steer clear.
August 14th, 2008
It’s been a few weeks, but I wanted to bring an update on my Mom’s breast cancer process. As I’ve mentioned before, this isn’t really about my Mom, as she is past her life insurance buying days, but rather about the process and how her scenario might impact the quest for life insurance for a younger woman.
After a full body and bone scan it was determined that if any of the breast cancer had left the right breast and adjacent lymph nodes, it was an undetectable amount. This is good news knowing that it hasn’t traveled and set up shop (metastasized) somewhere else. This is not to say that cells haven’t migrated, but at this point as she starts treatment if there are cells that have migrated, they are random as opposed to organized.
Her oncologist has recommended 6 weeks of radiation therapy that will be aimed at the right breast and adjacent lymph nodes. She is about a week into that treatment and suffering no ill effects.
Because of her age, 84, the oncologist has put her on oral medication, Femara, rather than attempting to do a course of chemotherapy. Someone younger might do chemotherapy, but the oral medication at her age is considered adequate to hold any stray cancer cells at bay.
Life insurance underwriting in this case would be looking favorably at the apparent lack of metastasis. A woman would likely be able to start getting offers on life insurance about a year post treatment. The further out from the treatment with no recurrence, the better the offers will get.
Bottom line. With early detection methods continuing to improve and treatment options getting better all the time, early stage breast cancer is ultimately going to be much more insurable than it has in the past.
August 13th, 2008
I just held an impromptu contest in my head to determine what group of people have the largest number of life insurance quotes asked for compared to actual policies applied for.
The results are in and I’m not going to try to make any broad social implication out of the fact that the smoking crowd won the contest. They seem to have this need to know how much life insurance will cost coupled with a real lack of enthusiasm for purchasing when they find out that the mortality experience from smoking drives their price up to 2 to 3 times what they would pay if they don’t smoke.
Never mind that even at the higher rates, most people who smoke are spending more on their habit than they are willing to consider spending on protecting their families future. I am down playing somewhat how strongly I really feel about this issue when I say that if I were King, I would require all of my subjects who smoke and have families to carry life insurance. If they refused, their cigarette money would be garnished from their paychecks to forcibly buy the life insurance. If they tried to game the system I would have their heads chopped off and their families would be awarded the benefits from their life insurance anyway.
Bottom line. For all of you who smoke and have done the responsible thing anyway, I salute you. If you smoke and are still avoiding life insurance, off with your head.
August 7th, 2008
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