I get calls every once in a while from people whose spouse or parent is literally terminally ill and many times imminently terminal. I think they know the answer already but I understand that they see what’s coming and they know it’s going to be a financial hit and, after all, isn’t life insurance all about spreading that risk and helping families when they need it most?
Unfortunately for those in that situation there is the other factor in life insurance, the fact that if companies aren’t profitable and avoid imminent risk, they can’t stay fiscally sound enough to meet their obligations to those who purchased life insurance when their risk was still reasonable. Unfortunately for those in this situation there is no product or company that will work for them. Guaranteed issue life insurance or graded benefit life insurance, even though they could purchase it, wouldn’t pay a death benefit if the insured died in the first two years.
It’s a sad situation and I feel for those who have waited too long, but it is what it is. Waiting too long can be seen in the situation we’re currently going through with no lapse guarantee life insurance. This product, in spite of all of the flak I’ve taken for claiming this, is simply the best permanent life insurance option available. It’s far more affordable than it’s ugly step brothers traditional universal life, variable universal life, whole life and how can I put this, more straightforward than indexed universal life. The no lapse guarantee product or externally guaranteed universal life is a product that came on the scene for the very reason the step brothers don’t cut it. With the other permanent products it simply wasn’t affordable to carry adequate coverage for the need at hand. By externally guaranteeing the death benefit through company reserves instead of internal cash value, it became affordable. Like term life insurance affordable.
But darn the luck it became a little too affordable. Some actuaries didn’t do their homework and a few years ago companies started realizing that they had severely underpriced the product. Companies literally started freaking out and pulling the product, first, out of the options for term conversion. Next they tweaked the product so it was less risk for their bottom line. In some cases they raised the prices to create larger reserves and in other cases they shortened the guaranteed level premium period to, in essence, shorten the amount of time a customer could afford to carry the product.
Finally the National Association of Insurance Commissioners stepped in and recognizing that the product was good but the pricing was just a little off they came up with AG38 (actuarial guideline 38) that requires companies to adjust the amount of money going into reserves for all new policies beginning 1/1/13. No magic how that’s going to happen. It’s called a rate increase and we know that Banner Life has announced that at some ages that can be as high as a 9% jump. Some companies have intimated that it could be as high as 20%. Some have just thrown up their hands and walked away from the product.
This is permanent life insurance. It has a guaranteed level premium to 100 and with no more premiums, guaranteed, a level death benefit to 121. There is always good reason to consider purchasing before an announced price increase, but when you know that you could be paying 10% to 20% more to age 100, it’s time to sit down and seriously have a talk with yourself, your accountant and your spouse about what action you should take. Missing the cut off on these increases won’t be the end of the world because the no lapse guarantee UL will still be the best priced, most prudent product out there, but dang, 10% over 20, 30 or 40 years or more can become more than pocket change in a hurry. If you’re young the increases may not be that high, but if you’re over 50 this type of life insurance is going to go ballistic.
Bottom line. You may not think of any reason to make this move now to save the money and that’s OK, as long as you think about it. But, if you’ve been considering for a while the purchase of a small permanent policy, a final expense policy, an estate tax protection policy, or if you have a permanent product which is in danger of imploding, it’s time. You’re not too late if you act now. If you have any questions, or would like to have your current situation evaluated against what can be done, call or email me directly. My name is Ed Hinerman. Let’s talk.