Life Insurance Log
Your life insurance questions, answered!

So you already have a life insurance policy. Fantastic! But is it performing to your expectations? I’ve replaced many under performing life insurance policies this year and I’d like to share the most common situation where a replacement makes sense.

Universal life policies that have been under funded.

Do you know if you’re under funding your universal life policy? An independent life insurance agent can ask for an in force illustration and find out for you. Often times, these policies are sold showing unrealistic interest rates and you may be faced with increased premium in order to maintain coverage.

Term insurance policies with increasing premiums.

If your premiums are increasing, get a quote from an independent life insurance agent who may be able to get you a lower, level premium and keep the same benefits.

Term insurance policies that are non-convertible.

Term insurance policies can be converted to permanent life insurance with no medical underwriting if the policy is within it’s conversion period. A lot of policies don’t let you convert for the full term. What would happen if your term insurance expired soon and you had a sudden decline in health, wouldn’t it be important to have the option to convert your term life insurance to a permanent policy?

Permanent insurance policies with significant loans outstanding.

If you borrowed against your permanent insurance policy and don’t have the ability to repay them, it might make sense to start over. There are some tax issues that go along with this.

If you ever decide to replace a policy, NEVER surrender your existing policy until your new policy is issued. You have to be fully underwritten again and there is no guarantee a policy can be issued on you.

Again, these are the common policies that I’ve been replacing. If you think you might fall into one of these categories, please give us a call or call your current independent life insurance agent.

I’m at Ralphs (my local supermarket) yesterday and at the checkout stand I see a display with different financial services brochures. I guess Ralph’s does finance now. They had different brochures for credit cards, mortgages, home equity, pet insurance, identity theft protection, car insurance, homeowners insurance and alas…life insurance. Of course I grab a brochure on the life insurance offering to investigate it myself.

First of all, this is “non-med” product. Meaning you don’t have to take a medical exam to apply. Non-med products are easier to apply for, but are more expensive than fully underwritten products. Please read my blog post about non-med products here.

Lets examine what Ralphs is offering their customers. I scanned the image below from their brochure.

Ralphs is offering a 50 year old male non-smoker a $100,000 of life insurance for $65 a month guaranteed level for 10 years. If this person qualifies for preferred rates, I can show over 15 companies with rates less than $20 a month. For example, Genworth comes in at $18 a month for the same policy. That’s a savings of over $560 a year!

Lets say this same 50 year old male non-smoker qualifies for standard rates. West Coast Life, Transamerica and Protective come in at $24 a month with about 10 more in that same range. That is still over $490 a year in savings!

Ralphs and Garden State Life Insurance are sucking people in by advertising your first month of coverage for only $1. This is in big print on the front of the brochure. It definitely caught my eye (see photo on right). Ralphs customers are thinking they are getting a great deal on life insurance, yet it couldn’t be further from the truth. Unfortunately, the majority of people who purchase life insurance from places like Garden State Life and Ralphs, just don’t know any better.

My job is to protect families and offer the cheapest possible rates and this supermarket is ripping people off by selling life insurance like it’s a pack of gum at the check out stand. In these tough economic times, you’d think they would look after their customers.

Bottom line. Don’t purchase life insurance without shopping it with an independent life insurance agent. We are on your side and will find the best deal possible.

Life insurers WILL ask about your alcohol consumption on a life insurance application.  A good independent life insurance agent will ask you before you apply so you aren’t blindsided by a rate up after you apply.  Generally speaking, social drinking is fine…but it depends how social you are.

If you consume more than 2 alcoholic drinks a day, you generally will not be approved at preferred rates.  You will start at standard rates.  If you consume more than 3-4 drinks a day, standard will be tough to get.  You’re looking at a table rating or decline.

According to the CDC (Centers for Disease Control and Prevention), excessive alcohol use over the long term can lead to chronic conditions such as depression, liver disease, stroke, dementia, cardiovascular problems etc.  So obviously life insurers take alcohol abuse very seriously because of its serious mortality risk.

You can’t lie about your drinking habits either.  Your physician knows if you’re a drinker and will document it.  If there are no records, the life insurance company can order an alcohol test.  This is called a CDT or an alcohol marker.  These tests are very sensitive and if you test positive, most of the time it’s an automatic decline.  Typically, if you drink more than 4 drinks every day, you will test positive.

The tough part about talking about alcohol for me is perspective.  The accessibility and acceptance of drinking in our society makes it hard to explain these underwriting guidelines to individuals purchasing life insurance.  For some people, 3 glasses of wine a night is their routine.  For others, they drink heavily on the weekends and nothing during the week.  You might not think of these 2 situations as drinking problems, but some life insurance companies do.  It’s not what you or I think is reasonable, it’s what the life insurance underwriters think. 

That’s why it’s important to use an experienced independent life insurance agent even if you’re a “social drinker”.  “Social” for you and “social” for a life insurance company can be way off in your thinking.  If you are honest from the beginning, we can help you obtain the best rates.  Each life insurance company underwrites alcohol consumption differently, it’s our job to find the company that will give you the most favorable underwriting and offer the best rates.

If you suffer from a health issue, the insurance company may charge you more for your life insurance. A table rating is a percentage increase above the standard rate.

Each table is equal to a 25% increase in price. For example, if you received a table 3 rating offer from a company and the standard rate is $1000, a table 3 rating would add an additional 75% or $750 to the cost of the policy for a total of $1750.

Insurers use numbers or letters for table ratings. So a Table 1 (or A) would be a 25% increase. Table 2 (or B) would be a 50% increase. Table ratings run A-H or 1-8 typically.