Getting Life Insurance
What kinds of questions should I ask when evaluating life insurance options?
When you're evaluating your life insurance, you need to ask questions. "Am I covered with enough coverage?" First, that's probably the most important thing. "Do I need a million? Do I need two million? Do I need 5? What is going to do the job the way I want it to do?" The next thing is, "Am I able to afford the premium that it costs to buy these insurance policies?" You work with a good insurance broker, you sit down across the table, you break bread and you figure out what is going to be best for you, whether you should buy term life insurance, universal life insurance, whole life insurance, or some combination of the three. That's what you do when you're evaluating your life insurance,
What does it mean to be "rated" when buying life insurance?
When you're rated for life insurance it means that the insurance company has looked at your health history and looked at your medical exam that you took to qualify for the insurance. They wrote to all your doctors that they thought were important, looked at everything and they said this person has some health history. They're not going to die tommorow, they're not going to die in 2 years but they're not going to live to normal life expectancy of 85 or 90 years of age. So the insurance company said this person's still worthy of getting insurance, and so instead of charging the premium of a normal perfectly healthy person, they might say we're going to charge 20%, 30%, 100%, 200% more than the normal rate. Some people have had cancer in the past pay a very high premium if they apply for insurance just a year or two after they have had that condition. After five years, the insurance companies may say you're at normal risk and were reducing your premium to a normal rate; they've taken off the rating. So a rating basically means that they're charging a higher premium based on what they come up with in your health history. Now, when you get a rating it doesn't mean you're done, it means that the insurance agent has a choice of talking to you and saying do you want to accept this or should we try other companies that might have a better offer. Many times one company could be prejudiced against a specific type of condition. They might read more into the details of your medical history than was probably reasonable, and so often times we have to go back and forth with the insurance company or sometimes we actually apply to different companies.
Can I contest my life insurance rating?
People don't realize that insurance companies are not just walls of concrete and steel and mortar and brick and nails. They're really made up of people who are possibly 3 miles away from you, and all they're looking at is a whole bunch of paperwork from your doctors and from the insurance agent. They have to make an evaluation; they don't know who you are. So, sometimes it takes a little bit of extra effort by the insurance broker to get the insurance underwriter in the home office to give you a good price.
What are the designations of "preferred", and what do they mean?
Insurance companies look at all people for life insurance to see if you are super-preferred. That's a person that has no medical history, has probably taken no medications, is normal height and weight, has everything going for them health-wise, and maybe exercises on a regular basis. With this person, when the lab results come back everything is really good, they take regular physical exams, everything looks really terrific, and their parental history or their sibling history is good. For example, if a parent died prior to age sixty from heart disease or cancer, they usually ding the premium, so to speak. However, if a person has healthy parents and they lived a long life or died at age eighty-nine or ninety, the insurance companies like that type of scenario, and they issue what's called a super-preferred rate. That's the best rate you can get. If they find that you're perfect but you might be taking cholesterol medication or you're a little bit chunky and you haven't lost all those extra pounds that you should, they'll probably issue you a preferred rate. Then, if you're just an average person; you're not a preferred, they might give you what they call a standard rate. Then, you have the problem cases. That's when you have serious problems and what they usually give you is what's called a table rating; they rate you Table A, B, C, all the way to Table H. Sometimes, some companies call them Table 1 through 16, and the premiums can be really, really high if you have serious problems. Many, many years ago I sold a four hundred pound client an insurance policy and he was only six feet tall. Now, obviously that wasn't a very healthy person but he was issued and he paid an exorbitant premium. He luckily lost weight, but unfortunately gained it back and passed away, and the insurance companies still lost money because he died way before they thought he was going to die. They look at these health conditions and then they just determine whether they're going to give the person a rating or not. The insurance broker is trying to get the best rate for the client, because otherwise the client will go to some other insurance broker who they think will get them a better rate.
What is a "table rating"?
A table rating is a rating of higher than standard normal rate. It could be 20 percent, it could be up to 25-30 percent. They look at your health, and based on all the points that they've given you: you're too overweight, you have too high cholesterol, your family history's not too good, you have had serious depression, you've had problems with colitis. All these things start adding up. You still may be insurable. But, with a table rating, the insurance companies will start adding points to your scenario, and they'll say, "We'll accept you, but we're charging you triple the premium. Take it or leave it." A lot of times the client will take it, because it's still a valuable program, if it's priced properly.
Is my table rating locked in forever or can it change?
Insurance companies look at you very intimately today. They take a picture of you. If you're a smoker today, you may not be a smoker in the future. A smoker pays a lot more premium for their life insurance than a non-smoker. So if a person is a smoker for several years and then stops smoking and goes for one, two or three years, the insurance companies are pretty happy with that person. They will either issue a brand new policy at a much lower rate, or they'll take the existing policy and reduce the premium. It's very important for people that were rated as a smoker to review their insurance on a regular basis, because some people who have been non-smokers for 2 years could be a preferred non-smoker today. Therefore, it's important to have a good relationship with the insurance agent who's going to look at your portfolio on a regular basis. People spend a fortune more than they have to if they don't review it.
How does smoking affect life insurance rates?
Well, smoking affects insurance rates by charging a lot more premium for the policy. As an example, one of the major health insurance companies today actually noticed us with a form saying that anybody who is a smoker is going to be paying 20 percent more premium on their health insurance. Life insurance is the same way. On life insurance, if the premium is 300 dollars for an inexpensive term policy a smoker might be paying 600 dollars for that same exact coverage. We all know that smoking is probably not very good for you. Some people will say that their parents smoked and lived to 90, but in general the medical science that we know today says that you're not going to live as long if you smoke. So insurance companies still will insure you but they are going to charge you a higher premium. Somebody who has congestive heart failure or who has asthma and smokes could beuninsurable because certain things are ridiculous. You should not be smoking if you have severe asthma or if have congestive heart failure, or if you have had lung cancer.
How does my weight affect life insurance rates?
Well, if you have normal weight for your height, you will be considered a preferred or a super-preferred rate. It's one of the factors that all insurance companies look at. Obviously, if you're carrying an extra 100 pounds, you're doing something deleterious to your health. Insurance companies know the factors, they have the statistics; they're going to be right most of the time, they'll be wrong some of the time. They're going to charge more for that type of condition. If you lose weight and you improve your health condition, they are more than open to looking and your rate and considering giving you a better premium at a later date.
How does getting married or having children affect my life insurance?
Getting married doesn't affect your life insurance, it just affects your need to review your insurance because you may have as your primary beneficiary your ex-wife or your parents, and really you should be considering putting your new spouse as your beneficiary. If you have children, you want to make sure that in case you and your spouse die, you have the right beneficiary. Many, many years ago I was reviewing somebody's life insurance and I knew that this person had three children, but only two children were named as the contigent beneficiary. I asked if there was any reason for purposely removing or deleting your one other child from this policy, and they realized they hadn't updated their insurance in many years. Had the insured passed away, and had the spouse passed away, the money would have been split between two children and they had no obligation, legally or morally, if they don't want, to share the money with a third sibling. So it's very important to review that.
How does getting divorced affect my life insurance?
In a divorce situation, on many occasions the attorney for the couple will recommend that life insurance is issued on one or both of the people. For example, in a typical scenario where you have the husband, who is the breadwinner, and the wife, who is the homemaker, the attorney for the wife may say, "We want the husband insured for $5, or a million or ten million dollars because if he dies, the money will not continue to be paid to the spouse. We want to insure that under no circumstances will my client, the spouse, not get paid." It is also very important for people when going through a divorce, not to change their insurance, because it looks very bad in court when you have unilaterally changed the beneficiaries of the policy without the approval of the court. I have been in many situations where my client, typically the male, changed the beneficiary to his new girlfriend or to someone else. And when the court found out, they said, "You are a bad person." And it cost the person, the insured, a lot more money in alimony because the judge figured they were not a reputable person. So, I always recommend to people that are going through a divorce that they don't make any life insurance changes unless it is permitted by the court or by their attorneys.
