Sean Drummey - Life Insurance Recommendations

Guaranteed Issue Life Insurance

May 19, 2011

3:18 PM

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Alzheimer's, Below Average Health: Substandard, Impaired Risk, In your 60's, In your 70's, Product, Whole Life

Those late night commercials or mailbox solicitations for life insurance that say, “You can’t be turned down” are talking about graded benefit life insurance, also called guaranteed issue life insurance. There are no medical questions, no medical exams. The applicant must be mentally competent and be able to sign their own application. There is graded benefit term and graded benefit whole life. Eligible ages are generally from 40 to 80, with some variations depending on the carrier. Benefit amounts generally run from $2,000 up to $50,000.

One can be on death’s door with cancer, heart disease or AIDS and get this kind of life insurance. Alzheimer’s, however, you cannot. The catch is that you must wait 2 or 3 years to get the full benefit. If one passes away before then, other than by accident, premiums are returned plus interest. Criteria for judging competing carriers are the premium, the waiting period, and interest rate on return of premium.

Is it a good deal, or at least an okay deal? Presidential Life Insurance Company, a longtime seller of guaranteed issue whole life, made the news this week by showing a profit in the 1st quarter. There are other carriers, but Presidential is usually come up on any short list, so I’ll use them to give a sample quote.

Age 65

Monthly Premium	Face Amount	Waiting Period	Return of Premium interest rate	Carrier	Graded Benefit Whole Life
$90.21	$10,000	2 years	5%	Presidential	After 2 year waiting period full benefit

So that comes to $1,082.50 annualized a year for coverage for a $10,000 benefit. Remember that’s the monthly bank draft rate. It’s $1,002.30 a year if you pay it annually. As usual, paying annually is a better deal. Not hard to do in your head math on this one, but let’s see how it figures out exactly: $10,000 benefit divided by $1,082.50 annualized premium equals 9.2 years (10,000 ÷ 1,082.50 = 9.23)

So it’s value as a coverage depends on one’s situation and life expectancy. Since there’s return of premium, you can’t lose on someone passing away in a short period of time, you get your money back plus interest. However for someone who lives a relatively long time, despite poor health, may end up paying more premium than their policy is worth.

Long term care and life insurance

by Sean Drummey

May 18, 2011

11:51 AM

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Accelerated Benefit, Accelerated Benefits, Accelerated Death Benefits, life insurance and long term care, long term care insurance, long term care plans

Bloomberg published an article today on long term care and life insurance. It was a fairly good overview, but a bit limited on the products available. They keyed in more on the life products where you have to pony up a lump sum premium like for Genworth’s Total Living coverage or Lincoln Financial’s Money Guard Reserve.

You should also note that North American’s universal life products that allow the policy holder to accelerate out the death benefit for long term care. You pay regular life insurance premiums, so no lump sum is required to start it. Coverage amounts start at a $25,000 benefit, so these can be very affordable. For example, for a female age 60, preferred non tobacco, a $25,000 guaranteed to age 120 universal life is $36.26 a month. Not a bad starting point. Face amounts go up to $50,000,000 , so that can fit a wide range of situations and goals. Maximum issue age is 75.

If the lump sum life insurance products appeal to you, make sure you compare them to annuities with long term care riders. You can leverage 2 to 3 times your annuity for long term care benefits, and they come are inflation protection. For example a $100,000 annuity with an initial $200,000 long term care benefit. Genworth has a Total Living Coverage Annuity, and United of Omaha has Living Care Annuity plans.

Contact me for a quote.

Prevent your life insurance going unclaimed

by Sean Drummey

May 18, 2011

10:58 AM

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Estate Planning, Policy Review

Life insurance carriers will probably in the future be more proactive in paying death claims because right now their feet are to the fire. State regulars are banding together to investigate carrier past practices with the National Association of Insurance Carriers is becoming involved.

States are doing this to collect money on unclaimed death claims. Policyholders should take the necessary steps to avoid any delay in their life insurance going unpaid for any unnecessary length of time. Here are a few suggestions:

Contact your life insurance carrier and verify your contact information, and especially the contact information of your primary and contingent beneficiaries. If you need to make any changes to your primary or contingent beneficiaries, request from the carrier the appropriate change form, fill it out and send it back.

Contact your beneficiaries or executor and make sure they know the names and contact numbers of your life insurance carriers. Make sure they know that they will have to file a death claim with the carrier when you pass away.

Contact your life insurance agent and make sure your agent has all the correct beneficiary name and address information. Your agent can play a crucial role in making sure your policy will remain in force for the rest of your life. If it is a term policy, when does the level term period end? What are your conversion options? If it is permanent life insurance, whole or universal life, review your annual statement. What are the guaranteed and non guaranteed cash value projections? Since annual statements are often incomplete, request from the carrier an in force illustration. You can save your policy from lapsing or save yourself thousands of dollars in premium if you know how the policy is projecting and how to manage your cash value.

If you no longer have an agent, you may request to an agent to become your agent of record.

Whole Life is better under age 40

by Sean Drummey

May 16, 2011

4:40 PM

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In Your 20's or 30's, In your 60's, In your 70's, Universal Life, Whole Life

I was running $100,000 permanent life insurance quotes today for a woman in her late 30’s. I quoted MassMutual for whole life. Premiums for guaranteed universal life with PennMutal were about half as much. But I recommended whole life even though it was more. Being under 40 the quality of whole life is worth the extra price.

With a participating whole life’s dividends like MassMutual, the face amount increases over the years: $101,000, $102,000, etc. There is also paid up insurance. Whole life has guaranteed cash value and dividends will increase the cash value higher. Over time the policy holder will have many options as those dividends and cash value increases to vary their premiums.

With the guaranteed universal life it’s a fixed course. The face amount remains level. $100,000 all the way. That’s my biggest concern with setting a level face amount too in one 30’s. What will $100,000 be worth 40 to 50 years from now? The payments are level but if you miss a couple of payments, changing banks or whatever, you may rescue the universal life with the cash value, but the lifetime guarantee is broken.

Granted with a universal life (UL) you can opt to structure it with an increasing face amount and to endow, worth it’s cash value, just like a whole life. But it’s not guaranteed to do so like whole life. When you add whole life type features into a UL, the premium rises so close to a whole life you might as well go for the real thing. That is when you’re in your 20’s or 30’s.

Now when you’re in your 60’s or 70’s it’s a different story. You don’t have time to build up cash value in a whole life and the premiums are much higher. A guaranteed UL is better.

AARP life insurance poor choices

by Sean Drummey

May 11, 2011

11:11 AM

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Graded Benefit whole life, graded benefit whole life, guaranteed acceptance Whole Life, guaranteed issue whole life, In your 60's, In your 70's, In your 80's, non par whole life, Product, Simplified issue whole life, Whole Life

AARP life insurance choices are flawed and will tend to be more expensive. When you go to AARP’s website for life insurance, all the options say “No Physical Exam”. That’s more expensive coverage. Actually you want to take a “physical”, called a paramedical exam, even if you’re in your 70’s or 80’s. It’s free, they come to your door, takes about 20 minutes and can save you lots of money. Here’s the proper order of choices for life insurance as a senior.

#1 option

Fully underwritten life insurance. Applications require a blood test and short paramedical exam. Carriers generally request your medical records, all at no charge to you. This way life underwriters can gage your risk classification and make you an offer for coverage. This will save you lots money over a no physical exam policy. Genworth and North American offer lifetime guaranteed permanent coverage, called no lapse universal life, starting at a $25,000 benefit, Penn Mutual starts at $50,000, and multiple carriers, including Lincoln National and Aviva, offer coverage of $100,000 and more for seniors. Unless you’re in really, really poor health, try this first. There is no cost to you to apply, and the worst they can do is offer you a higher rate or turn you down.

Continue reading “AARP life insurance poor choices” →

Life policies from 1980 to 2003

by Sean Drummey

May 10, 2011

5:24 PM

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Policy Review

Do you received an annual statement from you life insurance company every year? It’s time to review, really review, these policies with particular attention to policies written in the 80’s, 90’s and the early 2000’s. Do not assume your policy is permanent coverage, lasting until you’re over 100, and that you can file and forget your annual statements.

If you brought a cash value policy in this time period, you most likely have universal life (UL). Do not not assume it’s whole life. Do not assume it’s a lifetime guaranteed universal life. Skip the cash value for a moment because cash value is a diverting side show. Look for the crediting interest rate. Look for the guaranteed interest rate.

Bottom Line: crediting interest rates have come down and may cause your policy to lapse way before you pass away.

Crucial Questions:

What was the non-guaranteed interest rate when you applied for the policy? Continue reading “Life policies from 1980 to 2003” →

Online term quotes: not all the cards are in the deck

by Sean Drummey

May 6, 2011

4:38 PM

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Uncategorized

Let’s say you go to an website for term life insurance quotes, plug in you information an you get a list of premiums and carriers. Are those the lowest priced carriers? Probably not. The website will only show you carriers the brokerage are able to represent or are willing to represent, not all the carriers out there. Certain carriers are closed or heavily restricted to independent brokers, like Northwestern Mutual and Cincinnati Life. Knowing this is especially important to tobacco users for certain age and amounts, because there are wide variations in tobacco rates and you’re not likely to see anywhere near the best rates in online term comparison quotes. Online quote system gives the illusion that your seeing the lowest rates. But that is really only an illusion. They only show you their carriers. It may be a long list, but not a comprehensive list.

My rule of thumb is that Genworth is by far the best term carrier because they have very competitive premiums and a superior conversion option that outdistances the competition hands down. Conversion is a key element. However, if another carrier has a far better price for whatever reason, saving my client money for decades is a more important consideration than conversion, so I recommend that carrier. Most of the time I can recommend a carrier I represent, but if I’m aware of a lower premium option for a carrier I can’t represent, I’m willing to make that recommendation and walk away. It’s the same ethic that is in place when recommending whether to replace a policy. A good life agent is always willing to serve in the client’s best interest, even if it means walking away.

Annual Statement: Review and Save Thousands

by Sean Drummey

May 6, 2011

12:08 PM

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In your 60's, In your 70's, Policy Review

I was reviewing an annual report for one of my life insurance clients this morning. Agents are cc’d a copy, and I make it a point on the policy anniversary to contact my clients. This policy is guaranteed universal life (G-UL) policy, also called a no-lapse guaranteed UL. As long as the premium is paid on time, the policy’s benefit is guaranteed. This one is guaranteed out to age 120 and is on bank draft, so it’s on auto pilot and in that sense the annual report is not that important.

But there is one key element worth considering: the policy’s cash value. This policy has a $25,000 level benefit. The cash value is building up towards $2,000. Since it’s a level benefit, when the policyholder passes away the beneficiaries only get the $25,000 face amount. Any cash value remaining in the policy disappears.

So what good is the cash value? There are several ways it may come into play: Continue reading “Annual Statement: Review and Save Thousands” →

Beneficiary Information Provide Details and Update

by Sean Drummey

May 5, 2011

11:59 AM

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Policy Review

With life insurance there is the primary beneficiary and the contingent beneficiary. Primary means first. There can be more than one primary beneficiary, and if there is more than one, the benefit is divided by percentages. All the life insurance carrier cares about is that the percentages add up to 100%. Most often there is only one primary beneficiary, but with children you often see it divided 50% and 50%, or whatever split given the number of children.

After the primary beneficiary, next in line is the contingent beneficiary. This is a secondary beneficiary. You may name one or more contingent.

There are many more possible beneficiary designations: trust, irrevocable trust, the Estate of the Insured, per stirpes, etc. Careful consideration should be given to providing the proper beneficiary designation.

It’s best to provide the address of your beneficiaries, even if it isn’t directly asked for on the application. Provide a contingent beneficiary. On some life applications, they don’t even ask for a contingent beneficiary. Make sure your put those details in the where called for on the application or in the comments or remarks section. If you already have a policy, contact the carrier and provide them with the information. If you have moved, make sure to provide your carrier with your current address. Now with so many policy owners on bank draft, it is easy for a life insurance carrier to lose track of a customer if they have moved.

Keep in mind that 20, 30, 40 or more years may go by after a life policy is written, and the beneficiaries are required to notify the carrier of a claim. Carriers have not been good about contacting beneficiaries about a possible claim. Do your beneficiaries know you have a life insurance policy and with which carrier? Does your carrier have complete and up to date beneficiary information? Are you still in touch with your agent to assist you and your benficiaries? Good agents will contact policyholders yearly to review information and policy performance. Make sure you get everything in order and your beneficiaries are in the loop, so your claim gets promptly paid.

Life Settlements

by Sean Drummey

May 4, 2011

11:36 AM