Tag: insurance

Facts About Life Insurance

Periodically LIMRA, the Life Insurance Management Research Association, conducts a study on life insurance ownership in the United States. The findings are always interesting, but they can also be somewhat startling considering the current state of finances in the households of most Americans. In today’s economy, many Americans are struggling to keep up with rising prices and the savings rate continues to drop which portends disaster for the 35 million families who don’t have life insurance protection and who are unfortunate enough to lose a breadwinner. Here are a few more facts gleaned from the LIMRA report:

Life Insurance Ownership has Declined

Only 44 percent of families own an individual life insurance policy. This is the lowest percent of individual life insurance ownership in over 50 years, and it corresponds with the number of families, nearly 50% who say they don’t own enough life insurance which is a 50 year high. Of this latter group, affluent households are counted with up to one-third of that group saying they lack sufficient coverage.

No doubt that the declining ownership of life insurance can be attributed in large part to the declining state of the economy. However, the trend runs straight into the teeth of reality with nearly seven in 10 households recognizing that their financial situation would be disastrous if they were to lose the primary bread-winner.

A part of the problem can be attributed to the fact that 25% of households call their employer provided life insurance their protection plan. While it is certainly a more affordable alternative, the fact is that nearly 17% of households were negatively impacted by unemployment in 2009. Employer-based life insurance is not portable, and when the employed join the ranks of the unemployed they are most likely to also join the ranks of the uninsured. The big danger with relying solely upon employer-based insurance, is that when your job situation changes, and you need to buy some life insurance, you could find yourself uninsurable or the insurance unaffordable.

The study found that the number of people buying individual life insurance policies dropped again in 2009 to 9.4 million which is nearly half the amount that were issues in 1985. Some of this can be attributed to an aging population. During the 1980’s the Baby Boomers were in their peak earning years and were the largest group of life insurance buyers. With the smaller sized generations to follow, such as Gen X, Y and Millenniums, the number of potential life insurance owners has declined.

Economic Troubles and Shifting Priorities

As it turns out, the smaller number of people at the life insurance-buying age is not the only reason for the decline in life insurance sales. For 40% of Americans, life insurance is simply not one of their major priorities. The purchase of life insurance takes a back seat to debt reduction and savings for cash strapped families.

On the other side of the coin, 70% of middle-market households, which must include most Gen X and Y families, do recognize that life insurance is the most important financial planning tool and that is the best way to cover debt and income needs of surviving family members. Most of these families plan on buying life insurance but have not yet set or shifted their priorities. It is likely that many are simply procrastinating as life insurance owners have done in generations past.

Most People want to Buy – But they don’t Know How

The paradox presented by the study is both clear and understandable. Historically, people have always understood the importance of life insurance, and, according to the study, they still do. And, people have always had the intent to follow through and buy some. According to the study, 25% of households say they plan to buy life insurance sometime in the next year. But, in the next breath they admit that they are unlikely to follow through.

The challenge today, as it always has been, is that people are conflicted about buying life insurance because they don’t know enough about it, and they need help buying it. 24% of middle-market households admit that they don’t know how to buy life insurance for their needs, but they aren’t likely to reach out on their own to get the professional guidance they need. In fact, only 18% said that they would actually speak with a financial professional about their life insurance needs.

So, the fact that nearly 80% of households don’t currently have a personal life insurance or agent to turn to shouldn’t be very surprising. This is more the case with the younger generations, as Baby Boomers are more likely to be aligned with a financial professional for all of their financial needs.

The younger generations are turning more to the internet and social media sources for their financial information, and they are more likely to conduct their financial product shopping and comparison online. The good news is that there is no shortage of internet resources for learning about life insurance, and it has never been easier to shop and compare. The bad news is that it may take the destruction of many families’ financial situation to wake them up to the stark reality that their actions are more important than their intent. If you’re looking for products beyond life insurance, annuities explained is a great resource.

Facts and figures from LIMRA’s 2010 Life Insurance Ownership Study

How Life Insurance Medical Exams Works

When a life insurance company issues a policy it is, essentially, taking on an obligation that must be paid to beneficiaries in the event of your premature death. It’s “premature” because the life insurer doesn’t expect you to die until you have lived out your life expectancy at which point they will have collected enough premium and earned enough interest on it to cover the obligation. The life insurer expects that you will live up to the actuarial assumptions it made about your age, health, medical history and life style, which is why it is willing to assume the risk that you won’t. In order for it to do that, it needs to know more about you – inside and out, and that what the medical exam is all about.

You Want the Works or a la Carte?

If you are over the age of 40 and are applying for more than $100,000 of life insurance, you will be required to submit to a medical exam of some sort. A full-fledged exam includes a physical, urine specimen, blood work, EKG and x-rays. The lesser the amount of life insurance for which you apply, the lesser the medical requirements for underwriting. For instance, if, at age 40 you are only applying for $100,000, you may only be required to submit a urine sample in addition to completing a medical questionnaire. If you want $2 million of coverage you could expect to run the whole gamut of tests.

If you’re 35 or younger, applying for less than $250,000, you may only be asked for a urine sample and a blood specimen. But, the requirements vary from one company to the next. Another company may require a medical exam in the same situation.

The medical examination process, for most insurers, begins with a review of your medical history. In addition to answering some medical questions on Part I of your application, you will authorize the life insurer to access your complete medical dossier through the Medical Information Bureau (MIB). Chances are your records will reveal things that you had forgotten, however, the underwriters will frown on any information they uncover that conflicts with the information that you provided, so it is important to be totally forthcoming when answering their questions.

Next you will be scheduled for an exam. Most exams are conducted by a paramedical profession who will come to your home or office. The exams typically last less than twenty minutes and it consists of more questions about your history, measurements, and basic diagnostics such as blood pressure. They will also draw blood samples. All of their reporting is done on Part II of your insurance application. As part of Part II, and depending on the amount of insurance, the life insurer will also request an attending physician’s statement (APS) from your primary care physician.

For higher amounts of insurance, or if there are certain medical conditions involved, you may need to have your exam conducted by a physician with a bigger battery of tests including a stress EKG which measures your heart before, during and after walking briskly on the treadmill.

Underwriting requirements vary from one company to the next and many have specific requirements pertaining to non-smoking applicants, or for people who are older than age 60, or for people of a certain height-weight ratio. These are all variants that can affect the way your policy is priced.

It’s Up to the Underwriters

Once all of the requirements and reports are completed, it is all packaged up and sent to the underwriting team with the life insurer. If anything pops up on their radar in terms of a medical concern or questionable results of a test, they could order additional tests. In most cases, the underwriting review process is completed within 30 to 60 days at which point they will approve the policy as applied for, or modify it by applying a rating which will increase the premium amount.

Rated policies are a result of conditions found in the underwriting process that present a higher risk to the life insurer. They may have found that your blood pressure was above the norm, or that your height-weight ratio was just off. In many cases, ratings can be challenged if you will allow them to conduct some follow tests. For situations involving blood pressure and weight, it may be worth the extra testing if you can produce more favorable results.

Improving your Medical Exam Results

The results of your medical exam and the subsequent decision by the underwriters becomes a part of your medical history, so it would be important to approach your life insurance medical exam in the best possible condition. While you can’t cover up some medical conditions, there are ways to improve the results of the standard tests and diagnostics.

  • Get at least two nights of sound sleep prior to your scheduled exam.
  • Avoid alcohol for 24 hours prior to the exam.
  • Avoid coffee, cola and other caffeinated drinks.
  • Reduce your intake of sodium and high cholesterol foods 24 hours prior.
  • Keep your physical activity low for 24 hours prior.