Life Insurance, Really?


Life Insurance 1by Tim Barnes, CLU

Last week, I was reminded of why I do not actively market Life insurance.  I will gladly help my clients obtain life insurance if they ask me, but I do not go out of my way to market that line of business.

My decision was reached, not because I think that it is a bad product.  For people with dependent children, no savings or large business debts, there may not be a more suitable product.

However, there are a couple of reasons that I do not actively market life insurance.

LIES

As a kid, I was taught, “Telling the truth is the best policy.”  Unfortunately, many of the sales techniques that are taught to life insurance sales people are lies.

I do not want to imply that life insurance sales people are liars.  On the contrary.  Most of the life insurance agents I have met are honest, trustworthy people.  They only want to help.  Unfortunately, if they have not learned how to think for themselves, they do not understand how to tell the difference between the lies they have been told by their parent company and the truth.

One of the biggest lies that come from life insurance companies is, “Everybody needs life insurance.”  That is not true.

Yes, many people need life insurance.  In fact, more people actually NEED life insurance than have it.  However, I do not see why someone whose children are grown and gone, have money in savings that can be used for final expenses, and does not have any substantial debt would NEED life insurance.  

Life insurance would be a nice luxury for their estate, but I cannot argue that a person, in that financial situation,  NEEDS life insurance.  I would rather see them use the money that they are paying for life insurance applied to the premiums for Long Term Care insurance or saved in an annuity for retirement.

REPUTATION

With as much money at risk, that the typical life insurance death benefit has, I understand why life insurance companies want to get all the information they can.  They want to make certain that every applicant pays the correct premium for their level of risk.

For example, I know that people who smoke, on average, have a shorter life expectancy than someone who does not smoke.  I also know that, just under a third, of Americans still smoke.

That makes it reasonable to assume that, roughly, 3 out of every 10 life insurance applications will need to be charged rates consistent with smokers.  It is not fair to charge people who do not smoke the same rate as those who do.

Unfortunately, many Americans, who smoke, know that they are lowering their life expectancy but would rather continue smoking.  (My grandfather was one of them.  He died from lung cancer many years ago, but he sure did love his cigars.)

The problem is that, often, people who smoke, understand that they will pay more for life insurance than someone who does not smoke.  They will tell their agent, when he is helping them with their application, that they do not smoke.

The agent may tell the insurance company that he is suspicious that the applicant uses tobacco, but the insurance company cannot do anything without proof.

In the absence of proof, the insurance companies are required to take the applicant at his word.

WHY EXAMINERS ?

Here is where my reputation as an insurance professional has been harmed, multiple times.

In order to get the proof they need, insurance companies often hire, a third-party medical professional, to visit the application and collect blood and urine samples for testing.

If the levels of nicotine, the harmful chemical in tobacco, are higher than normal, the insurance company is justified in charging the applicant smoker’s rates, regardless of what he/she said on the application.

I wish I could say that the third-party medical professionals that are used have never caused me problems.  However, that would be a lie.

Early in my career, I had problems with the service that insurance companies used in my area.  Samples were getting lost, medical professionals were missing appointments and other problems were happening.

In health insurance, I have not had that problem.  Only twice, in 27 years, have I had an insurance company ask for a current medical exam.  In both cases, the request was made because the applicant had told me, “I have never had a sick day in my life and have not needed to see a doctor in decades.”  The insurance companies were not willing to offer that person coverage until after he/she saw a doctor for a full physical to make certain that there was not a health problem that he/she did not know about or was hiding.

Obamacare has made medical underwriting, for most Major Medical policies, a thing of the past.  That scenario, as rare as it was, cannot happen in the future.  There are still  reasons why a health insurance application can be denied, but current health status, for an approved Major Medical plan, is not one of them.

EXAMPLES

This is where my problem with life insurance lies.  My clients have to right to expect nothing but professionalism and honesty when they deal with me.  Unfortunately, when it comes to life insurance, I cannot always guarantee that.

I have the ability to control what insurance companies I recommend.  As a result, I have the ability to weed out those insurance companies that, in my opinion, do not offer the same level of professionalism and honesty that I am comfortable recommending to my clients.

However, those insurance companies, often, and understandably, request blood and urine lab results.  I have no control over the medical professionals who are contracted to collect those samples.  If they behave in an unprofessional manner, it is a reflection on me, in the client’s eyes.

As I said, I tend to only work with life insurance when I am asked to do so.  I do not actively market for that line of business.

Several months ago, one of my Medicare Advantage clients requested that I help him with life insurance.  The insurance company requested a para-medical exam that included his blood pressure reading.

The medical professional that the insurance contracted required that he come to her office when she was supposed to go to his office.  He did not know any better so he spent a few hours going to her office.  When he got there, the “professional” that was contracted to perform the exam delegated the exam to a young lady, fresh out of medical school.  (He tells me that she was less than 7 months from graduation.)  The result was that the combination of strange surroundings and lack of experience by the tester, caused his blood pressure to go up.

After he told me about his experience, I arranged for a different tester to come to his home to conduct the test, and his blood pressure reading was normal.  The result was that the insurance company granted my request for a preferred rate, in spite of the unprofessional actions of the original tester.

Last week, I had another problem with a medical “professional.”  A nurse, that was contracted by a life insurance company, did not show up for a scheduled appointment.  I know that personal emergencies can happen, so I was not upset about that.

What upset me is that the nurse in question did not contact my client to let her know that she would not show up, after my client had fasted for several hours in preparation of a blood test.

Fortunately, in both cases, I already had a relationship with these clients that was strong enough to survive the unprofessional actions of these nurses.  The reason for that relationship surviving is because they both know my reputation because I have helped them with their health insurance before I did anything with their life insurance.

PROTECT YOURSELF

I do not want to leave anyone with the idea that all para-medical organizations are like this.  In fact, most of the time, the system works wonderfully.

I just want to warn you that if you happen to get one of the few examiners who are less than professional, don’t hold it against your insurance agent.  He/she is not the one who chose that particular examiner.

If the examiner you get makes you feel uncomfortable, or you think something is happening that should not be happening, call your insurance agent.  He/she can confirm what tests are required or have the insurance company use a different examiner if the one you get is not up to par.

Just remember, neither your insurance agent, nor your insurance company, can read your mind.  If there is something happening that you do not think is right, stop everything and call your agent.

As mentioned above, under Obamacare, medical underwriting is no longer, except for tobacco use, for approved Major Medical policies.  However, it is still allowed for non-approved Major Medical policies.  Click the banner below, if you are in average health, to see what options may  be available for you.

Non-approved plans

 

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