It’s difficult for consumers to know if they’re being ripped off when it comes to life insurance. Price alone doesn’t tell the whole story because many products are cheap, but they have terrible coverage. Without much product knowledge, consumers will rely too much on price to make a buying decision, which quite often leads to a bad decision. At Houston Life Insurance Plans, we try our best to educate consumers with product knowledge so they make the best buying decision possible. Try out our blog page to get the product knowledge you need.
To get the best insurance advice, you should work with an independent agent that has experience. Experience is important because new agents don’t know the market very well. A new agent might think that a particular product is well priced, but an experienced agent may know of a better priced product. New agents may be biased in the products they recommend because they lack the experience working with different products. Finally, some agents are contractually obligated to sell insurance with only one company (called captive agents). Those agents are obviously biased in their recommendations. Not only that, but captive agents quite often sell products that are not competitively priced. It’s important to work with an experienced, non-captive agent to get unbiased advice, which is exactly the type of agent you get at Houston Life Insurance Plans.
If you have COPD or any other lung disease, insurance companies will put you in one of three categories: graded (also called modified), standard, or preferred. Graded plans have a two year waiting period for full coverage, and they are usually the most expensive. Unlike graded plans, standard and preferred offer immediate full coverage (no waiting period). The only difference between standard and preferred is the rate you pay, with standard being more expensive.
The category you fall under depends on three criteria: the insurance company, the type of lung disease, and the frequency of symptoms. As you probably know, different insurance companies have different appetites for risk. Some insurance companies try to put everyone with more than seasonal symptoms into a graded/modified plan. Conversely, some companies are fine giving preferred rates for chronic asthma. The type of lung disease matters to insurance companies because some types pose a greater risk to life. No company will give a preferred rate for COPD. A standard rate is the best you can hope for with that disease. As a general rule, you should expect a graded/modified plan whenever supplemental oxygen is used (some companies make an exception when oxygen is used for sleep apnea). The last criteria is frequency of symptoms. Inhalers are a good example. Inhalers used for yearlong symptoms will sometimes give you a less favorable underwriting decision than inhalers used for seasonal allergies. If you live in Houston or surrounding cities, you can get one of the Houston life insurance plans that cover COPD and other lung diseases.
Income replacement is one of the biggest things to consider when determining the amount of coverage needed in a life insurance policy. Financial professionals offer several different formulas to calculate income replacement. One of the simplest formulas takes your annual income and subtracts your personal expenses. For example, let’s say you bring home $50,000 per year. Some of that money will be spent on your personal needs (not family needs). If you are no longer alive, then you are no longer spending money on personal needs. That’s why personal expenses are subtracted from annual income. A common assumption is that 25% of your annual income is devoted to personal expenses. Financial professionals recommend a minimum of 5 years income replacement.
There are some decent life insurance calculators available, but one assumption they all make is that your income is the only income that needs replacement. Grieving affects many things, including job performance. Some surviving spouses may require a long time to grieve, so their job performance may be affected long term. Grief may even cause someone to lose a job. I don’t claim to know the statistics on grieving and job performance, but one thing makes intuitive sense: jobs that require a great deal of creativity are most affected by grieving. On the other hand, jobs that require repetitive manual labor are probably the least affected.
Job performance may also be affected if the surviving spouse has young children. Time may be needed away from work in order for a parent to provide emotional support for grieving children. In conclusion, it’s good to consider the income of both spouses for life insurance coverage even though only one spouse is being insured with the policy. If you have any questions, don’t hesitate to send me a message.
One of the biggest rating factors for life insurance is your age. Most people probably don’t realize they can turn back time and be rated a year younger. Before people get too excited, I want to caution there are some restrictions and reasons for not doing this.
- Every insurance company has its own rules for backdating. Some allow a full 6 months, others allow a much shorter time, and some don’t allow any backdating. Backdating a policy several months might not be ideal for many clients because an agent has to collect all backdated premiums up front.
- Backdating might not be advantageous for young people. The difference in premium between someone who is 20 years old and someone who is 21 years old is negligible. On the other hand, the difference in premium between someone who is 79 and someone who is 80 is substantial.
- Backdating is only for people who are fairly certain they will keep a policy for life. I would not recommend it for someone with a history of life insurance cancelling because of nonpayment. If you end up keeping a policy for only a few months, then backdating is a waste of money.
- You must deal with an agent’s willingness to backdate. The issue of backdating rarely comes up for agents, so they might be out of practice and uncomfortable with the idea. Agents are a little paranoid about making mistakes, and agents know they are more likely to make mistakes with uncommon issues.
What are your options if you had cancer in the past and you want life insurance? The type of cancer matters. Insurance companies are okay with basal cell skin cancer. They are also okay when the affected organ is removed. For instance, if you have a radical mastectomy after having breast cancer, the insurance company will act as if the cancer never occurred. The length of your remission plays a big role. If you’ve been in remission for two or more years, you should be able to get simplified-issue-whole-life. Keep in mind that medications may impact your approval. Some companies are friendly toward cancer maintenance drugs. Other companies seem to imply that you still have cancer if you are using cancer drugs (even if you’ve been in remission for a long time).
Many people who had cancer in the past head straight for guaranteed issue products without considering alternatives. It’s easy to understand why. Guaranteed issue products don’t ask medical questions, which many people like. People with a history of cancer fear being rejected by insurance companies. Emotions are not the only thing at stake with rejection; some companies specifically ask if a denial of coverage occurred in the past (insurance companies may deny coverage if another company denied coverage). Therefore, if you are not going with a guaranteed issue product, make sure your agent is trying to place you in a policy that has a high probability of approval. That way you won’t have a denial on your record (insurance companies can track denials in a database called MIB). Despite the positives of guaranteed issue, it shouldn’t be your first choice. Guaranteed issue comes with a two year waiting period for full coverage. Immediate full coverage should always be your goal. If you have any questions, don’t hesitate to contact us.