Do you have a dangerous job and need life insurance? Most types of life insurance ask at least one underwriting question about your occupation. You can either do things the hard way, finding a company willing to accept your particular occupation, or you can simply go with a type of policy that doesn’t ask occupation questions. Is it fair if the insurance company doesn’t ask about a risky job and you have one? Yes, the insurance companies are very much aware of the risk factors out there. If they don’t ask a question, it’s because they don’t care about that risk or they already beefed up their premium to account for a certain percentage of people with dangerous jobs. As far as I know, all term life policies want to know what job you have (guaranteed issue term life is probably the one exception). Whole life policies also ask about occupation, except for simplified issue whole life and guaranteed issue whole life. Guaranteed issue products are not the best option because that product is designed for the most extreme risk, such as someone who was just diagnosed with cancer or terminal illness. You’ll end up with coverage limitations (2 year waiting period) and higher premiums if you go with guaranteed issue. Therefore, the best thing to use for dangerous jobs is a simplified issue whole life policy. With simplified-issue, there are no occupation questions, but there are questions to eliminate high risk medical problems. This allows you to have a policy with lower premiums and no coverage limitations.
This article disputes what other authors say are the best whole life insurance companies. Learn why their list of best companies is flawed.
I have to admit I’m jealous of other websites that are given clout and authority by search engines despite their terrible advice. These websites don’t deserve the clout and authority given to them. One whole life insurance article touted New York Life and State Farm as two of the best life insurance companies. I will dispute this assertion.
New York Life has a particular life insurance product that is sold to seniors. This product is ridiculed by hundreds if not thousands of independent agents. Here is what makes it so bad: premiums increase every five years and the policy automatically cancels at age 80. So even if seniors on a fixed income can somehow afford the premium increases, the policy cancels just a year after their life expectancy. Yes, the policy is convertible to a permanent policy, but I suspect the vast majority of policyowners don’t attempt conversion until age 79, when they are greeted with an unpleasantly high conversion quote. What might not be explained well is the way conversion rates are calculated; they are based on the age of the insured at the time of conversion. Nearly everyone trying to get a permanent policy in their late 70’s or early 80’s will have to pick their jaw off the floor after reading the quotes. Seniors are much better off buying simplified issue whole life, where the premiums never change and the policy never cancels (as long as premiums are paid).
State Farm has many good things going for them, but competitive life insurance rates is not one of them. State Farm is well known for having some of the highest life insurance rates on the market. State Farm does have an impressive reputation for never missing a dividend payment, but I suspect that can be attributed to overpriced premiums. If companies charge too much in premiums, they will always have enough money to pay dividends. Non-participating policies (no dividend payments) seem to be the norm for companies with competitive premiums.
Any reputable agent selling whole life insurance will avoid modified plans unless there is no other option. Every client dreads the bad news that only modified whole life can be offered (agents don’t enjoy giving the bad news either). To soften the blow, I’ve constructed a list of medical conditions that typically trigger an offer for modified whole life. I want to caution that every insurance company is slightly different in the medical conditions they accept, so don’t think of this list as exhaustive. Also, as a general rule, the companies with the best pricing tend to have more restrictive underwriting.
- organ transplant
- terminal illness
- congestive heart failure
- cognitive impairments such as dementia
- heart problems within the last year
- supplemental oxygen (some companies will accept this for sleep apnea)
- recent drug or alcohol abuse
- recent cancer
- assistance with daily living activities (eating, bathing, etc.)
- current dialysis
If you do get an offer for modified whole life, it isn’t totally bad. You will have full coverage after a two or three year waiting period. In the unfortunate event you pass away during the waiting period, the premiums you paid weren’t wasted because all of that money comes back to your beneficiary plus interest, and the interest is better than anything you would get at a bank. Be sure to contact us with any questions.
Below is a quick reference for the benefits of simplified issue whole life:
- 1st Day Coverage. For non-modified plans, you are fully protected the very first day your coverage goes into effect with no waiting period.
- Ease of Issue. No physical exams.
- Premiums will Never Go Up. Lock into a rate at your current age and the cost will never increase regardless of changes to your health and age.
- Benefits will Never Go Down regardless of changes to your health and age.
- All Policies Build Cash Value.
- Benefit is Paid Tax Free for lump sum payments.
- Your Policy Can Never be Cancelled as long as premium payments are made.
- Protected Asset. You will never be forced to liquidate this plan (assuming you have a living beneficiary).
If you have any questions about these benefits of simplified issue whole life, don’t hesitate to send us a message.
The great thing about being young is the number of options available. This applies to whole life insurance as well. I will discuss four whole life options for young adults: simplified issue whole life, fully underwritten whole life, limited pay whole life, and single premium.
Simplified issue whole life is the easiest to sign up for. Only a handful of underwriting questions are asked and most of the time you have an underwriting decision before the agent walks out the door. This type of policy is highly recommended for seniors, but young people usually have better options.
Fully underwritten plans are good for young adults, but not for older adults. Of course this is a generalization. There are certain circumstances where I would recommend the opposite. Fully underwritten doesn’t always mean medical exams. There are no medical exams if the policy is small enough. A physician statement might be required (a statement from your doctor claiming you are in good health). Physician statements don’t require any effort from the applicant, but they do slow down the underwriting process since doctors typically view physician statements as a low priority.
The next type is limited pay whole life. This type of policy has advantages. The first advantage is the limited number of payments before the policy is paid up in full. You can have the policy paid up in 10, 15, or 20 years. You can even have the policy paid up at a certain age, like when you’re 65 or 85. The other advantage is having a policy paid up before you retire. Paying for life insurance in retirement can sometimes be a heavy burden. There are two versions of limited pay whole life: simplified issue and fully underwritten.
The last type is single premium. This type gives you whatever coverage one premium payment can buy. This is a one and done deal. The biggest downside to single premium plans is the lack of tax advantages (the IRS treats these plans less favorably than other plans).