Wednesday WTF: July 19, 2017
Insurability and your Options
Welcome back to Life Insurance week here are Budget Boss. Yesterday I spoke about why you should obtain coverage when you are young and healthy. During that post, I mentioned how it is often cheaper and more effective to get covered when you at a younger age. I also mentioned that there are options for those who may be harder to insure or those who have been declined coverage in the past. Today I am going to go over those options and show the importance of coverage even if it has become tougher. The goal of Life Insurance is to protect those you love and understanding your health and its risks should be your goal. Knowing what your options are is priceless and that is my job as an Insurance Advisor. In this post, I will go over the scenarios when applying for Life Insurance coverage and what may be your best option.
1) Rated
If you have health issues a traditional Insurance carrier may give you a rating. What is a rating? A rating is where the insurance company decides that you have extra “risk” compared to the standard person and therefore insurance will cost you more. Ratings are multiples of your standard insurance premiums such as 125%, 150%, 200% and so on. What this means is that your standard premium will be multiplied by that rating amount. (ie: $20 x 125% rating = $25, $20 x 200% rating = $40). For the insurance company, they charge extra to take on the extra “risk.” The question you then have to ask yourself is: “What is my best option.” The way I see it is that if an insurance company rates your premium it is a sign. The sign can be taken as a sign to focus on health. The sign can also be taken as although you feel healthy, health may be an issue for you moving forward. Being that health may be an issue for you moving forward you should then make sure you have your loved ones protected in case health issues arise. This to me makes the insurance rating a moot point. Your policy can be shopped around to find a better rating and therefore better price. You can also apply for better rates later to lower the price if you have improved your health. Getting a rating doesn’t mean it’s the end of the world, it just means that you have some work and thinking to do.
Possible reasons to be rated: Diabetes, Weight Issues, High Cholesterol, High Blood Pressure and many other conditions
2) Being Declined
The first Life Insurance policy I ever sold was declined. The client was declined due to health reasons, namely having Ulcerative Colitis. UC is a non-life threatening condition but can lead to complications later in life including colon cancer. The client was fairly upset that they were declined because their health had actually improved recently and they felt pretty good. This didn’t matter to the insurance company as they look at it in the frame of “worst case scenario.” I was very upset when this happened because the first policy I sold was for me. Yes, I was declined for Life Insurance. It was pretty frustrating but it definitely opened my eyes to how insurance works. Even someone with non-life threatening conditions can be declined. I used this as an educational moment and researched other methods of coverage for someone like me. There are companies that insure people with no medical required. There are also companies that insure people with limited underwriting. The key thing to understand is that if no medical is being conducted you might have a “two-year exclusion” on your policy. What that means is that if you die in the first two years of your policy the death benefit won’t be paid, only the premiums will be returned to your beneficiary. That to me isn’t that bad as it creates a no lose situation for everyone involved. If you live past those 2 years than the full death benefit will be paid. These companies also provide “limited underwriting” policies that will fully cover you from day one. The only catch is that it will cost more than traditional carriers or the amount you can be covered for will be limited or both. Those scenarios are still better options than not having coverage at all.
As mentioned earlier in the post I think results from a Life Insurance application should be a sign. A sign to get healthier or even a sign of what your priorities should be. The decision to buy Life Insurance is a noble one. It shows that you care for those around you more than yourself. It is for this reason that I think everyone should have Life Insurance. The secret to buying Life Insurance is to have all the information available to you so you can make an informed decision. Cost and coverage amounts are important and don’t be discouraged if you are rated or declined. Even I was able to obtain coverage after being declined and since then I have realized the importance of health. I now am taking the steps to improve my health and it is paying off. You have to look at Life Insurance as a business and emotional decision. Look at it as a business decision when choosing the best possible coverage with the best possible price. Look at it as an emotional decision when thinking of who you want to be protected in case something happens to you. All of our lives have value and you might be surprised to see how much your life is actually worth.
Thank you for reading my post today and tune in tomorrow for “Thursday Trim the Trash Time,” where I will discuss Insurance that doesn’t cover you like you might expect. Have a great day friends!
“Time and health are two precious assets that we don’t recognize and appreciate until they have been depleted.” – Denis Waitley
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca.