At the age of 26 what type of life insurance policy would be best... lifetermuniversaletc.
Total Comments: 18
Posted: Mon Jan 18, 2010 06:25 pm Post Subject:
Guest1,
I understand your point that if I'm middle age with wife and kids and I die they don't much care what type of policy I had and the add benefits of having say WL or UL over term won't matter much at that point. From the stand point that you could die tomorrow it is often the case that death benefit amount is more important than type of policy from a very broad stand point of say term premium vs. WL premium.
We have to qualify what "more important" means.
Ultimately, it's what's important to the client. I've been in the fight a few times with people who refuse to buy term insurance because they don't want to live with the possibility that they might never "collect" on the policy. I've walked away with a permanent policy paid for. They view being underinsured from my point of view as unimportant. I looked at it as they are at least better off than they were before.
Take a final expense scenario into consideration. Maybe the client would be better off buying UL because they could get a larger death benefit than WL, and that larger death benefit would more appropriately address their needs. Problem is the funding requirements for the policy might leave them without any insurance, or SGUL's might leave them with a smaller death benefit than they paid in premiums if they live too long. We have to keep tomorrow in mind, and with that, death benefit will not always be the most important variable in the equation.
Posted: Mon Jan 18, 2010 06:29 pm Post Subject:
Maxherr,
Are you suggesting that for an insurance company to charge for a longer conversion period on a term policy is bad and not good for the client?
I'm going to disagree with this if this is your stance. There needs to be some hedge on the behalf of the insurance company to guarantee insurability of a permanent policy in the face of declining health. I agree that some seem to charge a hefty sum for the ability of conversion for the entire length of the term product, but I'd like to know of a company that doesn't "charge" for it and what their term rates are.
Posted: Sun Jan 24, 2010 05:29 am Post Subject:
Are you suggesting that for an insurance company to charge for a longer conversion period on a term policy is bad and not good for the client?
No . . . I'm not saying this at all. What I'm saying is that the insurance company just doesn't need to charge to include a conversion privilege at all. Just like they don't need to charge for a renewal provision.
They can choose to limit conversion to years 5-10 or 5-15 of a 20 year term policy if they are concerned about the future health of the insured. But the heart of the matter is simple, do they want the insured to convert from term to WL/UL or not?
Of course they do. Means more money (cash flow) by virtue of age alone -- and we gotta fill the CV by age 121, so that bumps up the premium, too.
Actuarily speaking, obviously the ones who are more likely to want to convert are those who now have health challenges, and might not be insurable at Table XVI rates. But does the insurer really care? I don't think so, they've got plenty of business going with young, healthy people. It's no different than issuing a $1,000,000 UL policy on Joe Studly at age 25, and he breaks his neck snow boarding the next weekend. The company pays the claim, and life goes on, and premium dollars keep coming in from the living.
I don't think I've ever seen any stats on how many term policies actually convert, and of those that do, how many survive to the death of the insured. The actuaries know the answer, though.
But I'd be willing to bet that 90% of the extra money insurers charge for their term conversion privileges is pure profit and has absolutely nothing to do with the cost of adverse selection. The 10% covers the cost of the actuaries who know the answer.
Ultimately, it's what's important to the client. I've been in the fight a few times with people who refuse to buy term insurance because they don't want to live with the possibility that they might never "collect" on the policy. I've walked away with a permanent policy paid for. They view being underinsured from my point of view as unimportant. I looked at it as they are at least better off than they were before.
Can't say it better than that. You know . . . I know . . . even the client probably knows it's the wrong amount. But the client got "what they wanted" and that's just as important -- the good news is, if they do die soon, at least the beneficiary will get more than what they would have gotten if we had never taken the app.
Funny thing is, I've never had a client say, "You know, I'd rather have an auto insurance policy that gives me a new car in ten years," or "I'd prefer that medical insurance that pays for an operation, even if I don't need one, if I haven't been hosiptalized in ten years." It's only in life insurance that people seem to think "they should get something back". My hat's off to the marketing genius that first said, "Let's tell 'em they get the money even if they don't die -- we'll just make 'em wait till they're 100."
I think his name was Alzheimer -- but I can't remember.
Posted: Mon Jan 25, 2010 12:50 am Post Subject:
I once told at&t they should let me use my rollover minutes to pay for my bill, making an analogy to whole life insurance, they didn't get it, and of course weren't open to the idea.
I'm still quite surprised by what seems to be the suggestion that the charge for making a policy convertable is unneccessary. There's definitely a risk involved, and I've witnessed a nervousness at several top insurers over issuing policies to elderly people. The example of the 20 something breaking his neck would likely be explained away by the insurance industry as something they know is highly unlikely.
Although, to give one piece of credit to your view, I suppose we could argue that converted policies later in life will have a higher potential lapse rate, since they are not filled with large amounts of cash and premium loans and/or dividend offsets won't be available to preserve them.
Posted: Mon Jan 25, 2010 06:46 am Post Subject:
Not an argument, but that's part of my point. Insurers know that the average policy (term/WL/UL, doesn't matter) only stays on the books about 7-10 years, and it's probably even shorter for term conversions. The insured/owner was used to paying the lower term premiums then gets hit with the much higher "perm" premium, and after a few years perhaps cannot afford to continue. The real harm there was, perhaps, not fully understanding the client's need initially and recommending the term policy when a WL policy might have been the better solution (higher premium than the term, but considerably lower than the later conversion premium).
I once told at&t they should let me use my rollover minutes to pay for my bill, making an analogy to whole life insurance, they didn't get it, and of course weren't open to the idea
Perfect analogy. Of course they weren't open to the idea, there was no cash flow involved. They got your monthly payment (AKA premium) and gave you something they knew you'd probably never use. Same can be said of conversion privileges.
As for "nervousness" over issuing policies to older folks, the rates are already justifiably high enough to cover the risk -- it's not really any different than the equivalent low rate for a 20-something. Some will pay premiums for a long time and still never die with an in-force policy, others will pay a few months' worth of premiums and die. That's just the game of insurance.
The company was willing to issue a term policy and collect a (relatively) small premium in exchange for their promise of a big death benefit -- based on age and other underwriting criteria. Fundamentally, that risk doesn't change when the policy is converted. But as I mentioned above, the ones who are more likely to convert, of course, are those who would otherwise present a somewhat greater element of adverse selection (very much like most of those who decide to continue their health insurance via COBRA).
I suppose the insurer can hedge its bet by slightly increasing its rates to everyone, knowing that maybe 15-20% convert (probably far less), and (my guess) 70% or more of those lapse or are surrendered, or it can just suck it up and accept the risk. They do the same thing with guaranteed purchase options -- charge money for the privilege, knowing that most of the options will never be exercised, and count the money all the way to the bottom line.
It's like asking Bank of America why it needs to charge $35 for a bounced check. It doesn't, but the money is nice to have. It looks especially good to shareholders.
Posted: Tue Jan 26, 2010 04:47 am Post Subject:
Good thing I don't have a checking account with Citi, if I bounced a check maybe they'd send me a 17 billion dollar bill :(
:lol:
Posted: Fri Feb 19, 2010 12:31 pm Post Subject:
At 26, it is safe to assume that all of life’s financial obligations haven’t yet been met (mortgages, for instance) and some are yet to begin (having kids, raising a family and putting your kids through college). Term life insurance would be a good idea at your age, because it offers you the best coverage at affordable premiums that won’t eat into your income when your financial obligations increase. Life Insurance 101 is a great resource to get you acquainted with life insurance terms, and to help you get an affordable term life policy.
Denise at AccuQuote
Disclaimer: I work for AccuQuote and this is my personal opinion.
Posted: Thu Apr 01, 2010 12:34 am Post Subject:
Not necessarily a good idea to do business with companies in New Zealand unless that's where you live.
Posted: Mon Jan 18, 2010 06:25 pm Post Subject:
Guest1,
I understand your point that if I'm middle age with wife and kids and I die they don't much care what type of policy I had and the add benefits of having say WL or UL over term won't matter much at that point. From the stand point that you could die tomorrow it is often the case that death benefit amount is more important than type of policy from a very broad stand point of say term premium vs. WL premium.
We have to qualify what "more important" means.
Ultimately, it's what's important to the client. I've been in the fight a few times with people who refuse to buy term insurance because they don't want to live with the possibility that they might never "collect" on the policy. I've walked away with a permanent policy paid for. They view being underinsured from my point of view as unimportant. I looked at it as they are at least better off than they were before.
Take a final expense scenario into consideration. Maybe the client would be better off buying UL because they could get a larger death benefit than WL, and that larger death benefit would more appropriately address their needs. Problem is the funding requirements for the policy might leave them without any insurance, or SGUL's might leave them with a smaller death benefit than they paid in premiums if they live too long. We have to keep tomorrow in mind, and with that, death benefit will not always be the most important variable in the equation.
Posted: Mon Jan 18, 2010 06:29 pm Post Subject:
Maxherr,
Are you suggesting that for an insurance company to charge for a longer conversion period on a term policy is bad and not good for the client?
I'm going to disagree with this if this is your stance. There needs to be some hedge on the behalf of the insurance company to guarantee insurability of a permanent policy in the face of declining health. I agree that some seem to charge a hefty sum for the ability of conversion for the entire length of the term product, but I'd like to know of a company that doesn't "charge" for it and what their term rates are.
Posted: Sun Jan 24, 2010 05:29 am Post Subject:
Are you suggesting that for an insurance company to charge for a longer conversion period on a term policy is bad and not good for the client?
No . . . I'm not saying this at all. What I'm saying is that the insurance company just doesn't need to charge to include a conversion privilege at all. Just like they don't need to charge for a renewal provision.
They can choose to limit conversion to years 5-10 or 5-15 of a 20 year term policy if they are concerned about the future health of the insured. But the heart of the matter is simple, do they want the insured to convert from term to WL/UL or not?
Of course they do. Means more money (cash flow) by virtue of age alone -- and we gotta fill the CV by age 121, so that bumps up the premium, too.
Actuarily speaking, obviously the ones who are more likely to want to convert are those who now have health challenges, and might not be insurable at Table XVI rates. But does the insurer really care? I don't think so, they've got plenty of business going with young, healthy people. It's no different than issuing a $1,000,000 UL policy on Joe Studly at age 25, and he breaks his neck snow boarding the next weekend. The company pays the claim, and life goes on, and premium dollars keep coming in from the living.
I don't think I've ever seen any stats on how many term policies actually convert, and of those that do, how many survive to the death of the insured. The actuaries know the answer, though.
But I'd be willing to bet that 90% of the extra money insurers charge for their term conversion privileges is pure profit and has absolutely nothing to do with the cost of adverse selection. The 10% covers the cost of the actuaries who know the answer.
Ultimately, it's what's important to the client. I've been in the fight a few times with people who refuse to buy term insurance because they don't want to live with the possibility that they might never "collect" on the policy. I've walked away with a permanent policy paid for. They view being underinsured from my point of view as unimportant. I looked at it as they are at least better off than they were before.
Can't say it better than that. You know . . . I know . . . even the client probably knows it's the wrong amount. But the client got "what they wanted" and that's just as important -- the good news is, if they do die soon, at least the beneficiary will get more than what they would have gotten if we had never taken the app.
Funny thing is, I've never had a client say, "You know, I'd rather have an auto insurance policy that gives me a new car in ten years," or "I'd prefer that medical insurance that pays for an operation, even if I don't need one, if I haven't been hosiptalized in ten years." It's only in life insurance that people seem to think "they should get something back". My hat's off to the marketing genius that first said, "Let's tell 'em they get the money even if they don't die -- we'll just make 'em wait till they're 100."
I think his name was Alzheimer -- but I can't remember.
Posted: Mon Jan 25, 2010 12:50 am Post Subject:
I once told at&t they should let me use my rollover minutes to pay for my bill, making an analogy to whole life insurance, they didn't get it, and of course weren't open to the idea.
I'm still quite surprised by what seems to be the suggestion that the charge for making a policy convertable is unneccessary. There's definitely a risk involved, and I've witnessed a nervousness at several top insurers over issuing policies to elderly people. The example of the 20 something breaking his neck would likely be explained away by the insurance industry as something they know is highly unlikely.
Although, to give one piece of credit to your view, I suppose we could argue that converted policies later in life will have a higher potential lapse rate, since they are not filled with large amounts of cash and premium loans and/or dividend offsets won't be available to preserve them.
Posted: Mon Jan 25, 2010 06:46 am Post Subject:
Not an argument, but that's part of my point. Insurers know that the average policy (term/WL/UL, doesn't matter) only stays on the books about 7-10 years, and it's probably even shorter for term conversions. The insured/owner was used to paying the lower term premiums then gets hit with the much higher "perm" premium, and after a few years perhaps cannot afford to continue. The real harm there was, perhaps, not fully understanding the client's need initially and recommending the term policy when a WL policy might have been the better solution (higher premium than the term, but considerably lower than the later conversion premium).
I once told at&t they should let me use my rollover minutes to pay for my bill, making an analogy to whole life insurance, they didn't get it, and of course weren't open to the idea
Perfect analogy. Of course they weren't open to the idea, there was no cash flow involved. They got your monthly payment (AKA premium) and gave you something they knew you'd probably never use. Same can be said of conversion privileges.
As for "nervousness" over issuing policies to older folks, the rates are already justifiably high enough to cover the risk -- it's not really any different than the equivalent low rate for a 20-something. Some will pay premiums for a long time and still never die with an in-force policy, others will pay a few months' worth of premiums and die. That's just the game of insurance.
The company was willing to issue a term policy and collect a (relatively) small premium in exchange for their promise of a big death benefit -- based on age and other underwriting criteria. Fundamentally, that risk doesn't change when the policy is converted. But as I mentioned above, the ones who are more likely to convert, of course, are those who would otherwise present a somewhat greater element of adverse selection (very much like most of those who decide to continue their health insurance via COBRA).
I suppose the insurer can hedge its bet by slightly increasing its rates to everyone, knowing that maybe 15-20% convert (probably far less), and (my guess) 70% or more of those lapse or are surrendered, or it can just suck it up and accept the risk. They do the same thing with guaranteed purchase options -- charge money for the privilege, knowing that most of the options will never be exercised, and count the money all the way to the bottom line.
It's like asking Bank of America why it needs to charge $35 for a bounced check. It doesn't, but the money is nice to have. It looks especially good to shareholders.
Posted: Tue Jan 26, 2010 04:47 am Post Subject:
Good thing I don't have a checking account with Citi, if I bounced a check maybe they'd send me a 17 billion dollar bill :(
:lol:
Posted: Fri Feb 19, 2010 12:31 pm Post Subject:
At 26, it is safe to assume that all of life’s financial obligations haven’t yet been met (mortgages, for instance) and some are yet to begin (having kids, raising a family and putting your kids through college). Term life insurance would be a good idea at your age, because it offers you the best coverage at affordable premiums that won’t eat into your income when your financial obligations increase. Life Insurance 101 is a great resource to get you acquainted with life insurance terms, and to help you get an affordable term life policy.
Denise at AccuQuote
Disclaimer: I work for AccuQuote and this is my personal opinion.
Posted: Thu Apr 01, 2010 12:34 am Post Subject:
Not necessarily a good idea to do business with companies in New Zealand unless that's where you live.
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