Life Cycle Financial Planners, LLC

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10 Life Insurance Underwriting Tips To Lower Your Costs
Life Insurance Underwriting – Demystifying The Black Box of Underwriting

Sex, Drugs and Genetics

One of the most effective ways of reducing your cost of life insurance is by improving the rate class or making sure to get the best class possible when buying new coverage. Once you decide to purchase a life insurance policy, the process of underwriting begins. Life insurance underwriting is the process allowing an insurance company to determine the appropriate rate class for your policy. It is important because the rate class determines the premium. There are many different rate classifications, usually starting at preferred. Most companies use a system with 16 extra classes – the highest rating being a Table 16.

A system of credits and debits.

Overweight by 20 pounds? On high blood pressure medication? Smoke an occasional cigar or occasionally use marijuana?

Most people feel certain that any one of these will cause their life insurance premiums to be higher. In most cases, not one of them will increase the rate or knock you out of standard rates.

You should expect to pay the lowest possible premiums and receive the best rate class each company offers, based on your specific information. It is the responsibility of your agent to get you the best rate by giving the underwriters all the information in the best light possible. Underwriters convert positive information into credits and negative information into debits. More information is better. Still, too many people are not paying the lowest possible premiums.

The difference between one or two rate classes can lower premiums by 20% or more, annually.

Life insurance underwriting is a blend of art, skill and experience. The key to getting the lowest rates possible is full disclosure on your part. The improvements in medical sciences are leading to lower premiums. These improvements lead to more people reaching life expectancy, resulting in decreasing premiums. In other words, the rates you are paying on policies issued several years ago are likely MORE than new policies issued today, even though you are older. If you are in similar or better health, you should be able to reduce your cost of life insurance.

The following issues require good life insurance underwriting management. A good underwriter will consider many factors to determine your rate class. The more information you and the agent provide to the carrier, the better your chances will be in creating maximum credits:
- Extra weight. Most people carrying extra weight miscalculate by a lot how their premiums will be affected. Typically, unless the extra weight puts you in the obese class or is causing other medical problems, added pounds do not automatically warrant any rate increase.
- Cardiovascular issues. Many life insurance companies excel at underwriting these cases. If there is good follow up and control, many insurance companies will consider standard rates after a few years.
- If you have had cancer in the past, you have a reasonable chance of getting a policy with standard or preferred rates, depending on the history and your current health. Do not assume the worst; this is a classic mistake made by people and their advisors, including their physicians. I have many clients with cancer history who now have standard rates.
- People with Type 1 diabetes typically have impaired life expectancy across the board, so your rates will depend on how well controlled your condition is and what you need to control it. If well controlled, Type 2 should lead to a smaller spike in rates. Diabetes is complicated and requires excellent underwriting.
- Mood Stabilizing Drugs, Depression, Psychotherapy. If you’re taking medication for an ongoing condition such as anxiety or depression (meaning it’s more than just a temporary state due to, say, a loved one’s death), you will probably see higher rates, but typically not what most people expect. The insurance industry needs to review these issues regularly as the medications are better and untreated anxiety and depression is far worse.
- Family history. If immediate family members have had serious or hereditary conditions, that may prevent you from getting preferred rates. The biggest culprits here are cardiovascular disease (especially if a parent died from it before 60), cancer and diabetes.
- Cholesterol & High Blood Pressure. Controlled high cholesterol and blood pressure, by themselves, typically do not add extra cost or deny you preferred rates. With these conditions, it is all about control and stability.
- Nicotine use. The use of nicotine comes in many delivery systems and life insurance companies are not consistent about this topic. Using the Installment Payout Option can help smokers reduce their premiums by as much as 40% per year.
- Driving History. If you have more than two moving violations in the last three years, you likely won’t be able to get the best life insurance rates. Time is your friend here, even for the most serious offenses.
- Substance abuse. It is impossible to generalize with substance abuse history. However, with full disclosure and a strong record of non usage, life insurance can be obtained at standard rates.
- Lifestyle/Career Issues. Any hazardous, regular activities such as rock climbing, motorized racing, skydiving, ultralight flying, hang gliding, and scuba diving could increase life insurance premiums.
While some companies increase rates for firefighters and police officers, many do not.

Full disclosure and working with an experienced agent is crucial. Knowing which companies excel in the each area and then not being afraid to challenge underwriters are some of the advantages you will get from an experienced professional.

Want to learn more? Please contact me at 561-869-4500 or by email. I will clarify and answer any questions on a complementary basis.”

Ted Bernstein Boca Raton Florida
April 27, 2017
Federal Estate Tax Repeal – Bad For Business

The life insurance industry let us down when it allowed the estate tax rate to settle at 40% and the lifetime credit (exemption) to rise to $12MM per couple. The impact is still punishing planners of all stripes. It is time for life insurance companies to step up and commit to national advertising and marketing campaigns to promote the virtues of their core products, especially permanent life insurance.

Since then, the pin has been pulled from the grenade for PERMANENT life insurance. If the estate and gift taxes are successfully repealed in an upcoming tax reform act, it will be a devastating blow for the jumbo case market and for PERMANENT life insurance. The grenade will have gone off. I understand there will be a few niche markets (key man, forced savings strategies, over-funding for retirement income, premium finance and others) that will survive. Those niche markets for permanent insurance may be meaningful enough for a handful of carriers; not for dozens of them. There will always be a need for low face amount, permanent policies. To be clear, the sale of these permanent policies does not support or lead to a successful, bustling practice. That model used to work by helping new agents develop the stepping stones to much larger opportunities. That model is on life support and the repeal of the estate tax will be its end.

Just look at the overall permanent insurance numbers since the industry did not prevent the tax from being lowered or the exemption from rising to almost $6MM per person. Hopefully, the life insurance industry is mobilizing their influence and inspiring their troops to prevent the estate tax repeal from becoming reality. Personally, I don’t see it happening and I’m not sensing the passion and the fear required to win this battle. As much as anyone else in our industry, I hope that I am wrong.

Whether the tax is repealed or not, I would urge life insurance companies to act like companies in other industries who own the responsibility for creating a product’s demand. Without advertising and marketing campaigns on a national stage to re-brand the image of permanent life insurance and its distribution system, the remaining agents who average 60 years old will continue jumping ship. Leaving the responsibility and the cost of creating demand for this product to the distribution system, or no one, is a recipe for further disaster. Manufacturers create organic demand for their products. The auto industry and consumer electronics are two great examples.

Imagine if Apple and BMW left all sales and marketing solely to their local dealerships or the local wireless stores? No national sales and marketing campaigns to launch new products, defend against competitors, shape markets or educate consumers?

Today, most life insurance companies do not advertise on a national stage and if they do, they are brand advertising, which is of little or no value in business development at the local level. We don’t need anymore TV branding ads from insurance companies during The Masters. What the industry DOES NEED is for every relevant company to start running advertising campaigns about the virtues of permanent life insurance (and their other products) during the NCAA tournament, The Bachelor, the morning news shows, The Late Show with James Cordon and The Masters. This is an industry-wide problem and the industry needs to step up.

Permanent life insurance is a remarkable tool with extraordinary flexibility and great versatility. It can be customized, by the right professional, so that no two permanent life insurance policies are the same. No two buyers are the same. Their policies can and should reflect their differences, their needs and their desires, now and in the future.

One client may have an over-funded $5,000,000 IUL with Option C and a death benefit payable in a lump-sum. Another may have a $5,000,000 GUL with Living Benefits and the Installment Payout Option to protect his/her family with 20 guaranteed payments of $250,000 for 20 years. Another client may have a minimum funded UL tied into their lifestyle, earning credits for living the good life. And another might have a $5,000,000 WL policy with vanishing premiums.

Just like the combination of apps on my Smart Phone are not like the apps on another’s, no two permanent life insurance policies should be the same. We each start with a Smart Phone that makes calls. But, the way I intend to use mine is different than how you use yours. Our needs are different and that is what leads to which apps we download.

To help our industry fight the battle against the estate tax repeal, contact AALU for information about who to contact in Washington.

Ted Bernstein can be reached at Life Cycle Planners or by calling him in Boca Raton, Florida at 561-869-4500.

Don’t need your life insurance policy anymore? It has value, even term insurance. Read more…

March 28, 2017
Life Insurance Industry Must Do Better Controlling The Important Conversations.

Can you recall any life insurance company campaigns targeting consumers directly about the value and virtues of their core products? Have you ever seen these ads during the LPGA, The Masters, The World Cup or the World Series?

They could be promoting the value of income annuities in retirement, or the differences between permanent life insurance and term insurance? Each of those events reaches the necessary demographics for our industry. Imagine if Apple did not advertise directly to their customers? What if Ford didn’t advertise directly to buyers but GM and Toyota did, spending hundreds of millions of dollars targeted right at those consumers? The immediate impact on GM sales would be dramatic.

Imagine if these companies left the sole messaging responsibility to their local, privately owned distributors? They wouldn’t. It would be disastrous in every way. And yet, this is exactly what is happening with the life and annuity companies; almost without exception.

This is not about brand advertising. There is plenty of money being spent on branding ad campaigns while Suze Orman, Ken Fisher and Dave Ramsey have taken control of these conversations affecting our businesses.

Why are these companies not advertising and marketing their products to their policyholders? One explanation from some companies is that they do not sell directly to consumers and as a result, it is not their responsibility. Insurance companies rely on a variety of distribution methods to sell and reach their policyholders, mostly through a network of professional agents who specialize in the sale of these products.

Distribution in the automobile industry is similar. For example, as consumers, we are unable to purchase a BMW directly from the BMW company. Nor can we buy a Cadillac directly from GM. We buy from their middleman, their dealerships. The car companies support their distributors in many ways and one way is through direct to consumer advertising and marketing. The manufacturers advertise on a national level and their dealerships are targeting more locally in a coordinated partnership.

We have reached the point where our product manufacturers must seize this responsibility and begin to advertise, promote and market the products they manufacture, directly to insurance and annuity buyers. Over the past several years, there has been an obsession to “crack the code”, to find a way to jump start and create online consumer demand for life insurance and annuities. Unfortunately for all stakeholders, no magic bullet has been found. Life insurance is sold, not bought. But the insurance companies can help us create demand for these products. We are the industry’s “dealerships” and we simply cannot afford to shoulder this responsibility without their help.

The time is now for the industry to use its formidable resources and take control of these conversations. The carriers should begin inspirational campaigns that are dedicated to influence consumers to take action. This messaging requires complex, multi-media campaigns. I believe the ROI will be significant on many tangible and intangible levels, especially on new sales.

Without this change, calculated misinformation from our competitors will continue to influence consumers about our products. Consumers will lack the education based information to make informed decisions which negatively impacts sales. As the whole pie continues shrinking, so too will the overall slice for each distributor. We know this happens. The industry continues to lose agents every year and the remaining agents have reached an average age of 60. Sales are down or flat every year!

Currently, it is our competitors who define our products, our services and our professional status. They spend more, they message better and they communicate better with financial journalists. With all due respect to the few journalists who cover and do know the insurance and annuity space well, there are far too many others making incorrect and un-rebutted claims about our industry. I worry every time I see an article about life insurance and annuities written by journalists without the credentials to critique these products. Asking the distribution system to be solely responsible for pushing back against these misinformation campaigns is ineffective. By definition, we are easily dismissed for lacking objectivity and impartiality.

As these trends persist, crises of uninsured’s and under-insured’s have emerged into a national problem. I also suggest that there is a crisis of incorrectly insured’s, people who own the wrong coverage. There are millions of term insurance policyholders in their 50’s and 60’s who are near the end of the guaranteed term period, without good options. They didn’t convert and the conversion deadline passed meaning they cannot convert if they wanted to. For some, obtaining new coverage is filled with hurdles. Their health has changed and their budgets may not allow them to acquire what they now need.

How did they get here? Suzy Orman, Dave Ramsey and Art Williams told them to buy term and invest the difference. But nobody did. They bought term but didn’t invest the difference with any kind of discipline, if they did at all. Too many inexperienced insurance agents told people they would not need life insurance once their kids were grown and independent. Ask any person over 50 with kids and a spouse if they have no further need for life insurance today. There is plenty of pain and blame to go around but these consumers deserve good solutions going forward and we need to counsel the millennial generation about how to buy the right blend of affordable protection, for now, and permanent coverage for later. The cheapest term insurance product when they’re 35 is not the answer.

It is time for the entire compensation system to be reconsidered. Part of the reason for the widening gap of un-insured’s and under-insured’s in the middle market is because the commission is too low for sales in this market. As premiums drop and commission levels remain constant, the selling compensation is dropping in real terms.

To conclude with some good news, I am hearing more and more carrier interest about direct to consumer campaigns. Let’s hope this interest turns into real, meaningful dialogue about these issues, with all stakeholders.

I can be reached at Life Cycle Planners, Email or Facebook.

October 11, 2016
How Much Life Insurance Should You Buy?

Term Insurance Rates Are Remarkably Low! How Much Life Insurance Should You Buy? From Who?

It is important for consumers to have a good understanding of how inexpensive term insurance really is to own. Once you engage with a professional to start the process, a robust discussion will usually follow about “how much” coverage do you need to meet your goals and objectives. From there, you should learn about state of the art innovations to reduce premiums, create value and increase flexibility. Maximum flexibility and the ability to customize for most people, is more important than anything else.

The Installment Payout Option – Just one example: Most people buying life insurance today for income protection prefer to have the proceeds paid to their heirs in a partial lump-sum with the balance paid in equal, guaranteed installments over a time period they choose. Life insurance buyers now can control how the proceeds are paid to their beneficiaries at the time they purchase the policy. Until recently, beneficiaries were always paid in a lump-sum. Now, at the time of purchase, you instruct the insurance company to pay GUARANTEED, pre-determined payments over a time period you selected. The premiums can be up to 40% less, EVERY YEAR!

Things change as time goes by. The Installment Payout Option allows you to re-design the structure of payments at any time to meet the needs of your family, without underwriting.

Still, too many people are only concerned about the minimal premium differences among different insurance companies. They key is to work with a professional to first customize exactly what you need and want the policy to do in the short and long term. Not doing so is the equivalent of going into an auto dealership and demanding the least expensive car without first “building” the car to meet your unique goals and objectives. Worse is the fact that most people are not aware of these relevant innovations that can now be customized into your policy. More and more insurance companies are creating products that allow experienced professionals to design the perfect policy for you.

I offer a complementary consultation, by phone or in person, which is designed to help you explore the innovations that now exist and to determine if I am the right professional for you. I have 30+ years of experience that will ensure you end up with the perfect plan and products for you.

Send an Email to Ted Bernstein or call my direct number at 561-869-4500. Upon request, I can provide you with many clients or professional advisors who can speak to the experience of working with me and my family.

September 22, 2016