The problem with Group life insurance benefits!!

Having group life insurance through your job is certainly one of the top excuses for not buying a personal life insurance policy. After all, if you already have it, why buy more. And group insurance is generally sooo cheap.

Well, allow me to throw a rock in that placid pool of thought and cause a few waves. Changing jobs is statistically happening more frequently. It’s not like our parent’s day when you got a job and worked it from then until you retired or died. I think I read somewhere that the average working person who has a job that would be eligible for group benefits, changes employment 7 times over their working lifespan.

Two things can happen to your group life insurance when you change jobs. Most group life insurance policies, which are term insurance, are convertible to either whole life or universal life policies if you leave employment. Very few of these conversion options would fall into the category of what would be called an attractive offer. Generally they are overpriced and under guaranteed. So your choice becomes either accepting a bad deal, quickly finding another job with a comparable group life plan, or buying a personal policy.

The other thing that can happen with group coverage if you leave employment is that it simply ceases. Most are kind enough to give you 30 days, a grace period of sorts, but then it simply goes away.

Especially in today’s market when an independent life insurance agent can find you term life insurance at extremely competitive prices, a prudent and reasonable thing to do is to carry a personal policy all of the time and consider group benefits to be the frosting on the cake, not the cake itself. Then, if you change employment you have ongoing coverage. Your family is never put in a position of being left with nothing if you pass away unexpectedly.

Please don’t misunderstand. I advocate gobbling up all the the cheap group benefits that are offered. Just remember they aren’t guaranteed. Your employer could decide to cut benefits. You could quit or be fired and be forced into a bad conversion option or be left with no option at all.

Another one bites the dust!!

Would everyone who has a whole life or universal life policy please stand up and raise your hand so I can see you! There is not a day that goes by that a case doesn’t cross my desk where someone believes they have a permanent life insurance policy (defined as you can’t outlive it) and when we dig into the guts of their policy we find out if they continue paying as they are, it collapses within a short period of time. When I say collapses what I mean is that they no longer have insurance unless they agree to pay substantially more than what they were led to believe would be their level premium for life.

Today I spoke with a doctor whose parents had carried a whole life policy on him from childhood. They gave the policy to him several years ago and he just let it sit until a captive agent from the company called him up and suggested the do a conversion to another type of policy. So, the doctor tells me that this life insurance agent showed him rows and rows of numbers and assured him this was a policy guaranteed for life. He said he was so overwhelmed by all the numbers that he finally just caved in and told the guy to sign him up.

The doctor was 55 at the time. Today we looked at the guarantees in his policy, and it collapses at age 71. We worked the numbers and found him a new policy that will be paid in full in 15 years and will be GUARANTEED not to lapse before his death. The  life insurance quotes are almost identical to what he is paying now for a life insurance policy that will likely be gone at his age 71. His supposed “permanent” policy isn’t guaranteed as long as his term life policies.

Life insurance agents that don’t have the moral and ethical values to sell guaranteed policies should be asked to leave the business. If you have purchased a whole life or universal life insurance policy in the last 20 years, find an independent agent and have it analyzed. As they used to say in the Navy, “this is not a drill, this is the real thing. The cost of waiting is much higher than you can even imagine.

Again, please raise your hands!

Warning! Warning!

I’ve often wished my blogs would be read by everyone. I’m pretty sure that doesn’t happen, but for this one I am lowering my wish expectations. I am only hoping that everyone who has life insurance or is considering buying a life insurance policy will listen up.

If you have a term insurance policy, or for that matter, universal life or whole life, pull it out (if you can find it), dust it off, and read it. The following stats aren’t based on any kind of scientific survey. I wouldn’t even know how to do one,  but based on what I hear from my new customers, most don’t remember what they have for life insurance. That is to say that only about half even remember the amount of insurance and substantially more than that can’t remember how long the life insurance policy is guaranteed to have level premiums. And, while not a large percentage, many can’t remember where their policy is. That makes it kind of unlikely that their family will know where the policy is, or even if one existed, should they pass away unexpectedly.

The number one reason that these problems exist, is the lack of a good, preferably independent life insurance agent that worked with you from the time you got your life insurance quote to now. A good agent is going to educate their client on what they have at the time of sale. A good agent will make sure the client understands all of the guarantees in a policy from the level premium, the conversion options and the accelerated death benefit provision. A good agent is going to instruct a client on what to do with the policy and who to inform about the life insurance, so that in the event of a death, the family knows what you have and who to call. A good agent is going to stay in touch and keep reminding their client about the benefits they purchased and keep them informed of any changes that might be prudent.

Test yourself. Without looking, write down the amounts and term lengths of any insurance policies you have. Write down your best guess as to how many years are left before the life insurance rates go up. Write down the beneficary designations just as you remember them. Ask your spouse, family, or business partner if they know what you have and who to call if you were to die.  Now check it against reality, provided you can find the policies.

When you read your policies, if there is anything you don’t understand, call the agent who sold it to you (if they are still in business) and insist on education and clarification. If they happen to not be in business anymore, go onliine or look through your phone book and find an independent agent who can help you understand what you have. Whover said “ignorance is bliss” obviously wasn’t dependent on life insurance benefits.

Test yourself today. Waiting is an option that could severely damage your family’s future.

The second most valuable feature of term life insurance!!

Term life insurance is the most practical, appropriate and affordable life insurance for 90% or more of the average person’s life insurance needs. The obvious feature that people buy term life insurance for is the death benefit. They want to know that their family is protected for a specific period of time. That period could be when your children are growing up, when you owe a substantial amount on a mortgage, or when you have a period until retirement when your missing income could be a financial setback for your spouse.

 The second most valuable feature of term insurance is the conversion option. Simply stated the conversion option allows you to convert all or part of your term policy to permanent coverage, usually universal life, WITHOUT evidence of insurability.

 As an example. Let’s say you take out a $250,000, 10 year term policy when you are 55 and you’re in great health and get the best rate available. 10 years later you decide that, while you don’t need $250,000 any longer, you need $100,000 to carry on beyond the 10 year term.

The problem is that during that 10 years you have had two heart attacks and have had two bypass surgeries. You’ve also been diagnosed with colon cancer that appears to have spread. Bottom line is that you aren’t insurable, but you need $100,000.

The conversion option that is built into your term policy allows you to convert all or part of your policy to a universal life policy without evidence of insurability. That doesn’t just mean without an exam. Without evidence of insurability means they will issue that $100,000 at the best rate available just like they did 10 years ago. The conversion option just made you insurable again.

Read your policy. Know your conversion option. It’s the second most valuable feature of your policy.