Life Insurance Questions

[Mr. Frugal]

Hi! I have a 30-year term life insurance policy which I bought a few years ago. I'm currently in my mid-30s. My premium is $102/month for $1.25 million in coverage. I was rated a preferred non-smoker. I bought the policy through a friend who I thought I could trust - but after reading the WCI I am wondering if I am paying a little too much for this policy. If I am - what recourse do I have? Can I attempt to renegotiate the premiums with the insurance company? Do I shop for a cheaper option with a different agent and simply let my current policy lapse by ceasing to make payments on my current policy? Would love to hear people's thoughts. Thanks!

[DMFA]

Most of being "cheated" in life insurance usually pertains to cash-value policies like whole life, universal life, etc. Even if you could get a slightly lower premium, the amount lost is minimal compared to the tens of thousands people lose upon surrender of lousy whole life policies.

[Jason Veirs]

Mr. Frugal wrote:

Hi! I have a 30-year term life insurance policy which I bought a few years ago. I’m currently in my mid-30s. My premium is $102/month for $1.25 million in coverage. I was rated a preferred non-smoker. I bought the policy through a friend who I thought I could trust – but after reading the WCI I am wondering if I am paying a little too much for this policy. If I am – what recourse do I have? Can I attempt to renegotiate the premiums with the insurance company? Do I shop for a cheaper option with a different agent and simply let my current policy lapse by ceasing to make payments on my current policy? Would love to hear people’s thoughts. Thanks!

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Hi Mr. Frugal - If you purchased this policy through a friend, there's a chance that your friend was a "captive agent" who worked with a carrier like Northwestern Mutual, or New York Life, or one of the other captive carriers. If this is the case, then you will definitely want to shop it out now, as you could be paying way more than you should. It all depends on your health/lifestyle and what carrier is going to look at you the most favorably. Since you said you took out this policy a few years ago, I calculate that you should have been in your early 30's at the time, which means, you should have been pretty darn healthy - Did the carrier/your friend say after underwriting was completed why you were rated Preferred Non-Tobacco and not Preferred Plus Non-Tobacco?

There unfortunately are many agents/brokers who do not know underwriting like they should, which ends up costing consumers a ton of unnecessary premiums over a 20-30yr term. Believe it or not, these carriers have very specific underwriting guidelines, which you have to be aware of when trying to lock-in the best rate. I actually just saved a 35yr old male over $600/yr on a $1.5MM 30yr term policy that he took out 2yrs ago through another broker. It turns out that he had high cholesterol at the time and it was not controlled (ie: no medication), therefore, he was rated as a Standard Plus Non-Tobacco rating. We just got him approved one step higher at the Preferred Non-Tobacco rate, which ended up extending his coverage by 2yrs, while also saving him over $18k in premiums over the full 30yr term.

Lastly, it never hurts to shop out your life insurance policy, as there are a lot of agents/brokers who start out in the industry, sell all of their friends and family on a policy, and then quit the industry a couple of years later, as they can't sustain themselves. There are also quite a few carriers who are not competitively priced, which means that you could be overpaying for the same term coverage that you could find through another carrier.

[Ed_CLU]

Jason Veirs wrote:

Hi Mr. Frugal – If you purchased this policy through a friend, there’s a chance that your friend was a “captive agent” who worked with a carrier like Northwestern Mutual, or New York Life, or one of the other captive carriers.

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FWIW, NML agents are not captive and can sell most any carrier.  Not sure about NYL, but would imagine they are the same.  The OP mentions 30 year term and neither NML or NYL (or any of the other mutual to my knowledge) offer those products.  This would lead me to believe they used someone outside the mutual carriers.  Just thought I would clear that up for Jason and others that jump to conclusions.  As an industry person it might be helpful knowledge for you to know going forward.

[Miss Bonnie MD]

NML agents almost never sell anything but their own products.

[ticker]

It sounds a little high.  I have nearly the same policy, same age, same health.  Mine is $50/month (for $1.25mil/30 years).

Check term4sale.  You can "backdate" to your age to what it was when you got your policy and get some idea of what other rates you might have been able to get.

[Mr. Frugal]

Hi again and thanks to everyone for your feedback. I did not mean to imply that I had been cheated. I only thought I might be paying too much - but wasn’t sure. Even a difference of $20/month adds up to a large amount of savings over 30 years! I thought that maybe I didn’t get the best deal when I read Jim’s book where he gave this example “A healthy 27-year-old female can buy a $1 million 20-year level term policy for about $400 a year. A 30-year policy will run $550 a year.” I also went to www.term4sale.com and quickly plugged in some numbers for a $2 million policy and received a rough estimate of $80/month. My current policy is through Legal & General America and I can only assume I did not receive a “super preferred” rating due to aspects of my family history but am not sure. I also think the person I purchased the policy through was an independent agent at the time but again, am not 100% positive. Anyhow, you all are basically confirming what I suspected. I suppose I will return to www.term4sale.com and shop for a new policy amongst the agents they recommend and see what premiums they can offer me. I just wish I didn’t have to repeat the hassle!

[Jason Veirs]

Ed_CLU wrote:

Jason Veirs wrote:

Hi Mr. Frugal – If you purchased this policy through a friend, there’s a chance that your friend was a “captive agent” who worked with a carrier like Northwestern Mutual, or New York Life, or one of the other captive carriers. 

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FWIW, NML agents are not captive and can sell most any carrier.  Not sure about NYL, but would imagine they are the same.  The OP mentions 30 year term and neither NML or NYL (or any of the other mutual to my knowledge) offer those products.  This would lead me to believe they used someone outside the mutual carriers.  Just thought I would clear that up for Jason and others that jump to conclusions.  As an industry person it might be helpful knowledge for you to know going forward.

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You are correct, Ed. I was merely pointing out that he should shop out his policy, as he could possibly get Preferred Plus NT rates with another carrier, and lock-in a lower rate, along with a longer term period. I was also bringing to light that there's a very high likelihood that his friend was a captive agent, which as you know, means that he only presented one option/carrier at the time - Never good from a consumer's standpoint. Unfortunately, this is oftentimes the M.O. for many captive agents who are just starting out in the business, as they are trained to try to sell to their warm market (friends and family) and not present other options. As a broker who represents over 60+ of the nation's top "A" or better A.M. Best rated carriers on the market, I'm their worst nightmare.

As far as I know, both NYL and NWM do not offer a 30yr term, but I've never worked for/with either of them, so I'm not entirely sure - I've just gone up in competition with them routinely, and have won out every time. I also have put both of those carriers up against other carriers such as Prudential, John Hancock and American General, and have found that many of the mutuals always seem to be much more conservative when it comes to underwriting. I actually had a good friend of mine purchase a WL policy with NYL (of which he didn't need), and he was rated as a Preferred NT, due to him riding a motorcycle recreationally on the weekends.. This is just baffling.

The only mutual carriers that I'm aware of who offer a 30yr term are Guardian and TIAA-Cref (both more conservative UW), but I'm more concerned with what the OP is currently is paying and the specifics of his current term length, as well as is current health. As I stated, shopping around beforehand is just a matter of doing your due diligence, and I always recommend that people start on www.Term4Sale.com, and then speak with a broker, who is unbiased and represents multiple carriers. I'm actually an agent listed on www.Term4Sale.com, and it's a great resource for the consumer, as you can really keep brokers honest. With that being said, there's obviously the lowest rate which you can see on www.Term4Sale.com, in addition to what the client can actually qualify for, which is where a good broker is worth their weight in gold.

Lastly, I had a client contact me about a year ago who previously took out a $1.5MM 20yr term policy through another broker, in order to fund an existing Buy-Sell Agreement that he had with his Business Partner. It turns out that he was 3yrs into his existing policy when he contacted me, and he was paying over $12k/yr for the policy. He actually chewed tobacco and his P&C agent who initially wrote the policy, mistakenly placed him with MetLife, where they rated him at a TOBACCO rate, which as you know, is typically 2-4 times more expensive. His P&C agent wasn't aware that there are other carriers who will offer him a Non-Tobacco rate, even while currently chewing tobacco, which really ended up costing him. We ended up replacing the policy 3yrs later with Prudential, and got him the same $1.5MM 20yr term policy for $6,700/yr. This equates to a savings of around $5,300/yr, or $106k in total savings over the 20yr term. This is prime example as to why it helps to know the specific Underwriting Guidelines of every carrier, and to always shop out the policy beforehand. The P&C agent ended up costing this client over $15k in unnecessary premiums, due to him not being an expert in his field. Definitely a bummer...

[Jason Veirs]

Mr. Frugal wrote:

Hi again and thanks to everyone for your feedback. I did not mean to imply that I had been cheated. I only thought I might be paying too much – but wasn’t sure. Even a difference of $20/month adds up to a large amount of savings over 30 years! I thought that maybe I didn’t get the best deal when I read Jim’s book where he gave this example “A healthy 27-year-old female can buy a $1 million 20-year level term policy for about $400 a year. A 30-year policy will run $550 a year.” I also went to http://www.term4sale.com and quickly plugged in some numbers for a $2 million policy and received a rough estimate of $80/month. My current policy is through Legal & General America and I can only assume I did not receive a “super preferred” rating due to aspects of my family history but am not sure. I also think the person I purchased the policy through was an independent agent at the time but again, am not 100% positive. Anyhow, you all are basically confirming what I suspected. I suppose I will return to http://www.term4sale.com and shop for a new policy amongst the agents they recommend and see what premiums they can offer me. I just wish I didn’t have to repeat the hassle!

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Hi Mr. Frugal - If your friend placed your policy with Legal & General (who is the parent company of Banner Life), then he was most likely an independent agent. Banner Life is a great carrier and pretty good when it comes to underwriting - They are also one of the main players in the term market and their rates are extremely competitive.

Banner Life is also one of the few companies who will not ding you for a family history of cancer (though a family history of CAD with mother, father or siblings before age 60 will be an issue), in addition to having a pretty unique Crediting Program where they will bump you up a health class, in the event that you meet all the other criterion with the exception of one finding (ie: blood pressure, cholesterol, H&W, family history, etc.). This is really helpful if you otherwise would be rated as the top tier Preferred Plus NT health class, but your HDL Cholesterol Ratio was in the Preferred NT range, as they would upstream you to the better/lower Preferred Plus NT rate if you met some of their additional guidelines.

Did your previous agent state as to why you were rated as a Preferred NT rate, as the carriers will always specifically tell you as to why you were a AOTA (Approved Other Than Applied), unless he submitted your application at the Preferred NT rate out of the gate? Either way, there are a variety of reasons why you were rated as a Preferred NT, such as H&W, meds, abnormal LFT, family hx, driving record, travel, etc., which is why I would definitely recommend that you look at it again with a broker who knows underwriting.