The Black Box of Underwriting

Sex, Drugs and Genetics

Overweight by 20 pounds? On high blood pressure medication? Smoke an occasional cigar?

Most people feel certain that any one of these will increase their life insurance premiums. In most cases, they don’t.

As a life insurance buyer, you should expect to pay the lowest possible premiums and receive the best rate class the company offers, based on your specific information. It is the responsibility of your agent to fight for the most appropriate rate for your specific circumstances. Sadly, too many people are not paying the lowest possible premiums. Don’t let incorrect information prevent you from taking advantage of better policies and lower premiums.

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

The underwriting process is a blend of art, skill and experience. The key is full disclosure on your part. The improvements in medical technology are leading to lower premiums. Better medical technology equates to more people reaching life expectancy and consequently, premiums are trending lower. In other words, improved mortality is a significant factor in determining premium rates.

The following issues require good underwriting management. They do not prevent you from getting competitive offers. There are many factors considered by a good life insurance underwriter and the more information you and the agent provide, the more likely an underwriter is to apply the appropriate credits:

• Extra weight.  This is, by far, one of the most misunderstood risk factors. Most people carrying extra weight are far off in their estimation of 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 a rate increase.
• Cardiovascular disease.  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.
• Cancer.  If you have had cancer in the past, you have a good 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.
• Diabetes. People with Type 1 diabetes typically have impaired life expectancies 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.
• Mood Stabilizing Drugs, Depression, Psychotherapy.   If you’re taking medication for an ongoing depressive condition (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.
• 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.
• 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 (www.InstallmentLife) 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.
• Substance abuse.  It is impossible to generalize with substance abuse history. However, with disclosure and these issues legitimately being in the rearview mirror, 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.

Working with an experienced agent is crucial. Knowing which companies excel in the various issues mentioned above and not being afraid to challenge underwriters are only a few examples of the value received from an experienced professional.

Visit www.LifeInsuranceConcepts.com or www.TedBernstein.com for more information about life insurance.

BIO

Ted Bernstein is a third-generation licensed life insurance specialist and nationally recognized industry innovation expert in alternative distribution strategies and life insurance product development with decades of speaking out and advocating for changes on behalf of consumers. A member of the Association for Advanced Life Underwriting, he was the first to introduce life insurance without commissions or “no-load” life insurance in the mid-1980s and launch the first fee-based Life Insurance Policy Audit and Review service for trust companies and life insurance fiduciaries. His newly introduced innovation, the Installment Life Option, is game-changing. To learn more, visit www.lifeinsuranceconcepts.com or call 561-988-8984.