Need your help to pick life insurance carrier :)

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Thu Jun 22, 2017 8:30 pm

I am shopping for the term life insurances. I picked five carriers from term4sale:

Mutual of Omaha
Principal
Protective
John Hancock
MassMutual

1. Ratings for financial strengths and claiming process
I googled the ratings. All of them have at least A+ rating from A.M.Best although MassMutual and John Hancock have better overall ratings from A.M.Best, S&P, Moody's, and Fitch. Of course, they are more expensive (about $100 more for 1M/20years and $200 more for 2M/20years) than the other three carriers. Do I need to care the ratings a lot? Or just pick the cheapest one? My concern is if i pick the cheaper/not-the-best rating one, the carrier may out of business in the future or decline the claim.

A independent broker (from term4sale) suggest Mutual of Omaha because it is the cheapest. It seems she does not know a lot about the ratings. Should I believe her?

2. Do of all of the five carriers require medical exam? Is there any difference in underwriting? Which ones are more restrict (or lenient)?

3. Beneficiary: can I change/add beneficiaries in the future? Some people suggest to set up trust first, then put the trust as the beneficiary.However, I haven't set up the trust yet. Can I set the beneficiary now and add the trust as the beneficiary later (for example, a few years later)?
Can I add a non-citizen parent to be one of the beneficiaries?


Thanks,
Jane

Malinois000
Posts: 90
Joined: Sun Feb 26, 2017 6:08 pm

Re: Need your help to pick life insurance carrier :)

Post by Malinois000 » Thu Jun 22, 2017 10:45 pm

How about State Farm? They handle all my insurance needs.

KT785
Posts: 79
Joined: Fri Jul 11, 2014 2:21 pm

Re: Need your help to pick life insurance carrier :)

Post by KT785 » Thu Jun 22, 2017 10:54 pm

I purchased a 30 year Mutual of Omaha term policy last year and just replaced it with a 30 year policy from American General (AIG). I'm 29 but had a medical issue that made me a substandard risk to some carriers, but the farther I get away from diagnosis, the better a rating I can get--I got Preferred with AIG.

The broker I worked with through Term4Sale did a "quick quote" to see who would offer me the best rates given my family/health history; the broker did this both last year and a few months ago. I'd defer to the broker as they're better positioned to know who will approve you for what rate class.

To answer your questions:

1. I'd stick to A rated carriers though A+ or A++ are not necessary and I wouldn't be concerned with those carriers going out of business. The carriers you listed are solid companies, as are others on Term4Sale, including those with less of a brand cache. Ultimately, the cheapest option is likely the best option for term life.

2. You'll almost certainly go through a medical exam. The process is easy and in my case, the person performing the exam came to my house. Different carriers have different underwriting niches and again, I'd talk to your broker about any medical conditions or family history that may be an issue.

3. You can typically change the beneficiary at nearly any time, unless you've made an irrevocable election (not likely). I don't know why you'd need a trust unless you had more complicated estate planning issues at play.

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Thu Jun 22, 2017 11:44 pm

To Malinois000:

In my quotes, the premium from State Farm is not impressive as others.

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Thu Jun 22, 2017 11:50 pm

To KT785:

Thanks very much for your response!

Did you pick Mutual of Omaha because it gave you the best price and has A+ rating? For me, Mutual of Omaha has the lowest price. Although the rating of its financial strength is not as good as MassMutual and John Hancock. Seems I worry too much about the rating? :)

I do not have much health concerns. My broker just recommends the cheapest one to me. She also said I should only pick one carrier so she can arrange the physical exam. Is it possible to pick more carriers first and see which one offers (officially) the best price?

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Thu Jun 22, 2017 11:52 pm

Another question: The broker (from term4sale) contacted me lives in different state from me. Is this usual? Do I need to verify if she has the license to sell life insurance to the residents in my state?

User avatar
Nearing_Destination
Posts: 692
Joined: Wed Aug 05, 2009 1:26 pm

Re: Need your help to pick life insurance carrier :)

Post by Nearing_Destination » Thu Jun 22, 2017 11:54 pm

flyintangelet78 wrote:To Malinois000:

In my quotes, the premium from State Farm is not impressive as others.
Agree , SF wasn't even in the ballpark when I searched for LI ( ages ago)

Your agent should be able to get an idea of the cost for a policy from a number of insurers, depending on the specific conditions you have and thus the type/level of policy that they might underwrite you.

KT785
Posts: 79
Joined: Fri Jul 11, 2014 2:21 pm

Re: Need your help to pick life insurance carrier :)

Post by KT785 » Fri Jun 23, 2017 12:02 am

flyintangelet78:

I went with Mutual of Omaha because they were the cheapest--or more accurately, they gave me the best rating (Standard-Plus) which in-turn made them the cheapest option. The ratings didn't factor into my decision; again, I think the general rule of thumb for term life is to go with lowest premium for the coverage and term you want--though when searching Term4Sale I left the default option of only searching for companies with an A- rating or higher.

Re: exams and multiple carriers. You may have to do different exams for different carriers; I initially went with Banner Life last year (had the exam, went through underwriting, etc.) but they gave me a Table Rating (substandard risk) which was a bit of a shock to me and my broker so the broker did the "quick quote" process I mentioned before and that's when we went with Mutual of Omaha. Luckily, I didn't need to go through another exam at the time, but I think that may vary depending on the carrier. Nevertheless, if for some reason the risk class you're assigned through underwriting isn't what you're expecting, you can always re-apply with another carrier.

Re: broker location. I'm in Illinois and the broker I worked with through Term4Sale is based out of California (though he's originally from Chicago). Brokers can, and do frequently, hold licenses to sell insurance in states other than where they live/work.

Let me know if you have any other questions. Having gone through the process twice in two years, I understand some of what you're going through. :happy

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Fri Jun 23, 2017 12:42 am

To KT785:

Very helpful advice :) Yeah. Life insurance is a new area to me. Need to do some research before picking the carrier. It's great to find bogleheads and ask questions!

Some people suggest, instead of getting one policy, it's better to construct a ladder, or splitting the amount into multiple parts and picking different carriers. For example:
(1) Option 1: 1 million/30 years
(2) Option 2: 500K/30 years + 250K/20 years + 250K/10 years. i.e., 1 million in first 10 years, 750K in second 10 years, and 500K in last 10 years
(3) Option 3: Two 500K/30 years, each is with a different carrier

It says option 2 and 3 have the advantages of: get multiple insurance guarantees from the state, lower risk, etc.

Which one do you think is better?

Thanks!

KT785
Posts: 79
Joined: Fri Jul 11, 2014 2:21 pm

Re: Need your help to pick life insurance carrier :)

Post by KT785 » Fri Jun 23, 2017 3:20 pm

flyintangelet78 wrote:To KT785:

Very helpful advice :) Yeah. Life insurance is a new area to me. Need to do some research before picking the carrier. It's great to find bogleheads and ask questions!

Some people suggest, instead of getting one policy, it's better to construct a ladder, or splitting the amount into multiple parts and picking different carriers. For example:
(1) Option 1: 1 million/30 years
(2) Option 2: 500K/30 years + 250K/20 years + 250K/10 years. i.e., 1 million in first 10 years, 750K in second 10 years, and 500K in last 10 years
(3) Option 3: Two 500K/30 years, each is with a different carrier

It says option 2 and 3 have the advantages of: get multiple insurance guarantees from the state, lower risk, etc.

Which one do you think is better?

Thanks!
I raised this issue with my broker last year when I bought the first policy and he didn't recommend laddering. I believe he noted that some of his clients do so, based on the premise that they'll have a reduced need in 10-20 years but wanted to preserve the rate that they get now based on their age/health.

However, upon looking into the prospect of doing so, I found that I would spend nearly the same, if not more, on a laddered approach as opposed to purchasing a single 30 year policy for the amount of coverage I need now, at least for the first laddered period. Getting that single, large 30 year policy allows me to reduce the coverage (and thus the premium) at a later date if I want to, but it also guarantees that I have that higher coverage at a later date if I need it. Ultimately, the purchasing power of $1 million today will be reduced in 10-20 years via inflation anyway--further negating the benefit of laddering in my eyes.

Overall, I know some other Bogleheads pursue the laddered approach, but I don't see the value in it, especially since you can reduce the coverage of your policy down the road anyway (the amount of times you can do so may be limited though) and laddering multiple policies with multiple companies may actually cost more during the initial ladder period.

User avatar
powermega
Posts: 1131
Joined: Fri May 16, 2014 12:07 am
Location: Colorado

Re: Need your help to pick life insurance carrier :)

Post by powermega » Fri Jun 23, 2017 4:12 pm

We have our policies with Protective. I really like the feature where the face amount decreases after the level term period while keeping the premium constant. Other term policies keep the face amount level and let the premiums go up. It is typical that one has a decreasing need for life insurance as you get older. With the Protective policies, we can buy a 20 year policy, but we'll likely keep the policies for about 22 years.

You will have medical underwriting with any carrier for the amount of insurance you're shopping for.
Even a stopped clock is right twice a day.

FBN2014
Posts: 236
Joined: Sat Mar 08, 2014 3:07 pm

Re: Need your help to pick life insurance carrier :)

Post by FBN2014 » Fri Jun 23, 2017 4:53 pm

I would only choose a carrier that has a conversion clause in the policy that allows you to convert to a permanent policy at standard rates throughout the term without evidence of insurability. Let's say you bought a 20 year term policy and in the 18th year you have a serious illness. So at this point you may want to convert to a permanent policy to protect your family since your prognosis is that you have 3-5 years to live. Insurance companies are not stupid, they know that anyone who wants to convert in year 18 of a 20 year policy is most likely very ill. So the conversion policy they will offer you will have astronomical premiums which no one is going to buy. See how the game works? They win, you lose. That's why the tallest buildings have a John Hancock or Mass Mutual on them. There are only a few carriers that actually have the type of policy I mentioned that I would buy from.

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Fri Jun 23, 2017 6:58 pm

TO KT785:

Yeah. Getting multiple policies could be more expensive than getting one.

One advantage of getting multiple polices is to get multiple insurance guarantees from the state. For example, if the carrier is out of business, you can get 3 * insurance guarantees, instead of 1 * guarantee. If each guarantees is $200K, that is $600K vs. $200K.

About insurance guarantees, each state has their rules. This is the one for CA. http://www.califega.org/

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Fri Jun 23, 2017 7:00 pm

To FBN2014:

Thanks for mentioning the conversion clause. How much more expensive of the policy with this clause vs. the regular policy?

Regarding term vs. permanent insurance. I remember it is strongly suggested to only get the term policy, not permanent, unless you are very rich. :)

flyintangelet78
Posts: 8
Joined: Thu Jun 22, 2017 8:12 pm

Re: Need your help to pick life insurance carrier :)

Post by flyintangelet78 » Fri Jun 23, 2017 7:02 pm

To powermega:

For level term insurance, the premium is always the same for each year. It is not supposed to increase each year. right? Did I miss something?

FBN2014
Posts: 236
Joined: Sat Mar 08, 2014 3:07 pm

Re: Need your help to pick life insurance carrier :)

Post by FBN2014 » Sat Jun 24, 2017 6:43 am

flyintangelet78 wrote:To FBN2014:

Thanks for mentioning the conversion clause. How much more expensive of the policy with this clause vs. the regular policy?

Regarding term vs. permanent insurance. I remember it is strongly suggested to only get the term policy, not permanent, unless you are very rich. :)
The companies that offer this will not be the cheapest but are still very competitive. They are also highly rated with Comdex scores over 90 last time I checked.

The policy should have this wording in it. "Policy holder can covert this policy to any permanent policy that company X offers at the time of conversion"

Do not buy one that has this wording. "Policy holder can convert this policy to a permanent policy of the company's choosing"

Notice the subtle difference. I would never buy a policy that does not favor me in the event that needs change and I want to switch to permanent.
Last edited by FBN2014 on Sat Jun 24, 2017 7:02 am, edited 1 time in total.

ddurrett896
Posts: 664
Joined: Wed Nov 05, 2014 3:23 pm

Re: Need your help to pick life insurance carrier :)

Post by ddurrett896 » Sat Jun 24, 2017 6:48 am

flyintangelet78 wrote: Protective
This for my wife and I. Cheap, great ratings and smooth signup.

afan
Posts: 3013
Joined: Sun Jul 25, 2010 4:01 pm

Re: Need your help to pick life insurance carrier :)

Post by afan » Sat Jun 24, 2017 10:19 am

I have no opinion about those specific carriers. The last time I bought life insurance, a long time ago, USAA had very good prices and a top rating.
Having policies with multiple carriers to get multiple shots at the state fund is a good idea. You do not have to buy multiple policies from each company.

The value of conversion is greatly overstated. Remember that you expect your need for insurance to end at some point. If it is about to end just as you get your horrible diagnosis then continuing the policy for the few remaining years might be a good financial move, but unless your calculations are wrong, you will not NEED the policy at that point.

If you do figure it is a good to bet on a short life expectancy after the end of your term then you would be far better off extending the policy as TERM, rather than permanent insurance. You only play this game if you expect to die in a few years. Not if you think you have decades left. So you would still pay too much for a permanent policy.

The reason for a life insurance trust would be to keep the policy proceeds out of your estate. If you are going to have a federally taxable estate or if you live in a state with state estate taxes, then this can pay off.

We have been in a low inflation environment for quite a while. Recall that if inflation returns you may find that you need to keep the full amount of insurance for the long term because the real value of the death benefit will decline over time. Your family's needs are in real dollars, but the insurance is in, fixed, nominal dollars.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Benton Bair
Posts: 83
Joined: Mon Apr 21, 2014 8:06 am

Re: Need your help to pick life insurance carrier :)

Post by Benton Bair » Sat Jun 24, 2017 11:54 am

FBN2014 wrote:
flyintangelet78 wrote:To FBN2014:

Thanks for mentioning the conversion clause. How much more expensive of the policy with this clause vs. the regular policy?

Regarding term vs. permanent insurance. I remember it is strongly suggested to only get the term policy, not permanent, unless you are very rich. :)
The companies that offer this will not be the cheapest but are still very competitive. They are also highly rated with Comdex scores over 90 last time I checked.

The policy should have this wording in it. "Policy holder can covert this policy to any permanent policy that company X offers at the time of conversion"

Do not buy one that has this wording. "Policy holder can convert this policy to a permanent policy of the company's choosing"

Notice the subtle difference. I would never buy a policy that does not favor me in the event that needs change and I want to switch to permanent.
Benton Bair:

+1 Excellent observation. In my opinion choosing the business model of a life insurer and consider the corporate culture as well. Whose welfare is foremost, contract owner or stock holder? You know the answer. Other options like advance payments at end of life, chronic care and critical care are also valuable. These are contracts, words matter. Price is secondary. Not knowing how long this low interest environment may continue places more emphasis on strength of balance sheet and those companies which have weathered all kinds of storms over time. The low interest environment has significantly impaired Japanese and EU life insurers leading many to invest in the US. Also, some stock companies are using creative accounting techniques that may prove problematic in more challenging times. I prefer carriers domiciled/write business in New York state because of more stringent regulation. Please don't focus on lowest price first. As many things in life you get what you pay for.

FBN2014
Posts: 236
Joined: Sat Mar 08, 2014 3:07 pm

Re: Need your help to pick life insurance carrier :)

Post by FBN2014 » Sat Jun 24, 2017 1:23 pm

afan wrote:The value of conversion is greatly overstated. Remember that you expect your need for insurance to end at some point. If it is about to end just as you get your horrible diagnosis then continuing the policy for the few remaining years might be a good financial move, but unless your calculations are wrong, you will not NEED the policy at that point.

If you do figure it is a good to bet on a short life expectancy after the end of your term then you would be far better off extending the policy as TERM, rather than permanent insurance. You only play this game if you expect to die in a few years. Not if you think you have decades left. So you would still pay too much for a permanent policy.
You cannot extend a term policy after the term is up without going through medical underwriting. On the other hand you can convert to permanent without a medical exam. If someone is very ill and has paid into a policy for 20 or 30 years and even if their net worth has grown to the point where they can self insure, why would you not want to convert so that your family gets a large death benefit in the near future at your demise. That makes good financial sense to me, leveraging your money for a big payoff. I know it's hard for most people to justify the cost of life insurance since they think they will never see the benefits but the good term policies have the conversion clause I spoke of previously and if there is a need to convert to permanent then the permanent policy will have living benefits that the insured can use to borrow from the death benefit in case he/she is critically ill. At death, the death benefit to the beneficiaries is reduced by the amount used while the insured was living. How is that not a benefit to the insured and his/her family? As Benton Bair mentioned, cost of the policy is not the most important factor when choosing a policy. You want to make sure that the policy will work when it's most needed. Keep in mind that if you buy the policy through a website or over the phone, you are not going to get the best policy with the features I mentioned. I prefer a fee only insurance consultant who knows his/her stuff and can place the business with the right company.

User avatar
powermega
Posts: 1131
Joined: Fri May 16, 2014 12:07 am
Location: Colorado

Re: Need your help to pick life insurance carrier :)

Post by powermega » Mon Jun 26, 2017 12:13 pm

FBN2014 wrote:You cannot extend a term policy after the term is up without going through medical underwriting. On the other hand you can convert to permanent without a medical exam..
I believe you are incorrect about this. Term policies are normally sold as continuing beyond the initial level premium duration (the "term duration", 10, 20, 30 years, etc). It's what's called the "yearly renewable term" or "annual renewable term" premiums. Those premiums are going to be guaranteed premiums and based on the carrier's guaranteed issue pricing, so they will be significantly larger than the original level premium that was paid during the term duration.

flyintangelet78 wrote:To powermega:
For level term insurance, the premium is always the same for each year. It is not supposed to increase each year. right? Did I miss something?
Yes, term insurance has a guaranteed premium that can be paid to receive a guaranteed face amount, for some guaranteed period of time (10, 20, 30 years, etc). My point was what happens after the level premium duration. For typical term policies, the face amount remains level while the premium increases. For our Protective policies, the premium remains level while the face amount decreases. I like that feature about the Protective policies.
Even a stopped clock is right twice a day.

MrsBDG
Posts: 54
Joined: Thu Apr 13, 2017 4:04 pm

Re: Need your help to pick life insurance carrier :)

Post by MrsBDG » Tue Jun 27, 2017 12:59 am

Don't worry a bit about the agent being out of state, in the last twenty years it has become common for agents to be licensed in multiple states, from your larger websites with nationwide coverage to a smaller brokerage which is licensed in surrounding states or states to which they have a tie.

You can generally change a beneficiary any time. I have not seen a problem with a non-citizen beneficiary, some companies ask for the beneficiary SSN and some don't, so there could be some questions by a company which asks that.

Sometimes people need to do multiple applications, but if you choose one of the best priced options and get that offer, then I would not recommend multiples, it wastes the companies time and money and the agents often get punished for a poor placement ratio. So, if you are expecting preferred best rates with no issue, do one application. If you have a complicated issue where choosing the right company is critical, then I would like to see your agent run that situation before recommending a company, for example, family history can get you a better or worse rate classification depending on the situation, but that is something that can be determined before applying three places. Sometimes there is something, say for example, ADHD with Rx, most companies say standard, but some will offer preferred in certain cases, so maybe two applications makes sense there.

Some companies will use each other's exams, some will not, you just need to see your situation.

I agree with FBN, conversion is not going to happen or be necessary for everyone, but I see people all the time who have previously qualified for preferred best rates and then, boom! HepC, A-Fib, cancer, heart attack, bad stuff happens even to the people who seemed to be preferred best risks. Then if they are insurable, they are going to pay a much much higher premium. A standard rate class, rule of thumb, is about double a preferred best premium. If that person has a large term plan and wants to keep some amount of coverage for life, it's an easy move. And FBN is right, some companies are offering much more restricted conversion options, or any policy for the first 5-10 years with restricted conversions thereafter. Since you don't know if it will happen to you, it does make sense to check the options.

In other words, just because one policy is a few dollars less a month does not mean it is the best one, it may have some limits.

Regarding the companies, just my personal take:

Mutual of Omaha- I have only written a few policies with them, they have been good to deal with, and I have been surprised at their recently more competitive rates.
Principal
Protective- one of my favorite companies, Protective bought up numerous companies in the '90s- West Coast Life, Interstate Assurance, etc. I have seen them in several policy service situations with problems & issues. It can be complicated when the files are transferred from the subsidiary to the new company, in terms of small things being confused. We have policies 20+ years old with Protective and have had some complex client issues & Protective has been reasonable and helpful to deal with. I like dealing with them.
MassMutual- an excellent company to deal with, my family has had several policies with them and they have been nothing, but wonderful to deal with.

In reference to some comments above, Banner Life is a company we choose not to write based on customer service issues in a complicated situation. You cannot know across hundreds of clients, who is going to have something weird arise, but you can judge a company by how they handle it and I cannot recommend Banner to anyone based on what I have seen. The same goes in spades for Jackson National (which now only handles annuities)

wfrobinette
Posts: 522
Joined: Fri Feb 20, 2015 3:14 pm

Re: Need your help to pick life insurance carrier :)

Post by wfrobinette » Tue Jun 27, 2017 11:49 am

KT785 wrote:
flyintangelet78 wrote:To KT785:

Very helpful advice :) Yeah. Life insurance is a new area to me. Need to do some research before picking the carrier. It's great to find bogleheads and ask questions!

Some people suggest, instead of getting one policy, it's better to construct a ladder, or splitting the amount into multiple parts and picking different carriers. For example:
(1) Option 1: 1 million/30 years
(2) Option 2: 500K/30 years + 250K/20 years + 250K/10 years. i.e., 1 million in first 10 years, 750K in second 10 years, and 500K in last 10 years
(3) Option 3: Two 500K/30 years, each is with a different carrier

It says option 2 and 3 have the advantages of: get multiple insurance guarantees from the state, lower risk, etc.

Which one do you think is better?

Thanks!
I raised this issue with my broker last year when I bought the first policy and he didn't recommend laddering. I believe he noted that some of his clients do so, based on the premise that they'll have a reduced need in 10-20 years but wanted to preserve the rate that they get now based on their age/health.

However, upon looking into the prospect of doing so, I found that I would spend nearly the same, if not more, on a laddered approach as opposed to purchasing a single 30 year policy for the amount of coverage I need now, at least for the first laddered period. Getting that single, large 30 year policy allows me to reduce the coverage (and thus the premium) at a later date if I want to, but it also guarantees that I have that higher coverage at a later date if I need it. Ultimately, the purchasing power of $1 million today will be reduced in 10-20 years via inflation anyway--further negating the benefit of laddering in my eyes.

Overall, I know some other Bogleheads pursue the laddered approach, but I don't see the value in it, especially since you can reduce the coverage of your policy down the road anyway (the amount of times you can do so may be limited though) and laddering multiple policies with multiple companies may actually cost more during the initial ladder period.
I laddered 2 because I had a sharp increase in salary. The 2nd required me to be underwritten for the combined value but only issued at the extra amount.

Post Reply