term insurance renewal, now i'm high risk - "special situation"?

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e916mt
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term insurance renewal, now i'm high risk - "special situation"?

Post by e916mt » Sun Nov 05, 2017 9:03 am

Hi,

I'm 50, my 15 year term policy is about to end so I wanted to purchase another 15 year term (for $500K). We're a two wage earner family, have a 6 year old son, this is to pay off the mortgage so we don't need to move should anything happen until my son is out of the house. (Just wanted coverage until my son went to college, at that point could sell the house if need be, retire, etc).

So it turns out now I'm rated (considered high risk). One carrier has flat out denied me and other has approved me but it's extremely expensive, defeating the purpose for term, about $250 a month when it was like $100 a month before the rating. The agent from the carrier that approved me said that he normally would not recommend a permanent policy for someone like me, but if I want the insurance $250/m is no longer a cheap term policy and a UL/WL policy might make sense as a way to get the insurance. Does this count as a "special situation" where the term/invest rule doesn't apply?
(Since I can't get cheap term).

He's giving it some thought. Nice guy for what it's worth. I guess that means good salesman :).

For me the main issue is getting the insurance, the death benefit. Do you think WL or UL might make sense in this kind of a situation? Surrender it in 15 years?

Thanks!

NYC_Guy
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Re: term insurance renewal, now i'm high risk - wl/ul worth looking at?

Post by NYC_Guy » Sun Nov 05, 2017 9:25 am

e916mt wrote:
Sun Nov 05, 2017 9:03 am
Hi,

I'm 50, my 15 year term policy is about to end so I wanted to purchase another 15 year term (for $500K). We're a two wage earner family, have a 6 year old son, this is to pay off the mortgage so we don't need to move should anything happen until my son is out of the house. (Just wanted coverage until my son went to college, at that point could sell the house if need be, retire, etc).

So it turns out now I'm rated (considered high risk). One carrier has flat out denied me and other has approved me but it's extremely expensive, defeating the purpose for term, about $250 a month when it was like $100 a month before the rating. The agent from the carrier that approved me said that he normally would not recommend a permanent policy for someone like me, but if I want the insurance $250/m is no longer a cheap term policy and a UL/WL policy might make sense as a way to get the insurance. For WL if I wanted to put current college savings in there, for UL not 100% how to structure it. He's giving it some thought. Nice guy for what it's worth. I guess that means good salesman :).

For me the main issue is getting the insurance, the death benefit. Do you think WL or UL might make sense in this kind of a situation? Surrender it in 15 years?

Thanks!
I doubt it, but you need to do the math. It’s going to cost you about $45000 for the term insurance for 15 years. My guess is that same policy as a pure WL would cost you about $8000 per year. So maybe $120,000 over 15 years. You may get all of that back when you surrender. But you won’t be making much (if anything) by way of a return. There’s no free lunch here. I’d probably consider a 15 year guaranteed policy for $250k. And single year term for the other $250k (much lower premiums) and decrease the single year term as your time horizon shrinks. And invest whatever you can.

afan
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by afan » Sun Nov 05, 2017 9:30 am

Of course the answer will depend on the numbers, premium and cash value growth. Without those there is no way to analyze your options. But since the insurance company has the same exposure to the risk of your death under term and permanent insurance, it is not obvious why permanent would be a better deal for you.

Do you have the alternative of continuing your level term policy now as annual renewable? Usually the price for that is quite high since low risk people will shop for lower cost alternatives. In your case, if continuing is an option it may be the best choice.

I would be very reluctant to put college savings into an insurance policy. Remember that if you die you get the death benefit alone, not the death benefit plus cash value. If you count on the cash value to cover college and the death benefit to cover mortgage then your family comes up short at your death.

You could get around this by buying a larger policy but that is even more expensive.

Given that your need is temporary- dropping once your child is out of college and when the mortgage is paid off- I would not think permanent insurance makes sense. You may need coverage for 15 years, to your age 65, but it does not sound like you need it for 30 years or life.
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

KT785
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by KT785 » Sun Nov 05, 2017 1:03 pm

e916mt wrote:
Sun Nov 05, 2017 9:03 am
So it turns out now I'm rated (considered high risk). One carrier has flat out denied me and other has approved me but it's extremely expensive, defeating the purpose for term, about $250 a month when it was like $100 a month before the rating. The agent from the carrier that approved me . . . .

Given the way you phrased how you discovered your health rating and reference to "the agent from the carrier", I'm curious, did you go through an independent agent/broker? If not, I'd highly encourage you to go to https://www.term4sale.com and get quotes from the carriers there, use the "health analyzer" feature to narrow down the list if needed and contact one of the independent agents listed on the site.

I'm a healthy, 30 year-old marathon runner but because of a gastrointestinal issue, am classified as a higher risk to many insurers (table rated at some). However, I've gotten term coverage through a broker (found on Term4Sale) and was able to get a Standard Plus rate a year and a half ago, and subsequently got a Preferred rate more recently in light of the time elapsed since diagnosis.

If you've not gone through an independent agent who can take a look at your health profile and shop amongst a wide variety of carriers, I'd strongly encourage you to do so before buying either expensive term insurance or any permanent products.

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dm200
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by dm200 » Sun Nov 05, 2017 1:07 pm

1. This situation show the benefit of 30 or more year term policy (vs 15)

2. Some (perhaps many) medical "high risk" situations can be lowered or eliminated by lifestyle changes, including Type 2 diabetes, high blood pressure (and medication), high cholesterol (and medication), and tobacco use.

3. Many, many decades ago, I was denied term insurance for some obscure liver test(s), but was able to successfully (with a Physician letter) appeal and reverse the denial

technovelist
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by technovelist » Sun Nov 05, 2017 1:12 pm

dm200 wrote:
Sun Nov 05, 2017 1:07 pm
1. This situation show the benefit of 30 or more year term policy (vs 15)
Yes, I hate when people say "it's cheaper to buy 15 years and I'll just sign up again for another 15 years if I still need it."
dm200 wrote:
Sun Nov 05, 2017 1:07 pm
2. Some (perhaps many) medical "high risk" situations can be lowered or eliminated by lifestyle changes, including Type 2 diabetes, high blood pressure (and medication), high cholesterol (and medication), and tobacco use.

3. Many, many decades ago, I was denied term insurance for some obscure liver test(s), but was able to successfully (with a Physician letter) appeal and reverse the denial
Yes to both of those as well.
In theory, theory and practice are identical. In practice, they often differ.

technovelist
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by technovelist » Sun Nov 05, 2017 1:14 pm

Does your policy have a conversion option, as most term policies do? If so, you could convert to a permanent policy without evidence of insurability.

Yes, it would be more expensive than what you have now, but might still be better than any alternative.
In theory, theory and practice are identical. In practice, they often differ.

Nate79
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by Nate79 » Sun Nov 05, 2017 1:19 pm

What is your need for insurance?

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Kenkat
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by Kenkat » Sun Nov 05, 2017 1:29 pm

technovelist wrote:
Sun Nov 05, 2017 1:14 pm
Does your policy have a conversion option, as most term policies do? If so, you could convert to a permanent policy without evidence of insurability.

Yes, it would be more expensive than what you have now, but might still be better than any alternative.
That is a really great idea, worth looking into.

e916mt
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by e916mt » Thu Nov 09, 2017 8:14 pm

afan wrote:
Sun Nov 05, 2017 9:30 am
Of course the answer will depend on the numbers, premium and cash value growth. Without those there is no way to analyze your options. But since the insurance company has the same exposure to the risk of your death under term and permanent insurance, it is not obvious why permanent would be a better deal for you.
I have the numbers now so this should be pretty straightforward. These are the two scenarios as they were summarized

Current Scenario
- Annual contribution 401k: $35,200 (includes match)
- Current account balance: $830,000
- Avg. Annual Rate of Return: 7%
- Number of years: 15
- Ending balance age 65: $3,236,456
- Death Benefit and cash value age 65: $0
- Annual Income in retirement utilizing the Monte Carlo safe withdrawal rule (4% of $3.2M): $129,458

Alternate Scenario -- Reducing contributions to employer match, purchasing $500k Whole Life Insurance policy, $687/mo. premium
- Annual Contribution 401k: $24,960 (includes match)
- Current account balance: $830,000
- Avg. Annual Rate of Return: 7%
- Number of years: 15
- Ending balance age 65: $2,961,122
- Death Benefit Age 65: $500,000
- Cash Value Age 65: $130,867
- Annual Income in retirement utilizing cash value from life insurance in years following a down market: $171,381

In any event it's too complex and I don't have the expertise to fully understand why, in theory, the alternate scenario might be better (other than looking at a higher annual income in retirement figure). Can you explain the thought behind it?

At work we get $200K of life insurance as a benefit, so I think at this point I will purchase $250K of 15 year term for $125/m and call it $450K which is something. I still have three years left on the original $500K term, I may cut that in half for the remaining term, it's $120/month as is. I will check out term4sale.com, it sounds like there have been some good experiences.

technovelist
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by technovelist » Thu Nov 09, 2017 11:14 pm

e916mt wrote:
Thu Nov 09, 2017 8:14 pm
afan wrote:
Sun Nov 05, 2017 9:30 am
Of course the answer will depend on the numbers, premium and cash value growth. Without those there is no way to analyze your options. But since the insurance company has the same exposure to the risk of your death under term and permanent insurance, it is not obvious why permanent would be a better deal for you.
I have the numbers now so this should be pretty straightforward. These are the two scenarios as they were summarized

Current Scenario
- Annual contribution 401k: $35,200 (includes match)
- Current account balance: $830,000
- Avg. Annual Rate of Return: 7%
- Number of years: 15
- Ending balance age 65: $3,236,456
- Death Benefit and cash value age 65: $0
- Annual Income in retirement utilizing the Monte Carlo safe withdrawal rule (4% of $3.2M): $129,458

Alternate Scenario -- Reducing contributions to employer match, purchasing $500k Whole Life Insurance policy, $687/mo. premium
- Annual Contribution 401k: $24,960 (includes match)
- Current account balance: $830,000
- Avg. Annual Rate of Return: 7%
- Number of years: 15
- Ending balance age 65: $2,961,122
- Death Benefit Age 65: $500,000
- Cash Value Age 65: $130,867
- Annual Income in retirement utilizing cash value from life insurance in years following a down market: $171,381

In any event it's too complex and I don't have the expertise to fully understand why, in theory, the alternate scenario might be better (other than looking at a higher annual income in retirement figure). Can you explain the thought behind it?

At work we get $200K of life insurance as a benefit, so I think at this point I will purchase $250K of 15 year term for $125/m and call it $450K which is something. I still have three years left on the original $500K term, I may cut that in half for the remaining term, it's $120/month as is. I will check out term4sale.com, it sounds like there have been some good experiences.
Do you know whether you can still convert the existing term without evidence of insurability? Your existing term contract should say when the conversion privilege expires. If it has not expired, you can almost certainly convert part of it, e.g., 250k, and get the rate that you would get with your original health status.
In theory, theory and practice are identical. In practice, they often differ.

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dm200
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by dm200 » Fri Nov 10, 2017 8:18 am

Depending on the details of why you are now "High Risk", work very hard with "Lifestyle" changes to reduce or eliminate that "High Risk" status. I did it and I believe a large percentage of many "high risk" conditions can be reduced or eliminated with "Lifestyle" changes.

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djpeteski
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by djpeteski » Fri Nov 10, 2017 8:30 am

Given the stated objective you may want to look into mortgage life insurance through your lender. These are often sold at a group rate with no medical required. Another alternative is to obtain insurance through work.

The fact that you are rated can only be hidden by obtaining insurance without an medical examination. This is best accomplished through obtaining through some kind of group rate.

UL or WL has nothing to do with being rated, you will be rated with those kinds of individual policies as well. The underlying cost of insurance is the same, but is better hidden because the policies are so ridiculously expensive.

A key factor here is this something you can change? Another option is to get the Term policy and then go on a strict diet and exercise plan. Make appropriate fitness goals. Next year you might be able to pay a very normal amount.
e916mt wrote:
Sun Nov 05, 2017 9:03 am
He's giving it some thought. Nice guy for what it's worth. I guess that means good salesman :).
I am sure he was nice, his commission is liable to be massive. It will probably make his year. His intellectual dishonesty is telling. You are rated and you will be rated through an individual term policy, an individual whole life policy, or a individual universal life policy. When he says a WL/UL policy is a better deal, he is talking about his commission not your finances.

e916mt
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by e916mt » Sat Nov 11, 2017 9:23 am

A key factor here is this something you can change? Another option is to get the Term policy and then go on a strict diet and exercise plan. Make appropriate fitness goals. Next year you might be able to pay a very normal amount.
The issue is anxiety, I've been taking something like Celexa for years. Apparently that's all it takes. (I didn't think this was anything special but clearly it is, shows my ignorance). I'm fine, etc, etc, this was a problem before my teenage son was born. I guess the insurance companies view it black and white.
Do you know whether you can still convert the existing term without evidence of insurability?
It is. The policy is with USAA and they said yup, I can convert without EOI. The numbers they gave me were MUCH worse than the already bad ones.
Given the stated objective you may want to look into mortgage life insurance through your lender. These are often sold at a group rate with no medical required.
Great idea, will look into it.

I get $200K from work as a free benefit, so I think that, combined with the expensive $250K term policy is the best I can do. Obviously the $200K is dependent on staying employed. The existing $500K goes for 3 more years. I probably would cut that back to $250K depending how much I would save (I don't need what would be almost $1m).

Valuethinker
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by Valuethinker » Sat Nov 11, 2017 9:51 am

e916mt wrote:
Sat Nov 11, 2017 9:23 am
A key factor here is this something you can change? Another option is to get the Term policy and then go on a strict diet and exercise plan. Make appropriate fitness goals. Next year you might be able to pay a very normal amount.
The issue is anxiety, I've been taking something like Celexa for years. Apparently that's all it takes. (I didn't think this was anything special but clearly it is, shows my ignorance). I'm fine, etc, etc, this was a problem before my teenage son was born. I guess the insurance companies view it black and white.
Do you know whether you can still convert the existing term without evidence of insurability?
It is. The policy is with USAA and they said yup, I can convert without EOI. The numbers they gave me were MUCH worse than the already bad ones.
Given the stated objective you may want to look into mortgage life insurance through your lender. These are often sold at a group rate with no medical required.
Great idea, will look into it.

I get $200K from work as a free benefit, so I think that, combined with the expensive $250K term policy is the best I can do. Obviously the $200K is dependent on staying employed. The existing $500K goes for 3 more years. I probably would cut that back to $250K depending how much I would save (I don't need what would be almost $1m).
If I had 3 years to run on a low cost policy, I'd run it. Even if I was over-insured with new policies in the meantime.

BTW new policies have exclusion periods (and I believe these are set by state law). You don't want your survivors to be stuck in litigation with some insurance company with sharp eyed lawyers ("maybe he didn't run off the road at night by accident, maybe he was depressed because of a bad medical diagnosis and was trying to kill himself" etc. etc.). Hold onto the old policy until the exclusion periods are finished?

My father was killed in an accident. "Men make plans. God laughs".

technovelist
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by technovelist » Sat Nov 11, 2017 10:30 am

Valuethinker wrote:
Sat Nov 11, 2017 9:51 am
e916mt wrote:
Sat Nov 11, 2017 9:23 am
A key factor here is this something you can change? Another option is to get the Term policy and then go on a strict diet and exercise plan. Make appropriate fitness goals. Next year you might be able to pay a very normal amount.
The issue is anxiety, I've been taking something like Celexa for years. Apparently that's all it takes. (I didn't think this was anything special but clearly it is, shows my ignorance). I'm fine, etc, etc, this was a problem before my teenage son was born. I guess the insurance companies view it black and white.
Do you know whether you can still convert the existing term without evidence of insurability?
It is. The policy is with USAA and they said yup, I can convert without EOI. The numbers they gave me were MUCH worse than the already bad ones.
Given the stated objective you may want to look into mortgage life insurance through your lender. These are often sold at a group rate with no medical required.
Great idea, will look into it.

I get $200K from work as a free benefit, so I think that, combined with the expensive $250K term policy is the best I can do. Obviously the $200K is dependent on staying employed. The existing $500K goes for 3 more years. I probably would cut that back to $250K depending how much I would save (I don't need what would be almost $1m).
If I had 3 years to run on a low cost policy, I'd run it. Even if I was over-insured with new policies in the meantime.

BTW new policies have exclusion periods (and I believe these are set by state law). You don't want your survivors to be stuck in litigation with some insurance company with sharp eyed lawyers ("maybe he didn't run off the road at night by accident, maybe he was depressed because of a bad medical diagnosis and was trying to kill himself" etc. etc.). Hold onto the old policy until the exclusion periods are finished?

My father was killed in an accident. "Men make plans. God laughs".
Yes, that is good advice. In the past, I have always bought new policies that will no longer be contestable by the time that the old policy expires.

In most states, the contestability period is 2 years. In some states it is shorter than that.

After the end of the contestability period, the insurance company is on the hook to pay the death benefit no matter what, of course assuming that the premiums have been paid according to the contract terms.
In theory, theory and practice are identical. In practice, they often differ.

ncbill
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by ncbill » Sat Nov 11, 2017 11:09 am

e916mt wrote:
Sat Nov 11, 2017 9:23 am
A key factor here is this something you can change? Another option is to get the Term policy and then go on a strict diet and exercise plan. Make appropriate fitness goals. Next year you might be able to pay a very normal amount.
The issue is anxiety, I've been taking something like Celexa for years. Apparently that's all it takes. (I didn't think this was anything special but clearly it is, shows my ignorance). I'm fine, etc, etc, this was a problem before my teenage son was born. I guess the insurance companies view it black and white.
Seek out an "impaired risk" broker:

http://www.insure.com/life-insurance/special-risk.html

chrysogonus
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Re: term insurance renewal, now i'm high risk - "special situation"?

Post by chrysogonus » Sat Nov 11, 2017 11:53 am

I have a condition that makes it harder to get a good rate, but also exercise regularly and was able to get preferred plus rates on a 20 year term policy through healthiq:

https://www.healthiq.com/

If you exercise regularly they may be worth looking at.

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