When do you need life insurance? Part 2 By John B. Mattes, CPIA, CLTC
Our expert lays out in this blog post various scenarios for which you should get various amounts of life insurance. This is Part 2 of 3.
In this installment, I’ll answer the question by saying that sometimes you buy life insurance, not when you need it, but when you can get it.
While premium rates are decreasing for the healthy today underwriting for life insurance is becoming more demanding. You have to weigh less and less, and be healthier and healthier, to qualify for the over-the-radio discount you often hear about , for instance. (I swear you’d be hard-pressed to qualify for some of those phantom rates even if you were an Olympic athlete!) And while there are more and more health classifications for underwriting, those just give the companies more latitude to underwrite you at a higher premium rate.
Having said that, the earlier you choose to be underwritten for life insurance, the better your chances are for good premium rates and a lifetime of coverage. No matter the date when you first apply, you’re never going to be younger and, chances are, healthier, than on that day.
Therefore, the main reason you should apply early is to insure your insurability.
What do I mean by that?
I don’t need to remind you that we live in a world with more exposures to disease, with more impurities in the processed food we eat, the soil we touch or the air we breathe, and that more aggressive versions of diseases we thought long gone (polio, for instance) are finding a way to our shores from points unknown. Yes, we know more about these sicknesses, but we don’t know how or why they persist.
Here’s a case in point: The emergence of late-diagnosis Type 1 Diabetes, the bacterial or genetic one that was formerly known as “juvenile diabetes” when Mary Tyler Moore was its spokesperson in the 1970s. (Type 2 is the one that’s often “self-inflicted” due to diet or exercise habits.)
By “late” I mean after age 18, and usually between ages 21 and 28. Time was, you could be diagnosed with the disease at age 4, learn to live with it over the next four or five years and be firmly in control of all its manifestations by your early teens.
But consider the complications of a “late” diagnosis at, say, age 25. This is a time when a person has already learned how to live his or her life; is entrenched in habits, good and bad; and is often considering getting married or starting a family.
The way the life insurance company views it, if you’re 25 and were just diagnosed with Type 1, you won’t be insurable for at least seven years. Why? The company wants you to prove that you can re-learn how to live your life with the complicated treatments associated with diabetes. And you have no say in it.
If a person who already has a life insurance contract is diagnosed with Type 1, there’s no look-back. The coverage stays in force. And even better: The person would not only have that coverage for the term he or she had chosen, but he or she would also be able to convert the temporary coverage to permanent coverage usually any time before age 60, and without any additional underwriting, only with an adjustment for age.
Having a life insurance policy can mirror other aspects of your life: You won’t appreciate your ability to have it until you can’t.
In my final installment, I’ll explore why extremely successful people try to die with as much life insurance in force as possible. Investors, large and small, can benefit from this wisdom.
If you’d like to have a seasoned pair of eyes evaluate you particular circumstance, I’d be happy to take the time to listen to your scenario and help you plot a course of action. Just fill out the contact form below and I will get back to you right away!