I know that you all have been waiting for the sequel to my last piece on the insurance application process with the unabashed enthusiasm of my dog, Harley when she hears the word “treat.” As they say, “Good things come to those who wait.” I hope that this meets with the expectation of the throngs of excited clients who love any discussion of insurance.
When discussing the application process in the last article, I am now going to move further along and now assume that we have had the contract issued and it has now been in place for some time. The vast majority of my clients get the rate class that we thought that we would when we did the application, but there are times when things did not go as planned. Often, clients will be charged a higher rate than originally anticipated for any number of reasons. Most times that we are charged a higher rate is due to the lab results from the insurance exam, but that is not the only reason. It could be from our current build, and/or information in our medical records. So, in these cases we may have altered the face amount and/or the duration of the contract so as to reduce the premium to near the original quote or we agree to pay the higher premium. Just to be clear, paying the extra premium and maintaining the original recommendation is the preferred option as it fulfills the entire need as opposed to a portion of the need. That being said, it is for me to say to pay the increased premium since I am not the one writing the check! Regardless of which of the above options you chose, I would suggest that this should not be the end of the insurance discussion into perpetuity.
So here is an example of one of one of my clients. Back in 2011 I had a client who purchased a $1,000,000 30 year with an annual premium of $2600 per year which was the best that we could do back then due to his family’s health history. Fast forward to 2021, I can now get him the same $1,000,000 of coverage for 20 years (since our goal was only to insure him until 2042 which is his projected retirement) with an annual premium of $1500 with another carrier who is not as concerned with his family history. Keep in mind that we are saving almost $1100 per year for the same coverage and duration as the original contract even though he is 10 years older. There are countless examples of when this may work. It could be that you lost weight (or the less likely option of growing taller!!), maybe your driving record improved, maybe you have started taking medication to control your blood pressure or cholesterol, etc. Whatever the reason you just need to understand that we should continually look at your insurance situation to see if we can improve on the original offer or improve the overall insurance situation. For example, the client I talked about above actually now has a need for $2,000,000 of coverage as his income has increased dramatically over the last 10 years so his death will create a bigger financial problem than it would have back in 2011. The new company could give him $2,000,000 of 20-year term for $2,000,000 for $2660. So, you quickly see that we not only double the coverage for the client, give me the coverage the same as the original contact (to the year 2042) and even though he is ten years older now he can get the above contract for almost exactly what he is paying now.
Regardless of your policy type and/or the rate class that you were given with your original contract, we should look at the contact with an eye towards seeing if there is any way to improve your insurance situation. This improvement can be in terms of premium, policy duration, policy face amount, policy benefits or a combination of any the above. So please keep an eye on your contract and ask your advisor to see if the contract that you have is still best for you based on your current situation. Life changes and your life insurance policy needs to change with it. Until next time, take care.
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