Guaranteed Life Insurance is Expensive
Anyone that has ever bought a fully-underwritten life insurance policy knows that the process can be lengthy. After filling out seemingly as much paperwork as a mortgage, the next step involves having a contracted medical professional visit you for a quick check-up that usually involves drawing your blood and collecting a urine sample. This process, while lengthy, is necessary for the insurance company to do their due diligence and ensure that they have appropriately rated your risk of dying prematurely.
Of course, life insurance companies work a lot like casinos. Most people spend a big chunk of money before they ever collect a benefit; some never collect a benefit and the insurance company “wins” a lot like the “house”. If you know anyone that has passed away prematurely and left behind life insurance, you know that’s completely okay and an expense worth spending that you hope you never need.
Over time, the marketing of life insurance has evolved. Companies are now offering instant approval, no medical underwriting, and other buzzwords to potential customers such as simplified, instant, or guaranteed issue. Insurance companies that offer policies without any medical underwriting are almost always a bad deal for the average, relatively-healthy person. Why? Put yourself in the shoes of the insurance company. Would you want to take on a big risk on someone dying early without knowing how healthy they are? Of course not. The only way to justify blindly taking on risk is to increase the up-front cost. And in many cases, I have seen policies that are not fully underwritten cost as much as 3-5 times as much as those that are fully underwritten.
Here’s an industry niche: some agents write policies over the phone for clients that call in requesting life insurance after hearing it on the radio, television, etc. Try responding to these ads sometime. Many of these agents love to tell you that after a couple of questions to prove you’re still alive, they’ll give you insurance on the spot. The only time this type of insurance makes economical sense for anyone is if you actually are in very poor health and can’t get fully-underwritten insurance to begin with. Even then, you must be careful. Many companies will limit your payout within the first year or two of death to only the premiums that you’ve paid should you die early. That basically means you just get a refund if you die within a specified period of time - this is most definitely NOT life insurance.
The reality is this: if you are healthy, you should speak with an independent insurance agent that will guide you through the underwriting process. Going with just one agent that represents a single company isn’t wise. What are the chances that they have the best product out of all the insurance companies out there? Less than 1%. Even if you have something minor such as elevated cholesterol, high blood pressure, or take medications, the issue may not be as bad as you think relative to your cost of life insurance. Each company assesses risk slightly differently, and it is worth having an independent agent take your medical history to more than one company to see who will give you the best rating. If this is something that you have thought about, I’d love to connect with you sometime to talk further.
