There’s no worse feeling than screwing up something when you make a purchase. Forgetting to enter a coupon code when purchasing an item online is frustrating, especially after you’ve already processed the payment. Fortunately, it shouldn’t take too long to get over the $6 you could have saved.
There are much larger purchases, however, that if screwed up, can have a longer impact on your life. One of those is buying life insurance.
Over the years, I’ve assisted hundreds of people with buying life insurance and I’ve seen a ton of people make some of the same screw-ups that either caused their insurance premium to go up, or not get approved at all. If you plan on buying life insurance soon, don’t be one of these people.
1. Declined – So what?
Here’s a secret: if you’ve applied for life insurance and been declined (because you have too many high-risk health conditions), applying with a different life insurance agent will not get you approved. Surprise, surprise!
Yes, there is that rare exception where working with a different agent might get you coverage. Rare is the key word. But if you’re going to apply and not be up front with the new agent about being previously declined, you’re on the fast track of getting declined again!
We have numerous people that call our office and try to pass off that they are healthy individuals. It turns out that that is far from the case and that they’ve been declined on more than one occasion. Not being upfront and letting the insurance agent know what health conditions you have is a surefire way to get declined immediately and waste both you and your agent’s time.
What are your options? If you are considered to be a high risk individual and your life insurance company won’t even consider you, you can still apply for guaranteed issue life insurance. The coverage is minimal (max coverage is $100k) and expect the premiums to be much higher than your basic cheap term life insurance policy.
2. Pretend That You Don’t Smoke
Another favorite of mine is when a tobacco user tries to pretend that they don’t actually use tobacco. They never bother to tell us that they smoke or chew, so by not telling us they think the insurance company will never know any different. I hope you do realize that’s why they do a blood test to see if you have any nicotine in your system, right?
If you have tobacco in your system, they will find it, and yes, your rates will go up. Life insurance for smokers can cost 3-4 times more than non-smokers. Lying about using tobacco won’t prevent you from getting insurance, but it just doesn’t look good, especially if there are any other conditions that you’re trying to hide.
Also, if you are a casual smoker, DO NOT smoke a few days before your medical exam. I once had a guy applying for life insurance who smoked a few cigarettes the weekend before taking his medical exam. Even though he hadn’t smoked in years before that, the nicotine showed up in his system and his insurance more than tripled.
3. Holding Out for A Better Offer
The most recent and biggest screw up we saw had to do with a 30 year old female applying for a $1 million term policy. After asking all the basic medical conditions, she gave us the impression that she would get approved at a Preferred rate. With her age and the amount she needed, we anticipated her rate to be about $70 per month.
After the initial paramedical exam, they found that her cholesterol was a little on the high side; and not just a little on the high side, high enough where instead of being Preferred she was rated a Standard Table B (essentially that means she was knocked down four table classes). That means her rate went from $70 a month to $162 a month. The insurance company made this offer without requesting her APS, otherwise known at the Attending Physician Statement. Your APS contains your entire medical background. If you have any medical history, then there is a pretty good chance that the life insurance company will request your APS. This was a rare case where they didn’t; they made her an offer without requesting it. She had one of three choices:
- She could accept the policy as is;
- She could have them request her APS to demonstrate that her cholesterol has been controlled and that she should come in at a lower rate; or
- We could shop it with another insurance provider.
We contacted the client to let her know her options. I explained to her that there was an offer on the table, and if she felt that there was anything in her medical records that would show otherwise that she should accept the policy. Or at least accept the policy, get insurance in-force and pay on it for a year. If she felt her health could improve she could always reapply at a later time, but at least she would have coverage. The client stated that she did not want to pay that much for life insurance and told us to have the insurance company request her APS.
What was the final outcome? It turns out her cholesterol was not any better; in fact, it actually demonstrated how it progressively got worse over the years. In addition, it turns out that there was a lung nodule that her doctor was following, and she had also been treated for fibrocystic breast disease.
Instead of having an offer on the table for life insurance, now the insurance company was requesting more medical records, which either means that
- a) Her insurance is going to go up even higher if she chooses to accept it; or
- b) She won’t get approved at all.
The way that is progressing, she probably won’t get an offer at all.
Lesson learned: If you know you need life insurance and you have some type of high risk medical condition, and you get an offer – accept it!
Buying life insurance does not have to be complicated, but as you can see, there are plenty of ways to screw yourself in the process.