Wednesday, April 25, 2018

Life Insurance Underwriting Debunked

By Matt Kaas, Life Marketing Consultant

How many of you reading this article have applied for life insurance on a client who you thought was the perfect candidate: healthy, young, and doesn’t take any medications. Then you find out that they use chewing tobacco and you could not place the case because the client now received tobacco rates? Did you know that some life insurance carriers will rate chewing and other smokeless tobacco (patches) as non-tobacco?

Some of the most common misconceptions that I hear on daily basis have to do with life insurance underwriting.

Financial professionals often think that because their client may not be in “standard” health, or may have had some health issues in the past, that they are no longer candidates for life insurance. But that is not the case!

Diabetes is a big one. It is important to distinguish between whether the client has either type 1 (insulin dependent) or type 2 diabetes, as type 1 diabetes is rated significantly more compared to type 2. But a client with controlled type 2 diabetes, and no other circulatory or kidney issues associated with it, could qualify for up to Standard rate classes. “Controlled” will typically mean an A1C level < 7 and a glucose < 120.

Then there is the dreaded “C” word – cancer. Having cancer is never a good thing, but that does not necessarily mean that a client who has had cancer cannot qualify for life insurance. With cancer the type, stage, treatment, and follow-up all really make a difference as far as how it can affect life insurance rates and eligibility. For certain types of cancer that are limited to stage 1 or below, contained, and treated, clients can be considered for life insurance after even just one year. A good rule of thumb though is that a client should wait until at least three years after receiving treatment in order to receive their best rating.

Heart attacks and other cardiac diseases are the most often confused. Certain procedures such as stents and angioplasty, where there was no actual heart attack, can often be considered for coverage within as little as six months post-treatment, although a good rule of thumb is to wait at least a year after having any heart attack or any other cardiovascular conditions treated. But what is confusing is that these conditions are rated similarly regardless of how long it has been since the original date of diagnosis, treatment, etc. This is mainly due to the fact that heart attacks and other cardiovascular diseases are more likely to reoccur after their first occurrence. So the client who had a heart attack and was diagnosed with heart disease ten years ago is going to be rated the same as the client who experienced the same thing only two years ago.

These are only a few of the life insurance underwriting “taboos” I come across on a daily basis, and there are countless others. The best piece of advice I can offer is, if you have a client that may have some health issues, gather as much information on the front end as possible. For condition-specific fact finders, underwriting information, or to get a better idea if a potential client of yours could qualify for life insurance, please give me a call at 800.321.3924 x133.

Matt Kaas | Life Marketing Consultant
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x133 | Dir: 734.786.6133

Ann Arbor Annuity Exchange and its representatives do not offer tax or legal advice. Please encourage your clients to speak with their tax advisor or attorney.

Designed for Financial Professionals.