@knowstuff There is automatically “insurable interest” on family members so you should have no problem taking out policies on the kids (they will limit the amount but some carriers will go up to 500k on minor children). Many people buy policies on kids for the specific reason to protect their future insurability (not for financial loss). Without that, all of a sudden a kid develops an illness (say early onset diabetes) and they are uninsurable or heavily rated forever. This way they can take over the policies via a change of ownership at a later age and have coverage they need for income replacement later in life. Cost of coverage on kids is insignificant and the future benefit could be huge. If they get ill, you win (well sort of). If they don’t, you still win as they already have their future coverage in place. May need more than that but at least they’ll have someone. Some will argue a waste of money but that’s a different conversation. This is about risk mitigation. Lots of things are a waste of money in hindsight.
Not a fan of the burial type policies some take out on kids (and themselves). 10k whole life or something like that. Huge money makers for the carriers. You could easily invest the premium and generate more funds than the death benefit over time, especially on young kids (actuarial chance of death is so small).
@rickle1. Thx so much. Unfortunately when I say kids I mean my kids age 20 (21 in March) and 23 in July. Lynch runs in my family and I just found I am positive. So just diagnostic colonoscopies for me. For women it can lead to uterine cancer. Even if found positive nothing for either kids to do for years like screening checks.
On lynch sites they are saying to take out a policy before getting tested. I had one for 30 years or so but never thought about the “kids” till now.
Any advice is so appreciative and invaluable…
As a note I can have their tests done through Ambry and order it myself so it never gets into a medical record from a primary… Hate to say this… But again we would be buying the policy prior anyway, I guess.
@rickle1 I hope I’m not highjacking this thread. What about medical conditions that would not be life threatening…like glaucoma, or having had a broken limb and surgery. Clearly those require tests and treatment, but are not likely to cause death.
Oldfort, is the couple working with a knowledgable agent? And of course, it depends on what he’s potentially dealing with.
Having high blood pressure and being “treated for it” doesn’t preclude you from finding a good, reasonably policy. Otoh, there are companies that won’t tolerate any issues.
One way to understand the insurance application process might be to focus on the 2 year contestability period and on fraud.
During the first 2 years that a life insurance policy is in effect, the insurer can refuse to pay a death benefit or other claim (such as a disability rider) if the insured is determined to have made a material misstatement or knowingly concealed a material underwriting issue during the application process.
Whether or not failure to disclose the results of a genetic test which revealed a propensity of a serious illness in the family bloodlines depends upon the questions asked during the application process and the insurance company’s underwriting standards at the time of the application. Additionally, developing law surrounding genetic testing issues may have an impact.
After the two year contestability period, one should research the appropriate jurisdiction’s law regarding the impact of any fraud whether by fraudulent statement or omission or, of course, by filing a fraudulent claim (which was prevalent in the 1990s by the use of fake death certificates, for example).
The short version is that there is no easy answer with respect to adverse genetic testing results as this is a developing area both medically and legally. As stated above, once any adverse information is revealed to a life insurance company, it will be available to all insurance companies through the MIB (medical information bureau).
An additional caveat: Insurance companies no longer trust their agents or their applicants so, in addition to signing a written application for life insurance, the insured will be interviewed by phone on a recorded line. Of course, the speaker on the recorded line could be an imposter as verification methods just involve disclosing certain identifying information which could be known by others than the applicant.
@Knowsstuff There should be no issue (regarding the situation you describe) with them obtaining coverage. The test is not prescribed and does not indicate a medical issue. No treatment, etc. But to avoid the slightest bit of risk, I would obtain coverage prior to going down that road as who knows what you find.
Use an independent agent who can shop coverage among all the major carriers ( works for you not the carrier).
As @Publisher mentions, some ( not all) carriers will do phone interviews to get the info they need. They also pull up the MIB, RX, and move forward from accessible info.
@thumper1 minor illness/ injury won’t preclude coverage but underwriters May chose to request medical records based on issue, build, RX, etc. If it’s truly isolated to that issue, should be fine.
In post #10 above, you wrote that–paraphrasing–that in the event of a death by suicide during the first two years a life insurance policy is in effect will result in “not a penny” paid by the life insurance company.
I think that this is incorrect. My understanding is that the life insurance company will pay the “suicide death benefit” provided by the “suicide clause” in the life insurance contract. Typically, this is just a return of premiums or, possibly, a return of premiums with interest.
As an example of how underwriting has changed: I have a genetic clotting disorder. Got insurance policy in 1990 (age 30), increased it in 1991. Had blood tests, but they didn’t check for that. Had never had any symptoms. I found out I had the disorder in my 40s.
My nephew has the same disorder. Tore an ACL while wakeboarding and threw a clot following surgery. He’s 25 and can’t get life insurance (and has three young children). He’s off bloodthinners and aspirin now, and they are hoping after a few years he can reapply, but will probably be rated.
The chat boards for my kind of leukemia talk about life insurance coverage a lot. Folks haven’t been able to get it, even though their levels have been undetectable for years, and life expectancy is very, very good (which was decidedly not the case 18-20 years ago). Best shot seems to be employer-provided coverage with an option to convert to an individual policy after termination of employment. Sometimes those policies don’t have underwriting.
Publisher, my term policy says that if someone dies by suicide in the first two years of a policy, the beneficiary gets the return of premiums paid as a benefit. YMMV.
@CountingDown : Thank you for your response regarding the “suicide death benefit” of return of premiums on your individual term policy.
A “suicide death benefit” may be substantial depending upon the amount of the premiums paid. Additionally, a “suicide death benefit” may, like regular death benefits often–but not always–be income tax free.
Final expense insurance or burial insurance typically only pays a death benefit of return of premiums plus interest during the first 2 years of coverage so I doubt that any type of suicide clause is included.
Check your group term life insurance policy for any mention of suicide or inclusion of a suicide clause. My understanding is that group term life coverage does not have a suicide clause and, therefore, presumably would pay the full death benefit in the event of suicide by a covered insured even if committed during the first year of coverage.
With respect to conversion of one’s group term life coverage to a permanent life insurance policy, I wonder whether a ny contestabilty provisions apply and whether a suicide clause is included in the conversion policy.
The title of this thread is “Taking Out Large Life Insurance”.
What constitutes a large amount of life insurance coverage may vary by life insurance companies for purposes of investigation of cause of death and/or fraud.
In my opinion, taking out multiple policies from different life insurance companies is much wiser than taking out one policy from a single carrier with a very large benefit because some carriers may pay out a death benefit regardless of possibility of fraud because the death benefit amount does not justify the expense of an investigation and possible legal action.
Behemoth life insurance companies, however, can afford to spend $100,000 to investigate a $50,000 death benefit claim in order to deter life insurance fraud.
Hmmm, there is no life insurance on me and neither of my kids have policies nor dependents. At this point, I’m probably uninsurable or would be very expensive.
Thanks for starting this thread and raising awareness of these issues, OP.
The insurance D1 is taking out is not just a term life and the amount is a bit high.
For young adults who change jobs frequently may not want to depend on group insurance and the amount is usually not adequate.
@Publisher Yes the suicide clause typically provides a return of premium, not the life insurance benefits.
In general, cost of term coverage for young people is very low. What used to be considered a large policy by many (say 1M for a 25 yr old) is actually not considered large by most in the industry, more like normal. In fact many companies are using technology to eliminate human underwriting on policies like these. You can get up to 1M with high quality carriers with no medical exam, no medical records, etc. They simply do a phone interview, MIB and RX check, Motor Vehicle (MVR - to see if you’ve had a reckless history), Credit check (to make sure you actually pay your bills). They pay the agent to connect you with the company. They reinsure most of it anyway so the liability is minimal. Now if you have medical issues, it’s a whole other ballgame.
Tell your grown kids to get coverage outside of work, as those group policies are nice “extra” coverage but are not portable. So once kid leaves his job, he leaves his coverage. If something happens along the way, he might be uninsurable.
Been doing this, as part of an overall financial plan, for 30+ years. We’ve written little old ladies, senior execs, an owner of an NFL team and everything in between. Much easier to get life insurance today, but much less opportunity to discuss underwriting with carriers on behalf of clients. Also, forget about comparing it to health or disability insurance underwriting. Totally different animal. Many who get rated and declined for, say, personal disability (me included) can easily get life insurance at standard rates. Others will get rated, and of course some are just uninsurable…
@Publisher “large life insurance” is in the eye of the beholder. We’ve written as low as 25k and as high as 250M. The carriers themselves have capacity limits but you can normally bundle (kind of like a large commercial loan that is shared amongst many banks) several carriers together. Most of the stronger carriers have capacity to write, without using other carriers, far more than 99.999% will ever care about (35M+).
Financial underwriting comes into play based on age, income, net worth, etc. Typically a company will insure a 25 yr old making 100k up to 2.5M - 3M (25x -30x earnings). If they own a business they can generally get more for business succession purposes. That multiplier goes down as you age (less time to need the income replaced and less future wage increase).
A few yrs ago, no carriers would issue 1M without a paramed. Today it’s not uncommon (because they have access to the information described in earlier posts).
@Publisher Definitely applies to independents. I assume also to captives. I’ve been both and used to do that with both. Would actually get quite a bit of wiggle room on cases based upon my book, relationship with carrier, etc. Vividly recall a large case (mid 8 figure death benefits on three business partners) where we were able to get a solid offer on the one health risk based on the other parties. They made a “business decision” to write all three. No for a fact that wouldn’t happen today. Today it’s all about metrics, data, automation, process. They aren’t willing to rub the reinsurers the wrong way.
I’ve worked as an independent broker in the life insurance business for over 26 years so am qualified to answer questions in this thread.
Life insurance companies do not ask about genetic tests.
When you apply for life insurance, they will ask you about your medical history in the last 10 years as well as lifestyle questions (scuba diving, skydiving, etc…). If you have had any medical history, they will investigate further by requesting information from your doctors.
Once they have all of the pertinent information, they will categorize your risk. This can be super preferred, preferred, select, etc… Based on the category, they will make an offer with the premium.
Life insurance does not exclude any conditions. If you have a condition or jump out of airplanes they will likely rate you or charge you extra premiums.
All life insurance policies have a 2 year period of incontestability. What this means is that if a claim occurs in the first 2 years of the policy, the company will automatically re-underwrite the policy to see if any fraud was involved or if something wasn’t disclosed. If fraud was present, they have the right to rescind the contract. After 2 years, they cannot re-investigate a policy.
Most policies have a 1 year suicide clause (except for the state of MO). After 1 year, suicide is covered as well.
You may typically purchase up to 25x your income. Most people purchase policies in the range of 10-12x income.
Feel free to direct any questions to me or you can PM me as well.