If you are reading this then you probably have been declined for health insurance in the recent past. When you get declined for health insurance it probably has something to do with your medical history. Since California is one of the underwritten states health care companies have the right to declined people for health insurance. Who health insurance company might decline and who it might not all depends on risk assessment using actuarial tables. Anytime when you fill out individual application for health coverage and answer yes on one of the medical questions your application might be manually reviews by one of the underwriters. It is a person who is responsible to reviewing application using actuarial tables. Actuarial tables are statistics done by the insurance companies, hospitals, doctors, researchers that predict the cost of insuring some one with a specific medical history.
Some states like New York, New Jersey and Washington require insurance companies to insure everyone. Those three states do not have medical underwriting and everyone is automatically approved for health coverage. In order to insure everyone with medical history insurance companies increase rates to the point where it becomes un-affordable to most people. What keeps the average monthly premiums low is low utilization of health care. If there are more people with high medical insurance utilization with a specific health insurance company they have to raise the rates for everyone in order to keep up with paying medical claims. That also drives people who do not use health insurance that often to drop health insurance all together and yet driving rates even higher. This leaves no choice for insurance carriers but to drive rates even higher. New York, New Jersey and Washington have highest premiums for medical coverage and a lot of families find health care out of reach.
In California if you have been declined for health coverage you have options. If you out of job or currently on low income you can qualify for Medical and if you have kids they can qualify for a program called Healthy Families. Most states including California have high risk pools that are designed for people who have been declined for individual health insurance. In California this program is called MRMIP. Just the quick search on the Internet will guide to a government website. MRMIP is a program that is managed by the state and your big name medical insurance providers participate in it. Chances are you will be able to keep the same health insurance company if you are already use to them. MRMIP program has limits and it might have a waiting period.
One of the best options might be when it comes to getting the most coverage for your money is through a group plan. In the state of California all group plans by law are required to be a guaranteed issue. That means that there is no medical underwriting. This options requires more work from you. Insurance companies are not just going to let you set up a group plan if you have been declined for individual health insurance. Since insurance companies are required to insurance everyone who is part of the group state requires insurance companies to have rules when it comes to setting up a group plan. Some of the basic requirements change from the insurance company to the insurance company.
The best way to find out is talk to insurance broker. The basics that insurance companies are going to be looking for are that you have to have a reason for starting a group plan other then getting medical insurance. It is illegal to start a group plan just to get health insurance. That means that you have to have a business and that could be anything. To have a group plan you obviously have to have more then just yourself It takes at least two people to start a group plan. All the people that are going to be on the group plan are either have to be the owners of the business or have to be on the payroll. Some insurance companies require either a DE-6 form or six weeks of payroll records. If every one if the owner then you will be required to provide proof of the ownership listing everyone that is going to be on a group plan as the owner. This might not be simple but is is certainly doable and it is definitely worth it if you do not have any coverage and cannot get it on your own.
It is always easier to just blame the insurance company that they have declined you for health coverage. If you have been declined and are looking for health insurance you just have to be more proactive in getting your coverage. Once you work with a broker on getting on the requirements on setting up a group plan then it is forever yours and no one can take that coverage away from you unless you stop paying for it.
Life Insurance 101 – It’s Not About the Policy, It’s About Your Family
Life Insurance. This is a very touchy and personal topic to everyone. It reminds us of our own mortality. It reminds us perhaps, of a deceased loved one. There are many many emotions, thoughts and feelings that come up when the topic of life insurance is discussed.
While it is not a pleasant topic to think about, Life Insurance is quite possibly the greatest gift parents can leave to their children. It is about peace of mind. Peace of mind in knowing that if something unforseen should happen to us, our families will still be financially stable.
Before we get into the mechanics and the nitty gritty, I’d like to share a story about a client of ours with all of you. Years ago, as a green insurance agent, I sold life insurance as a product. I was too young and inexperienced to fully understand what life insurance can do for a family in their most dire time of need. I had a particular client who I sold a policy to. He and his wife had 4 young children at the time, a mortgage and all of the usual expenses we all have. Well, unfortunately, a couple of years after the life insurance sale, he passed away. When I got the emotional, tear ridden phone call from his eldest son, something in me finally clicked. After the funeral, he pulled me aside and gave me a hug I will never forget.
He tearfully said to me, “You know, after my father’s death, bill collectors started calling. Everybody came to our family with their hands out, wanting to be paid for one thing or another. But you, you came to us with a check in hand, a tear in your eye and a shoulder to cry on. I really don’t know what my sisters, mother and I would have done were it not for the life insurance my father had. I don’t know how to thank you.”
I told him that he owes me no thanks. The one he should be thankful for is the one whose life we are celebrating and remembering today. He stepped back and looked at me somewhat crosseyed and confused. I said, “Dave, you, your sisters and your mother were your dad’s pride and joy and number one priority in life. He guided you, provided for you and helped mold you and your sisters into the wonderful, caring people you are today. He took care of you all and took pleasure in doing so.”
I continued, “He blessed you and the rest of your family with many many gifts throughout his lifetime. The last gift that he made sure was available to you all was the gift of life insurance. The gift of peace of mind. Of course, I know and he knew that you would hand that check right back over if it meant 5 more minutes with him. But, the gift he left you all was the ability to live his legacy, follow in his footsteps and the financial means to continue your lives in the way that he made sure you were all accustomed to.”
He nodded. I said, “Your mom does not have to worry about the mortgage on her house, your two youngest sisters do not have to worry about how they will pay for college. Your dad took good care of you all while he was alive, and will continue to do so in memorium.”
He hugged me and thanked me again and returned to his family. It was that day that I realized that I was not selling policies. I was giving families the opportunity to continue to care for their loved ones long after they are gone. Life insurance is a gift, and not one to be taken lightly.
Now, I’d like to go into a short glossary and explanation of the different types of policies available so that everyone can be well informed consumers.
There are essentially two main types of policies, Term Insurance and Permanent Insurance. And yes, there are various subgroups and hybrid type policies, etc.
Basic Term Life Insurance is pretty much exactly what it sounds like. This type of policy is purchased for a specific amount of time, usually 10, 20 or 30 years. This is just pure life insurance. If John Smith takes out a $500,000 20 year term policy, and passes away in year 16, his policy will pay his beneficiary $500,000. Conversely, if John Smith passes away 25 years after taking out the policy, the term has expired and there is no coverage.
One might ask, “Why would I want this type of policy if it’s just going to expire and then I’m out all of that money for no reason?” Excellent question. Of course, there is a multi-part answer.
A) This is the type of policy that we call “peace of mind insurance”. You have the peace of mind for a set number of years that should the unforseen happen, your family will be financially taken care of. Therefore, you had the coverage for all of that time. Just like a homeowner policy, you may never put a claim in, still make your monthly payments, but have the peace of mind in knowing that if your home were to burn down, you have the coverage to rebuild your home and your life.
B) These policies are, on a monthly basis, cheaper than others. For a young family with limited resources, it’s the perfect starter policy to get the coverage in place and then later on, there are other options available.
C) Return of Premium option – Some Term policies have an optional enhancement called Return of Premium. This is the answer to the people who say, “I don’t want to spend all that money for 20 years to not get anything in the end.” Those who have this option on their policies are people who plan to keep the coverage in force for the entire duration of the plan (in this example 20 years), and will receive a check at the end of the term for every penny that was paid in premiums. So, now, John Smith will have been covered for the 20 years, and assuming he is still alive at the end, he’ll get back all the money that he put into it.
D) Conversion opportunity – Most Term policies include a clause that allows the policy owner to convert the term policy to a permanent one before the term expires and usually before a certain age, depending on the policy. What is the benefit in this? This is a HUGE benefit to the policy holder and here is why.
The price of life insurance is based on many things. The two items that carry the most weight in the cost are the health of the person taking out the policy and the age that they are when they take it out. As a general rule, we will never be as young or as healthy as we are today. And we were younger and healthier yesterday. Obviously an obease individual with high cholesterol and blood pressure will be more expensive to insure than a fit individual with no health problems. There is a much greater probability that the less healthy person will pass away sooner than the more healthy one. At the same time, a 20 year old is much less expensive to insure than a 60 year old, because all things being equal, statistically, the 20 year old has much less of a likelihood of passing away than a 60 year old. The 20 year old statistically has many more years to pay premiums, than the 60 year old, so his premium will be less.
The wonderful thing about the conversion option, is that it allows the policy holder to convert their term insurance to a permanent policy (which we will go over in a moment) while locking in the health rating that was received at the time of the original policy. The policy will convert based on the original health rating and the current age. This is of a huge benefit to those whose health has unfortunately deteriorated over the life of the policy.
Alright, now that we have a clearer understanding of Term Life Insurance, let’s go over Permanent Life Insurance. As the name suggests Permanent Life Insurance is generally set up to be Permanent and be in force for the life of the insured (that’s you!).
Now, Permanent Life Insurance is sometimes referred to as Whole Life, Universal Life, Variable Universal Life and Guaranteed Life, to name a few. The main difference between a permanent policy and a term policy is that a Permanent Policy has many more options.
The policy contains two main parts. The first being the basic life insurance coverage. And the second being somewhat of a “savings account”. The way that these two parts come together to form a comprehensive policy with many options and benefits is that a percentage of the premium goes to pay the basic cost of insurance and another portion goes into this “savings account”. Now, generally speaking, these policies have a minimum interest rate that paid on the money that is growing in the savings portion of the policy. These interest rates are usually market sensitive, so as interest rates in the marketplace go up, the interest rates that the policy will pay will go up. As interest rates in the marketplace decline, the interest rate of the policy will decrease, but never lower than the floor set by the policy contract.
One very nice thing about these policies is the flexibility that afforded to the policyowner as far as premiums and savings go. As an example, let’s say that John Smith has just taken out a Permanent Life Insurance policy and his minimum monthly premium is $100. He could decide that he wants to pay $150 per month, having that additional $50 per month go directly into the “savings portion” of the policy. Over time, that overpayment of premium will grow due to compound interest.
Let’s say that he pays his $150 per month for the first 20 years of the policy and then finds that he has fallen onto hard times and cannot afford to pay the additional premium. It’s possible that there is enough money built up in the “savings portion” or “cash value” that the premiums can actually just be deducted from that pot of money for a period of time. Or maybe his child is going to a private university and he has built up a lump sum of money in there. He can withdraw the money to use towards whatever he would like, in this case, his child’s education.
And this brings us to the end of our class on Life Insurance 101. Almost. One very important thing to remember about life insurance is that the most important aspect of it is not the company, type of policy or even the death benefit amount. The most important aspect of life insurance is that it is one of the greatest gifts that a parent can give to a child. The gift of love, life, legacy and the future. The proceeds of a life insurance policy can never make up for the loss of a loved one; but the gift of life insurance can help ease the financial burden and leave your family with peace of mind.
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