MarySue is a successful mid-level executive at a fast-growing small business. For a number of years, her employer paid for her $100,000 term life insurance policy, which cost less than $300 a year, and was guaranteed to stay at that rate for a total of 20 years. It was also "convertable," meaning that she could trade up to a permanent plan pretty much any time she wanted, locking in her coverage for the rest of her life.
A few years ago, she developed breast cancer, which was quickly removed with no apparent long-term effects. Still, it meant that her ability to buy life insurance was dramatically reduced for quite some time.
No problem: she still had better than 15 years left on her term policy.
Then, a few years later, her employer decided to discontinue paying her premiums for her. She could have easily taken them over herself, which is what we advised her (rather vehemently, given her recent cancer scare) to do.
But she was having none of that, and so she chose to let it lapse.
Was this a poor choice?
You tell me:
Recently, she called and asked about buying a new policy. I checked with our primary carrier; the underwriter informed me that, based on the facts of the case, MarySue would not be eligible for consideration for a few more years, and that whatever her rate would have been at that time, there will be an additional surcharge on her annual premium.
That means that her policy would start out "in the hole," and that's before the "regular" rate is applied.
Ouch!
Since she wants coverage now, and doesn't want to wait 2 or more years, I contacted our local "problem case" gurus, who told me that, after checking their markets, the best they could offer would be a guaranteed issue, graded benefit plan. These plans have reduced death benefits for the first few years before taking full effect, and are generally quite a bit more expensive than "regular" plans.
Could all of this have been avoided?
Of course: for less than 85 cents a day, she could have kept her perfectly good existing term policy, and even converted it into lifetime coverage with a level premium guaranteed never to increase. We always urge clients not to cancel existing coverage before a new policy is issued, but this goes beyond even that: she cancelled her policy after she already knew she had a major problem.
Life is tough...
[Special Thank You to Bob V]
A few years ago, she developed breast cancer, which was quickly removed with no apparent long-term effects. Still, it meant that her ability to buy life insurance was dramatically reduced for quite some time.
No problem: she still had better than 15 years left on her term policy.
Then, a few years later, her employer decided to discontinue paying her premiums for her. She could have easily taken them over herself, which is what we advised her (rather vehemently, given her recent cancer scare) to do.
But she was having none of that, and so she chose to let it lapse.
Was this a poor choice?
You tell me:
Recently, she called and asked about buying a new policy. I checked with our primary carrier; the underwriter informed me that, based on the facts of the case, MarySue would not be eligible for consideration for a few more years, and that whatever her rate would have been at that time, there will be an additional surcharge on her annual premium.
That means that her policy would start out "in the hole," and that's before the "regular" rate is applied.
Ouch!
Since she wants coverage now, and doesn't want to wait 2 or more years, I contacted our local "problem case" gurus, who told me that, after checking their markets, the best they could offer would be a guaranteed issue, graded benefit plan. These plans have reduced death benefits for the first few years before taking full effect, and are generally quite a bit more expensive than "regular" plans.
Could all of this have been avoided?
Of course: for less than 85 cents a day, she could have kept her perfectly good existing term policy, and even converted it into lifetime coverage with a level premium guaranteed never to increase. We always urge clients not to cancel existing coverage before a new policy is issued, but this goes beyond even that: she cancelled her policy after she already knew she had a major problem.
Life is tough...
[Special Thank You to Bob V]
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