Life Insurance - necessary or necessary evil?

[thefed]

Thanks for the replies...I'm considering my options.

Question: Say a guy was at a party, and he smoked some weed. Then he had a life insurance para-med out a couple days later for blood and urine. Would he get rejected?


Just curious. My friend is in this predicament, but he hasn't heard back from the ins. company yet. I say they do test for it and he won't be accepted. He thinks he'll be fine.

 

[brewer12345]

Thanks for the replies...I'm considering my options.

Question: Say a guy was at a party, and he smoked some weed. Then he had a life insurance para-med out a couple days later for blood and urine. Would he get rejected?


Just curious. My friend is in this predicament, but he hasn't heard back from the ins. company yet. I say they do test for it and he won't be accepted. He thinks he'll be fine.

A very large battery of tests is typically done, including several drug tests. I know they test for nicotine, alcohol, coaine and opiates. Not sure if they would test for weed specifically, but they might. Anyone's guess as to whether it actually gets picked up. I would guess that testing positive would be grounds for rejection.

 

[cute fuzzy bunny]

You can pretty much make a big bet that they test for it and he'll get rejected...

 

[thefed]

good, because we have $20 on it!

 

[saluki9]

You can pretty much make a big bet that they test for it and he'll get rejected...

One of my college roomates is an actuary for an insurance company. I just called him and he said that most companies will consider you as a smoking risk, not outright rejection.

Anything harder is a certain rejection

 

[Nords]

I just called him and he said that most companies will consider you as a smoking risk, not outright rejection.

Maybe he's just a risk around brownies.

Or, as was claimed once to me, it was in the BBQ sauce.

 

[thefed]

lol. a brownie risk, leading to obesity and then heart failure. wow,never thought of that....

 

[samclem]

Rich,
Thanks for the link the the consumer law article. It is definitely a jungle out there in the LTC insurance world. Martha mentioned that the federal LTC insurance program might be a better buy than most other policies, that's probably true. It also lacks many of the "gotchas" mentioned in the consumer law link, it's a good policy in that respect at least.
I'm not a big fan of insurance: I plan to dump my life insurance as soon as my daughter's college bills are paid and I've got bare-bones coverage on our (none-too-new) cars. Still, I'm thinking about buying LTC coverage just to cover the situation with which you opened this thread.

 

[poboy]

One of my favorite quotes regarding life insurance was made by Jerry Glanville, former coach of Houston Oilers and Atlanta Falcons.  He said he did not have any life insurance, cause when he died, he wanted his wife and kids to say how much they missed him -really missed him, and  he knew they would mean it.

 

[Nords]

Martha mentioned that the federal LTC insurance program might be a better buy than most other policies, that's probably true.  It also lacks many of the "gotchas" mentioned in the consumer law link, it's a good policy in that respect at least. 

I don't know how LTC policies are priced, but when the federal LTC program came out I told my father that he was eligible.

He said that John Hancock had a better deal. That might have been an isolated incident but Hancock bears comparison with the federal program.

 

[samclem]

Nords,
John Hancock and Metropolitan Life are the two compnaies who underwrite the federal program. Could their "open to the public" plan be differnet/better than the one offered through OPM? I guess it is possible.
When I found out the in-laws of active duty folks were eligible for the federal LTC insurance, I let my father in law know about it. It was a little awkward for me to suggest he look at this insurance, hard to sound like it wasn't just a matter of me being concerned about eventually having to help pay for his care. That never even crossed my mind!

samclem

 

[Nords]

John Hancock and Metropolitan Life are the two compnaies who underwrite the federal program.  Could their "open to the public" plan be differnet/better than the one offered through OPM?  I guess it is possible.

I was surprised too. I never chased down the details; I felt the offer was enough and my father knows far more about LTC than I do. Dad's extremely healthy (BP in double digits, heart rate in the low 50s) but at the time we had all just gone through 14 years of my grandfather (his father) in a full-care facility.

It was a little awkward for me to suggest he look at this insurance, hard to sound like it wasn't just a matter of me being concerned about eventually having to help pay for his care. That never even crossed my mind!

My dad did two years of Army conscription in the '50s, so I packaged it as the last chance he'd ever have for a real military benefit.

 

[Outtahere]

So Nords does that mean since my husband is and Army vet that he can get this LTC insurance? I'm a little confused by this.

 

[brewer12345]

I don't know how LTC policies are priced, but when the federal LTC program came out I told my father that he was eligible.

He said that John Hancock had a better deal.  That might have been an isolated incident but Hancock bears comparison with the federal program.

That was then and this is now. Hancock and others may well have been offering a cheaper product when the federal program was introduced, but it is highly unlikely that this is the case now. The private market offerings are a LOT more expensive now, since most companies realized they were giving away the store.

 

[Martha]

Brewer is absolutely right. We recently had John Hancock do a presentation at work for LTC insurance and the cost was considerably higher than the figures cited by SamClem.

 

[Rich_by_the_Bay]

I might add that premiums for LTC insurance are not guaranteed to remain stable (unlike level term life, for example). While the insurers cannot arbitrarily raise a given individual's premiums, they may apply to the home state regulatory agency to raise rates for entire classes of individuals. If granted, your rates go up.

At that time, even if you decide it's not worth it at the new rates, your prior premiums are basically out the window.

 

[REWahoo]

At that time, even if you decide it's not worth it at the new rates, your prior premiums are basically out the window.

Rich, can't the same be said for auto, homeowner, term life or almost any type of insurance? Even if you drop the policy without using it, you were covered while it was in force.

I'm not arguing the point that LTC premiums could go up dramatically. We have LTC policies with a 10 year premium guarantee and I cringe to think what will happen at the end of the guarantee period...

 

[uncledrz]

Rich and Martha
Just interested to know how you handled this. Because of the points you made, especially the problem that we're young now, in 20-30 years, if we need it, the premiums may be way too expensive to continue, we've decided to self insure.
How have you handled it?
Uncledrz

 

[Nords]

So Nords does that mean since my husband is an Army vet that he can get this LTC insurance? I'm a little confused by this.

I guess the best answer I can offer is "maybe". The eligibility requirements are pretty straightforward but it's along list of boring text. Even if your spouse doesn't qualify as a result of military service there may be something else that he qualifies under. Read the full list because I found some eligibility requirements buried waaaaaaay down the page (as mentioned below).

That was then and this is now.  Hancock and others may well have been offering a cheaper product when the federal program was introduced, but it is highly unlikely that this is the case now.  The private market offerings are a LOT more expensive now, since most companies realized they were giving away the store.

Good point, Brewer, I'm going to have to talk to my dad again. I'm eligible for the insurance on me but since I'm retired he's no longer eligible for the insurance through me. However the fine print indicates that parents-in-law of Selected Reservists are eligible, so he'll squeak out his eligibility through my spouse... until she retires. Go figure.

 

[cute fuzzy bunny]

I dug up my envelope calculations. I had a web site give me several quotes (all the companies were ones I had 'heard of', no 'big bobs insurance company'). The total premiums presuming no increases over inflation (a pretty conservative approach IMO) for our prospective lifetimes would be close to $200k. Looking at just a modest investment return of that money, tax implications of withdrawing the funds to pay the premiums, and actual inflation of health care insurance costs...an astronomical cost.

Granted if both of us end up needing 5-7 years of care at the end of our lives, that would be a good thing to have spent money on.

Otherwise this runs too close to the college savings plans...I can probably do as well or better just investing our money and paying for costs out of pocket.

 

[Rich_by_the_Bay]

Rich, can't the same be said for auto, homeowner, term life or almost any type of insurance? Even if you drop the policy without using it, you were covered while it was in force.

You are right, REWahoo. I somehow was comparing it to life insurance (for no logical reason).

The ideal solution is to save enough (or wait enough) to retire with sufficient buffer to handle this out of pocket with lifestyle adjustments. So much can change in terms of health care economics over time that I am uneasy about committing to 10s of thousands of dollars in premiums. At a SWR most of us will have lots of extra cash in our late retirement when this scenario is more likely.

Tough call. I am leaning toward either staying the course and saving as much as I can, or maybe biting the bullet and buying some life insurance (but not too much, say 250K to 500K) so I (or more likely my DW) can dig in to our retirement savings with the knowledge that there will be some recovery money when the unfortunate spouse dies. At least with life insurance a) the premiums are level and thus predictable, and b) you know there will be a payback for one of us eventually. But those premiums are high as you age...

 

[brewer12345]

Tough call. I am leaning toward either staying the course and saving as much as I can, or maybe biting the bullet and buying some life insurance (but not too much, say 250K to 500K) so I (or more likely my DW) can dig in to our retirement savings with the knowledge that there will be some recovery money when the unfortunate spouse dies. At least with life insurance a) the premiums are level and thus predictable, and b) you know there will be a payback for one of us eventually. But those premiums are high as you age...

I personally would not be making the same choice, but if you choose to buy life insurance for this purpose, what you want to buy is known as No-Lapse Guarantee Universal Life from a company rated Aa3/AA- from Moody's/S&P or better. Pick the one with the lowest premiums and ignore cash value. This product is basically level premium term for life, and many companies are putting this product out with VERY aggressive pricing (good for the consumer). If you want an opinion on the creditworthiness of a particular insurer, I will be happy to opine.

 

[Rich_by_the_Bay]

I personally would not be making the same choice, but if you choose to buy life insurance for this purpose, what you want to buy is known as No-Lapse Guarantee Universal Life from a company rated Aa3/AA- from Moody's/S&P or better.

Thanks. I would have run the other way the second I heard the term "No-Lapse Guarantee Universal Life." How is it different from level term? I was going to just shop it for price among highly rated companies.

 

[saluki9]

Thanks. I would have run the other way the second I heard the term "No-Lapse Guarantee Universal Life." How is it different from level term? I was going to just shop it for price among highly rated companies.

It's different because as long as you pay the premium the policy will stay in effect. Level term is contractually limited to 10, 20 or 30 years.

It's different from normal universal life in that the purpose is not to accumulate cash value but only to provide death benefit.

 

[Rich_by_the_Bay]

It's different from normal universal life in that the purpose is not to accumulate cash value but only to provide death benefit.

Thanks. If its purpose is only to provide death benefit, are the premiums competitive with level term over, say, 20 years? That is, if I am interested only in buying death benefit, what might be the reason to choose No-Lapse Guarantee Universal Life, if not premium cost?