Terminal Cancer and Guaranteed Issue Life Insurance

[Snidely Whiplash]

As I previously posted, my 54 year old wife has been stricken with stage 4 pancreatic cancer that has spread to her liver. Due to the amount of disease in her liver her doctors one year ago suggested she may live somewhere between 1-5 years.

My wife had a twenty year term life insurance policy for $100k that expired several months ago, but the insurance company sent a renewal notice and payment notice for a years coverage with no questions asked which we promptly paid. I assume this will continue for the next couple of years?

Watching TV today and I see an insurance company advertising Guarunteed Issue Life Insurance for anyone between the ages of 50-85 and implying rates of $10 per month for about $25k in coverage with no questions asked.

I feel a bit sleazy asking, and certainly my preference would be for my wife to live many more years, but I also have to be realistic and prepare for all possibilities.

Is anyone familiar with these Guarunteed Issue Life Insurance Policies? Is it truly possible I can get coverage for her "no questions asked?" Can I get more than one of these policies (one from from a couple of different companies)? If I inquire about one of these policies is there a chance my wife's current insurance company could find out she's looking for more (Guarunteed Issue) coverage and recognize the direction things may be going and refuse to renew her current policy?

As always, I'm grateful for any advice provided or suggestions for how to research this further.

 

[Souschef]

i cannot comment on the insurance issue, but give you all the support I can. My wife was DX with lung cancer in April and gone in May. I am so sorry for your situation and will keep both of you in my prayers.

 

[BreathFree]

As I previously posted, my 54 year old wife has been stricken with stage 4 pancreatic cancer that has spread to her liver. Due to the amount of disease in her liver her doctors one year ago suggested she may live somewhere between 1-5 years.

My uncle was just diagnosed with stage 4 pancreatic cancer. I made a trip out of state to visit him possibly for the last time. So sorry your family has to go through this. I pray the years you have left together are quality ones.

 

[Jerry1]

I'm sorry for your wife's diagnosis and what you will be going through. In response to your question, I did a little research and found the following:

In addition to the higher premiums, one of the main drawbacks to a guaranteed issue life insurance is that your beneficiaries wouldn't receive a full death benefit until your policy has been in force for a specific length of time (typically between one or two years, depending on the life insurance company). In the insurance industry, this is known as graded benefits. If you were to die during the first few years of the policy, most life insurance companies will generally issue a refund of your premiums to your beneficiaries in lieu of the actual death benefit. According to Investopedia, this practice prevents immediate large payouts for critically ill individuals who may wish to sign up for a policy just in time for their loved ones to receive a death benefit. - See more at: Guaranteed Issue Life Insurance | Protective Life

 

[athena53]

What Jerry just said. DH was diagnosed with acute myeloid leukemia in July and I looked at the fine print on one of those policies- if death occurred in the first year (might have been two years) they just returned all the premium you paid. I hope someone from the life insurance industry can answer your question about whether or not companies would know you're buying additional policies. That's probably information they wouldn't want competitors to know since it involves customer names. They probably wouldn't do it at all at the $10K/$20K level, which is what many of the "guaranteed issue" policies offer.

I DID have wicked thoughts about having DH get a credit card and running up the balance- DH had almost nothing to his name because I was 15 years younger and I was the money manager. In the last few months we even transferred the cars into my name. Creditors would have been SOL.

DH died last week, peacefully at home, with great support from hospice. Be grateful, at least, for advance notice; I think it would be much harder to lose a loved one with no warning. I treasure the memories of the last few months, the loving goodbyes he had from family, the last road trip, the talks we had. It was sad to see him growing thinner and weaker and his world becoming more limited as he became less mobile and the types of food he liked dwindled, but I'm grateful we were together through it. I hope that you, also, are left with mostly good memories of the days ahead.

 

[Taxman59]

Several years ago, an insurance agent told me that the "best" policy to get in your situation is a policy from your bank! Borrow on a new equity line, and buy the mortgage protection policy. It is guaranteed issue, and though the premium is somewhat high for a healthy person, in your situation it is a good deal. The best part is that you get cash up front (the borrowings) and then the loan is paid off. I talked with a banker, and he confirmed that that is valid.

This also applies to the credit card insurance. My Father was suckered into getting it, but he died about 4 months later (unexpectedly) and it just so happened that the card he insured was the card he used for medical expenses which included a hospital stay (charged before he died, and the insurance was paid to him!).

 

[Sunset]

I think most of these policies are small, but 10K and 10K there couldn't hurt. You could be lucky in many ways and your wife could live another 5 yrs.

I wouldn't rack up any CC as the interest rate is so severe and I've heard of more than 1 person doing that who then went on to live for years and years, stuck paying off a large CC debt.

 

[calmloki]

Several years ago, an insurance agent told me that the "best" policy to get in your situation is a policy from your bank! Borrow on a new equity line, and buy the mortgage protection policy. It is guaranteed issue, and though the premium is somewhat high for a healthy person, in your situation it is a good deal. The best part is that you get cash up front (the borrowings) and then the loan is paid off. I talked with a banker, and he confirmed that that is valid.

This also applies to the credit card insurance. My Father was suckered into getting it, but he died about 4 months later (unexpectedly) and it just so happened that the card he insured was the card he used for medical expenses which included a hospital stay (charged before he died, and the insurance was paid to him!).

Very interesting. Best to Snidely Whiplash and his Nell and sorry to read the news from Athena53.

 

[boaski]

I consider all this talk kind of dishonest I am proud I have my own money without having to scam someone.

 

[athena53]

I consider all this talk kind of dishonest I am proud I have my own money without having to scam someone.

I wouldn't call it a scam. In the case of insurance it's called "adverse selection"- people who are most likely to need insurance will buy it. They actually use separate mortality tables for pricing life insurance and annuities because people who buy annuities tend to live longer. Companies compensate for this partly via underwriting rules (requiring medical exams for large life insurance policies, limiting benefits the first few years, charging more for smokers, etc.) The rest of the adverse selection risk is built into the pricing.

Same for credit cards, really. Why do you think they charge those crazy interest rates? I just mentioned it as a wicked thought- not something we actually did, I've never walked away from a debt in my life.

 

[aja8888]

Scams? Credit card interest rates at 26% when the best you can do in the bank is 1%. Now that's a scam!

 

[MRG]

Very sorry for your situation.

I'd agree, insurance companies have the bases covered. They're ruthless about not being taken.

In my w*rk I dealt with many insurance companies, and other industries, from an IT perspective. We sold, implemented, supported software they used in the back office, say like life insurance policy initiation to termination.

I'd never heard of steps that were about checking with other companies, but I fixed the systems when they broke. I don't have intimate knowledge of ALL the business processes used.

I'd find it hard to believe that the morons I w*rked with could establish network connections between all the players. Perhaps there's a third party who provides this service to them?

Seems like the insurance companies all set out to protect their interests only. If they all do that, there's no reason to see if someone is buying multiple policies. It could be a legitimate thing to do.

 

[youbet]

I'd agree, insurance companies have the bases covered. They're ruthless about not being taken.

+1

I think it's a no-brainer to understand that insurance companies are not spending big bux advertising and buying infomercial time to sell policies where they will lose money! In aggregate, the premiums received will exceed the benefits paid or they wouldn't offer this type of policy.

It couldn't hurt to get a quote and a copy of a policy. But I'd be very analytical in deciding whether the policy would be beneficial. Most policy holders will receive less in benefits than they pay in premiums or the policies wouldn't be offered.

If it's too good to be true..........

The link in Jerry1's post (above) is very informative.

 

[mystang52]

I just looked into these policies. I have a 20-year term policy that expires next month. It's guaranteed renewable, with a few options. The policies are indeed guaranteed issue. The premiums are higher than "standard" but that should be no surprise. But, the premiums were not exorbitant. Both of the ones I looked at only refunded the premium if death occurs in the first 2 years of the policy. In my case, it was better to stay with my current insurer. I should mention that due to my own medical condition I am uninsurable so have limited options.
Sorry to read of your situation; I wish you and your wife the best.

 

[youbet]

I just looked into these policies. I have a 20-year term policy that expires next month. It's guaranteed renewable, with a few options. The policies are indeed guaranteed issue. The premiums are higher than "standard" but that should be no surprise. But, the premiums were not exorbitant. Both of the ones I looked at only refunded the premium if death occurs in the first 2 years of the policy. In my case, it was better to stay with my current insurer. I should mention that due to my own medical condition I am uninsurable so have limited options.
Sorry to read of your situation; I wish you and your wife the best.

Did your research lead you to any understanding of how the insurance companies make a profit (in aggregate) on these policies? Who are the folks buying them that wind up paying more in than is paid out at death?

I'm having trouble getting my mind around the concept of insurance companies (and their very sharp pencils) offering a product where folks who are in poor health can buy them and generally all expect their beneficiaries to receive more benefit than the premiums paid in. Insurance companies just don't work that way....... At least in my experience.

I'm really interested in what the "catch" is, if anyone can figure it out.....

Edit: I found a web site where a third party (broker?) has a tool that passes out quotes from various insurance companies. I asked for a quote for myself, age 69, for $25k of coverage. (The max was $40k.) The quotes ranged from $207 to $352 per month. That's quite a broad range so I suspect there are some significant differences in the policies, but those details weren' t given. If "gotchas" with the cheapest policy pushed you to chose a $275 policy, you will have paid in the $25k benefit in about 7.5 years.

https://www.truebluelifeinsurance.com/guaranteed-issue-life-insurance/

 

[athena53]

I'm having trouble getting my mind around the concept of insurance companies (and their very sharp pencils) offering a product where folks who are in poor health can buy them and generally all expect their beneficiaries to receive more benefit than the premiums paid in. Insurance companies just don't work that way....... At least in my experience.

I'm really interested in what the "catch" is, if anyone can figure it out.....

They price using average mortality rates by age based on industry experience for insured lives (people who actually bought policies, not the general population). Some policyholders "win" by developing a terminal illness or getting into a fatal auto accident at a tragically young age. Overall, the averages hold true. As for the differences in premium you noted, it may be that different policies are making different assumptions about their overhead expenses, the return on their investments (since they need to keep a good deal of the premiums they receive in reserves to pay claims), and lapse rates. Lapses mean the policyholder just decided to quit premiums- so the company collected the premiums and will never have to pay a claim. High lapse rates are good news for the insurer!

 

[mickeyd]

So sorry to hear about your wife's health condition.


It is good to always remember that any LI company is in business to make money and is not a charity. You should always assume that live or die, they tend to come out on top. Otherwise, why sell the product?

 

[Sunset]

......
I'm having trouble getting my mind around the concept of insurance companies (and their very sharp pencils) offering a product where folks who are in poor health can buy them and generally all expect their beneficiaries to receive more benefit than the premiums paid in. Insurance companies just don't work that way....... At least in my experience.

I'm really interested in what the "catch" is, if anyone can figure it out.....

......

One huge catch is they simply don't pay. Many States have sued and won against about 200 ins. companies for this very fact.

Insurance Industry Fails With Unpaid Death Benefits | The Huffington Post

I personally know a fellow that died of heart attack, the ins. company told the widow since he died of a heart attack, he must have had a heart condition 20 years earlier when he signed up, so they would only pay 1/2 of the $150K policy
They told her if she didn't agree they would pay nothing and she could hire a lawyer to sue for a payment.

I also worked with an ex-ins. office worker, who told me they got bonuses based on how much "less" they paid out on policies, the prime method for old claimant (spouse of deceased) was to deny and delay until the claimant died themselves. Then most often the issue was gone.

 

[youbet]

They price using average mortality rates by age based on industry experience for insured lives (people who actually bought policies, not the general population). Some policyholders "win" by developing a terminal illness or getting into a fatal auto accident at a tragically young age. Overall, the averages hold true. As for the differences in premium you noted, it may be that different policies are making different assumptions about their overhead expenses, the return on their investments (since they need to keep a good deal of the premiums they receive in reserves to pay claims), and lapse rates. Lapses mean the policyholder just decided to quit premiums- so the company collected the premiums and will never have to pay a claim. High lapse rates are good news for the insurer!

Thanks for the info/comments.

At first glance, it seemed like buying guaranteed issue life insurance for someone with a terminal condition would be a no-brainer. How could insurance companies possibly offer it and, in aggregate, make a profit? It must be a great, almost guaranteed, deal for the consumer! Or not...........

I looked up some premiums (they're quite high compared to traditional term), noted that the face value of policies offered is relatively low and that there is typically a 2 year waiting period before you're eligible to collect.

The waiting period eliminates "death bed" purchases and I suspect that many folks that live for 2 years have a high variability regarding how long they live after that. In other words, the "sure thing" aspect is reduced for many.

The high premium means you have to be committed and have the resources to follow this path. For myself at 69, I'd pay a premium of about $300/month for a $25k policy. If I invested the $300 into Wellesley every month, it would only be a few (5 - 6) years before that would have been a better option.

The low face values offered means you'd go through the rigors of opening and paying for the policy every month and assume the risk of perhaps living beyond the break even point without the possibility of a really big payoff.

Like all insurance, It pays off for some and not for others. That's what insurance is. Some people pay in more than they ever collect. Others collect more than they pay in. The insurance company almost always makes a profit.

If OP's wife lives more than 2 years from initiation of the policy, but not too many more years after that, it could be a beneficial situation. Get a quote. Read the fine print. Perhaps speak to an independent insurance agent or elder attorney and ask if there are "gotchas" to worry about. Check out the insurance company with your state regulators.

 

[youbet]

One huge catch is they simply don't pay. Many States have sued and won against about 200 ins. companies for this very fact.

Insurance Industry Fails With Unpaid Death Benefits | The Huffington Post

I personally know a fellow that died of heart attack, the ins. company told the widow since he died of a heart attack, he must have had a heart condition 20 years earlier when he signed up, so they would only pay 1/2 of the $150K policy
They told her if she didn't agree they would pay nothing and she could hire a lawyer to sue for a payment.

I also worked with an ex-ins. office worker, who told me they got bonuses based on how much "less" they paid out on policies, the prime method for old claimant (spouse of deceased) was to deny and delay until the claimant died themselves. Then most often the issue was gone.

Yes. Sadly, I'd guess your comments come into play some of the time. There has to be a reason insurance companies are spending big bux to advertise and buy infomercial time for these products. They wouldn't push them so heavily if profits were minimum.

Cynical me.

 

[Car-Guy]

I've always understood that such policies were very limited for the first two years.

 

[Taxman59]

I consider all this talk kind of dishonest I am proud I have my own money without having to scam someone.

The insurance companies make their money because the masses who generally get this don't die early. The banks are the ones who subsidize these policies so they can get their loans paid off (of sold to someone else).

 

[brucethebroker]

I just looked into these policies. I have a 20-year term policy that expires next month. It's guaranteed renewable, with a few options. The policies are indeed guaranteed issue. The premiums are higher than "standard" but that should be no surprise. But, the premiums were not exorbitant. Both of the ones I looked at only refunded the premium if death occurs in the first 2 years of the policy. In my case, it was better to stay with my current insurer. I should mention that due to my own medical condition I am uninsurable so have limited options.
Sorry to read of your situation; I wish you and your wife the best.

You might want to check with your current term ins. co. to see if your term policy has a guaranteed conversion option into a permanent/whole life policy. Many term policies do. Those conversions are guaranteed, and pay the death benefit immediately and the premiums are much, much better than the guaranteed issue plans discussed earlier. If you cannot convert, then you are wise to keep the policy you have.

 

[mystang52]

You might want to check with your current term ins. co. to see if your term policy has a guaranteed conversion option into a permanent/whole life policy. Many term policies do. Those conversions are guaranteed, and pay the death benefit immediately and the premiums are much, much better than the guaranteed issue plans discussed earlier. If you cannot convert, then you are wise to keep the policy you have.

Thanks. We really don't need life insurance anymore, but it was a futile effort trying to convince DW. I did renew with my current insurer for a decreasing term policy - same premium as now, obviously a lower death benefit, but that benefit is fixed for another 19 years, and gives a sense of relief to DW.

 

[Snidely Whiplash]

Just wanted to thank everyone (except boaski) for their very kind replies. I received a quote where the premiums were MUCH higher than were implied on the infomercial. The reply indicating yearly premiums of about 1/7 of the insurance amount with a 2 year "return of premium" clause was about right. It made little sense in our situation.

I am grateful for the information provided by everyone. My thinking isn't always straight during this and it's nice to have someplace to ask questions where I know I'll get knowledgeable replies.