“Help! I was just diagnosed with an illness, and I need to buy life insurance”
When one buys homeowners insurance, do they buy it before or after the house catches on fire? Whether or not you may or may not own a home, I anticipate you all know the answer. The same rationale and logic may apply to life insurance, or any sort of protection for those things you cannot afford to lose. Life insurance is something that tends to increase in price as we get older. All the while, when we are younger the costs associated with this are relatively low, but as we get older the premiums begin to rise. As I have shared in an earlier article, why be willing to pay more for something in the future when you can lock in the rates at a relatively cost-effective premium now.
The overall premiums for any sort of life insurance is built on a number of data points to ensure one may be eligible for their respective policy. The typical information that premiums are predicated on are things such as, age, gender, health, amount of insurance, and how long one is going to pay for it. The duration of financing is indicative within the premium – depending on the type of insurance one owns the longer or shorter period of payments may be higher or lower. While our relative health may slowly change in the latter part of our life, our age is a variable in the pricing of insurance.
Typically, when we reach certain age bands in our life (i.e. – 30, 40, or 50 years old) the premiums may increase more noticeably than when we were youngers. Many insurance companies that provide an ideal health typically reduce the premiums than those policies where the insured is not in great health. The anticipation is that premiums will continue to be paid, and both the insured should live a long fruitful life while the insurance company will make money from the premiums collected – everyone wins!
In a different circumstance when one was diagnosed with some sort of chronic illness such as diabetes or cancer, it changes the playing field of how premiums will be structured. It used to be that many companies may not consider underwriting or approving people with similar conditions because of the risk associated with approving them – the company may have to pay a claim within a short period of time. While the contract may be honored in theory, insurance companies would not be so quick or considerate insuring someone that has a severe illness or disease.
Nowadays, as a result of medical advancements and therapies insurance companies have begun changing some of their underwriting criteria and are insuring people that may not have been candidates years before. For example, one with sleep apnea or a history of bi-polar disorder may be eligible for life insurance nowadays. Given the associated ailment given their health, there might be an additional premium for the “added risk” but it’s better than being declined altogether and not being considered. In fact, one client of mine whom had cancer a few years before we applied for life insurance actually get a policy with a reputable company*.
The reality is that when it comes to planning our financial future many people tend to think about their retirement accounts, investing, and building a “nest egg”. Nobody wants to think or consider their mortality. It’s normal not to think of such a depressing topic. Yet, we may agree that it is important to have something in place to care for family or those that rely on us then not to not have it or be eligible for it when one’s health declines.
Therefore, while it is important to sustain a comfortable lifestyle, it would also be worth considering that while one is young and healthy to lock in insurance premiums than waiting until one gets older, and worst off is diagnosed with something that will noticeably raise the premiums.
Life insurance policies are subject to eligibility requirements and restrictions and may not be right for everyone.
*The company had retired doctors as underwriters familiar with different diseases and diagnoses making them a company worth applying with. They also differentiate themselves as considering those applicants with a history of cancer or chronic illnesses.
Registered representative of and securities offered through Hornor, Townsend & Kent, Inc. (HTK), Registered Investment Advisor, member FINRA/SIPC, 600 Dresher Road, Horsham, PA 19044, (215) 957-7300. HTK does not accept time-sensitive or action-oriented messages delivered via e-mail, including authorization to “buy” or “sell” a security or instructions to conduct any other financial transaction. 2545916AL_MAY21