President Obama’s grandfather was a life insurance agent, and in one of his speech he explained his grandfather’s predicament: his grandfather always said that “People would rather have a root canal than face a life insurance agent.”
Ha-ha, in my experience, he is right. People run away from life insurance agents.
But when would be the right time that people would stop running away from insurance agents and start getting a life insurance policy?
Lauren, is a childhood friend. After several years, I met her again at a party of a common friend. We immediately engaged in a conversation and she told me about her up-to-date life story. She told me, she has a husband, two sons and a thriving food business.
After that meeting we eventually met again to discuss her possibility of getting a life insurance. Only of course, procrastination got in her path.
Her first excuse, “I will discuss this first with my husband who is in another country.”
After a few months, her second excuse was: “so many problems with my business right now.”
A year afterwards, I saw her again in a reunion, this time she alleged, “I can’t commit right now.”
After that meeting, two months later, my phone rang, I saw her name in the receiver, Lauren.
Hmm.. Interesting! I answered her. “Yes? Lauren?”
She said, “Can I meet with you regarding your proposal?” We set up a meeting at her house. And when I saw her, I knew something was wrong. She was thin, with darkened eyes, and seems very very ill. She immediately told me: “I have cancer. Can I now still get a policy.”
“As much as I would like to give you one, it is too late. You will be turned down if you get it today.”
Oblivious to many, the right time to get a life insurance policy is crucial because when you are getting a life insurance policy, it is much like applying for a job, you declare all your qualifications and they will decide at the end of the day if they will employ you or not.
As each application for life insurance is submitted, it goes to what you call “Underwriting Process” where underwriters evaluate each application, weighs the risks of each person applying before they actually approve or reject it.
To make you understand what I am saying, look at the image beneath. Among these 3 men, who do you think has an average risk? Who do you think entails more risk?
As you can see, one is very very thin, the other one is average for it’s height and weight and the latter is obese. The very thin and obese ones could entail more risk than the average one. Factoring in, many diseases that predispose them associated with their Body Mass Index (BMI) like: malnutrition, tuberculosis, hypertension and diabetes, etc.
The more risks a person has, the higher percentage he has of dying much earlier than the average person. Which will definitely affect the approval of the policy.
Not just in the physical attributes do insurance companies evaluates each application. They also look at the following:
- Profession/Work – is your profession/work endangers your life?
- Health – do you have good health? Do you have a pre-existing disease?
- Risky behaviour/hobby – do you have hobbies that are risky, like: hazardous sports?
- Place of Residence/work – do you live or work in a place where there is obvious danger?
After careful evaluation they can either:
- Approve – Standard rates
- Approve but with exclusions
- Approve but Rated
- Deferred
- Declined
What do those means:
APPROVED
This means your application has been approved at a standard rate of a normal average person at that age. Congratulations!
APPROVED, BUT RATED
This means your application has been approved, but, your premium is higher than the standard person.
You may have one or more risks that made you deviate from the norm/standard. Anything that will make you deviate from the standard, will increase your chances of dying much earlier than a normal person with an average life span.
APPROVED WITH EXCLUSIONS
Your application for life insurance is approved, but they have excluded some causes of death that may happen due to a pre-existing disease or an existing risky hobby/behavior.
Eg. You are a mountain climber for 3 years already, before you applied for a life insurance.
Your policy may be approved at standard rates but any death resulting directly from “mountain climbing” is excluded from the benefits (this will be stipulated in the policy contract).
DEFERRED
Deferred means you are not approved today, but, you still have a chance to be approved later on.
E.g. You have been diagnosed with PTB (Pulmonary Tuberculosis), you may be deferred from your application, but they usually evaluate again after six months with the “Go signal” of your attending physician that you are completely healed.
DECLINED
This is the worst possible case scenario. Your application is declined due to extreme or high risks that are too much as evaluated by the underwriters and perceived by the insurance company.
Another thing that is important to note, all rated, deferred and declined applications due to medical reasons will be submitted to the MIB (Medical Information Bureau) which centralizes medical information from all insurance companies and file it for retrieval by other insurance companies.
This means, there is no shopping around, “if you get declined due to a medical reason in one insurance company, there is a high possibility of you not getting it from another company because of this, even if you don’t tell that your were previously declined.”
As they say, “Your money does not buy the Life Insurance, your Health Status does.”
Lessons:
The earlier you get it the better, where:
- The premium is much lower,
- You are healthier,
- You might still do not have the high blood pressure, or hereditary disease your whole family has,
- You might still not have adventurous hobbies (scuba diving, mountain climbing)
- You might still be working here in the Philippines and not as a seaman in Africa.
To answer the question in the title, “When is the Right time to get a life insurance policy?” The answer is “Yesterday.”
If you are like most of the people I know, and you turn down all the insurance agents that came to you. Well, think again, because by the next time, they might be the one turning you down.
Think hard!
Are you certain you are still insurable right now?
You need some help in getting one? Read this first:
Top 10 Life insurance companies in the Philippines: Most Updated and Most Unbiased Review
The Difference between Pre-Need and Life insurance companies
5 Insider tips on getting the best Life insurance / Financial Advisor for you
Ready to get one? Contact me here or any of your insurance agent friends.
Disclaimer: Cases above are true cases but, underwriting is done on case-to-case basis. Sample cases above may have different turn-out depending on underwriting process and evaluation.
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great article here!
This is a good wake-up call for those who are still hesitant in getting insurance. TFS.
Will never know what is life tomorrow or in the future…