McEvoy Ins Blog
Level term life insurance is widely considered a smart choice for most life insurance consumers. Large amounts of protection can be purchased for a modest sum. You’re also offered some degree of control with respect to the length of time that your premium is guaranteed to remain fixed and level. Insurers typically offer level term periods, in 5-year increments, beginning with 10 years and maxing out at thirty. In other words—it’s cheap and it does the job. But what happens to a level term policy when the level term period expires? Let’s take a look…
At the ages of 36 and 39—Samantha and James decide to purchase term life insurance policies with level term periods of 20 years. They have 3 young children and their McEvoy Insurance agent pointed them in a wise direction. In order to maximize their protection and minimize their expense, here’s how their agent helped them apply:
Benefit Amount: $600,000
Level Term Period: 20 years
Annual Premium: $596
Approved Health Classification: 2nd best tier
Benefit Amount: $400,000
Level Term Period: 20 Years
Annual Premium: $226
Approved Health Classification: Best possible tier
James and Samantha’s agent helped them find the magical intersection of cost, benefit amount, and longevity of their guaranteed premium. It’s important to point out that from a nuts-and-bolts perspective—the choices made by this couple may not seem ideal. For instance—their incomes and liabilities may have suggested larger amounts of coverage for a longer period. But “ideal” is a subjective term. Our agents know that for the promise of life insurance to be fulfilled it needs to be in place when the unthinkable happens and a claim is filed. That’s part of the aforementioned “magical intersection”. If the cost of the formulaic ideal (age, income, and liabilities based) doesn’t match someone’s ability to afford the protection for as long as possible—is it really ideal? Rational people would argue it’s not.
In helping James and Samantha refrain from biting off more than they could chew—their agent demonstrated his commitment to protecting his customer’s family. They settled on a monthly expense of around $72 per month for two policies because they knew they were buying something they could afford in good times and bad. The low cost ensured they would never find themselves in a compromising position. (“Should we buy groceries or stop paying our life insurance premium since we’re both unexpectedly not earning income?”)
So… “ART”. More accurately—"A.R.T.” This stands for Annual Renewable Term. It’s what level term life insurance becomes when the level term period expires and it’s either a blessing or an unfortunate consequence of not paying attention to your changing needs for life insurance protection.
If James and Samantha maintain their policies for 20 years and aren’t proactive with respect to exploiting other life insurance ideas and options, they’ll eventually get a letter from their insurance company. They’ll be informed that they can keep their term life insurance in place but the 20 year premium guarantee they received isn’t there anymore. Their new premium will be guaranteed for one year and it’s now mostly uncoupled from the favorable approvals they received and everything else that went into determining their pricing 20 years earlier. If they want to keep their coverage it’s going to be very, very expensive for a year. If they can afford it and want to keep it—they can expect an even higher rate in year 22. And so on (usually until age 95). Just as the name implies—their 20 year level term policies have morphed into policies that renew on an annual basis with premiums that increase each year based on their adjusted ages. And since declining health is inevitable it is also assumed when the cost of A.R.T. is considered.
When a level term life insurance policy is issued by an insurance company—they provide a schedule of maximum premiums you’ll expect to pay when your level term premium guarantee ends. It’s done this way because costs are constantly being adjusted over time based on changing life expectancies, new health data, market performance, etc. Although you can’t be certain your premium will be the maximum specified—you can be sure it will be significantly higher than what you had been paying as you enjoyed 20 years of cozy, manageable premiums. How much higher could it be? Let’s compare the annual premium for years 1-20 to the potential annual premium for Annual Renewable Term in years 21-25:
Surprised? People who are unaware of this level term life insurance feature are often unpleasantly caught off guard when this happens. It’s a cautionary tale. We hear way too often about agents promising their customers that they can keep their policies until the ripe old age of 95 without telling them that it would be ridiculous to do so. It’s simply not affordable. In fact—when you look at the Annual Renewable Term premium in the year following the end of level term period—you’ll see that cumulative costs associated with the first 20 years of policy ownership are roughly equivalent to the premium for a just a single year of A.R.T.
Under what circumstances would you consider yourself blessed to have the option to continue paying these high prices? It’s conceivable that someone diagnosed with a very serious illness would be grateful for the option to maintain protection a bit longer at just about any price. If you find yourself unable to qualify for something new, can afford very high premiums a while longer, and absolutely need the protection—maintaining your policy as A.R.T. may be the only move available. You might be pleased to have something instead of nothing.
In year 20—how will James and Samantha feel about the magical intersection of factors that once guided them to their current policies? That’s a question best answered after the passage of time and it will involve regular conversations with their agent.
Annual Renewable Term isn’t the only move you have as you age and life throws you a variety of pitches. Your agent can help you decide what to do and when to do it as long you keep your head in the game. You could buy additional policies as supplementary protection, start over with something entirely new, or you could choose to take advantage of your policy’s conversion option as well. Generally—by evaluating your options consistently and often (and sooner rather than later) you can rest assured you’re doing everything right for those who depend on you.
Live an artful life by thoughtful design… but don’t allow your life (insurance) to become A.R.T.
The ancient Greek philosophy known as Stoicism has recently experienced a worldwide surge in popularity. Followers of Stoic wisdom believe the philosophy offers a path to a more contented life through understanding what you can and cannot control.
Stoics are fond of reciting the Latin phrase “Memento Mori” (remember death). On the surface, this seems to contradict the notion of living a contented life. How are we supposed to find contentment while reminding ourselves we are, most certainly, going to eventually die? The answer is clear when you realize the real focus isn't mortality. It's the fact that mortality is not something we control. Our ultimate demise is inevitable. By maintaining awareness of what's out of your control you can make the most of the life you're living.
What does Stoic philosophy have to do with life insurance? Well… quite a bit. The Stoics were on to something. Imagine if everyone had the ability to process certain inevitabilities—like their own death—with a calm, level-headed sense of responsibility. It’s quite possible everyone on Earth would have life insurance in that scenario. Plainly stated—a life insurance purchase requires contemplation of your own death not to mention pondering the fate to befall those you leave behind. This is understandably difficult for most of us. It's charged with powerful, negative emotion. Also-- to the extent that most people believe death is something that only happens later rather than sooner-- it's illogically conceptualized. When it is indeed "our time"-- we'll have no say in the matter. The Stoics would remind you that death is out of your control and then ask why you’re acting like it is.
One of the most well-known Stoic philosophers, Seneca, once wrote:
"Let us prepare our minds as if we'd come to the very end of life. Let us postpone nothing. Let us balance life's books each day... The one who puts the finishing touches on their life each day is never short of time."
Have you prepared your mind for the one thing we all know must happen to every living thing on the planet? What are you postponing?
If you have not yet purchased life insurance—we’re here to help you control what you can and worry less about what you can’t. Call us at (877) 296-2386 or start the process with a quote and application request today.
If you’ve already purchased life insurance—whether it’s through McEvoy Insurance or someone else—give us a call so we can conduct a beneficiary review. We’ll review your coverage, help you determine if it’s adequately meeting your needs, and make recommendations. It’s how we help our customers “balance life’s books each day”.
Most people have seen life insurance commercials on television or heard a few on the radio from time to time. Unfortunately— too often these types of advertisements can be very misleading to the average consumer. The ads typically boast astonishingly low rates for generous amounts of coverage which, as intended, spurs those thinking about getting a policy into taking immediate action. To the extent that we believe everyone should acquire life insurance protection for those who depend upon them—we can’t help but applaud those who act decisively and make a life insurance purchase. However—the reality is that many people become almost instantly disengaged from the concept again when, after watching or hearing a life insurance advertisement, they’re told that the rate they should expect is considerably higher than the very low rate which inspired their action in the first place.
Obviously—the larger the life insurance benefit and the longer it provides protection the more it will cost. Most consumers know this intuitively.
But what if you were to hear an advertisement for a $500,000 life insurance policy for a 35 year-old male with a 20 year level term period and—since your age and perceived need are a match for what you just heard—you immediately call to take advantage of “The Deal”. Can you reasonably expect to sew up protection for the precise advertised rate?
The best answer is… well… a strong “maybe”. You see—it’s not just your age, gender, benefit amount, and policy type (permanent or temporary life insurance) that dictate the cost of a life insurance policy. In order to know what we’ll actually pay for a life insurance policy, we also need to be placed into an appropriate “health classification” (or “underwriting classification”). Our individual health characteristics, motor vehicle record, habits, hobbies, and family histories all play a role in how our rates are ultimately determined.
It’s the job of your agent to explain this to you and guide through some questions that will help increase the level of certainty that the rate at which you apply for coverage is the rate you will ultimately be offered by the insurance company. After underwriting, your actual rate may turn out to be higher or maybe even lower. If higher—you might astutely and quite appropriately ask, “Why isn’t the rate I applied for and the rate I ultimately receive automatically the same?”
There is not generally a short answer to this question; but it’s definitely a question you should ask.
After an application is made for life insurance coverage at a rate an agent honestly believes is accurate based on how certain key questions were answered—the application is submitted to a life insurance underwriter at the company of choice. This is “Part A” of the application process.
“Part B” of a traditional life insurance application will usually entail a visit from a paramedical professional (paid for by the insurance company) who is tasked with confirming some of the answers to the health questions from Part A of the application, physically measuring your height and weight, and possibly obtaining blood, urine, and (depending on your age and the requested benefit amount), maybe even an EKG. Once Part B is submitted to an underwriter—he or she may decide that additional information is required from a physician to make a final decision.
For the consumer—this isn’t as labor intensive as it sounds. Once the “hard part” (finding a good day and time for the free paramedical exam and completing it)—most of the process is methodically conducted behind the scenes as you await a final decision.
One important thing to know is that there are many types of life insurance products on the market and there are various methods of underwriting as well. Generally speaking—the larger the benefit amount (the amount at risk for the company providing the protection) the more thorough the underwriting process will be. This is the type of coverage situation on which we’re placing our focus right now. It is the traditional process; and it’s the most reliable way consumers can expect to acquire the best coverage at the lowest price.
Hopefully—so far—this goes a long way toward explaining why there can be disparities between the rates we hear (or see advertised) and the rates for which some consumers ultimately qualify. Getting excellent rates means you’re currently in excellent health. Your health history is excellent. The health history of your parents and siblings (usually before they turned 60) is excellent. Your paramedical results were excellent… and so on.
Many people can qualify at the best possible advertised life insurance rates. But certainly not the majority.
The moral of the story: When you know you need to secure protection for your family—choose not to become a victim of advertisement-induced-insurance-premium-optimism that could lead you down the road to disappointment and a delayed decision. On the other hand, you shouldn’t allow yourself to be a victim of ignorance-induced-insurance-premium-pessimism either. In both scenarios there is real risk in not acting in a timely fashion to protect your family.
Once you apply for life insurance, receive an approval, and accept your policy—your rates are certain. Unfortunately… life itself is not.
You can acquire a life insurance quote for yourself in just a few seconds on our site or you can simply call us today at (877) 296-2386 and we can guide you to a fully informed, tailored solution.
It is certainly plausible to consider that a pandemic might cause an increase in what you will pay for a Term Life Insurance policy in 2021. After all—the cost of life insurance is intimately tied to the risk of mortality. And obviously—a pandemic can indeed negatively impact our risk of passing away too soon leaving our loved ones unprotected.
So what’s really happening?
Fortunately—at McEvoy Insurance—we have NOT seen evidence of any increase in the costs of term life insurance products through our numerous, top-rated carriers. Life insurance is as affordable now as it was in 2019 (pre-pandemic).
Past and on-going affordability of life insurance is crucial to point out to anyone hesitating to make a purchase due to overestimation of cost. A recent LIMRA study (2021 Insurance Barometer) indicates that over 50% of the country believes life insurance costs 3 times more than reality demonstrates. In fact—that same study reports that most Millennials are overestimating cost by a factor of 6!
Consider this column chart representing the average cost of a typical policy:
Don’t let a misconception get in the way of doing the right thing for those who depend on you. Life insurance is usually more affordable than people think.
Call us today at (877) 296-2386 or get an instant quote and request an application right now. We’re here to help you…
*About these rates: The pricing displayed here is not meant to provide the monthly premium that a specific life insurance company may charge. These rates are meant to reflect the average cost (accurate as of April 14, 2021) of life insurance providers you’ll find when you obtain a quote online through McEvoy Insurance. Rates are ultimately determined by age and an individual’s unique health profile which means you could pay more or less than what is shown above. Get started here to found out how you may qualify. It only takes a couple of minutes!
Welcome to our new insurance agency blog!
This is our very first post. We're not quite sure what we're going to write about here, but the plan is to create helpful content for customers and prospective clients about information that is relevant to you.
We hope you'll come to view this as a top resource for keeping your family and your finances safe.
Here are a few of the topics we may be writing about: