Last night, an insurance broker visited our house and gave Berta and me some options for mortgage insurance. Basically, we were interested in having at least a portion of the mortgage paid in the case of our death. So we sat for his hour and a half presentation, and now I present some notes of the salient details.
Sometimes companies will offer “accidental death” insurance along with some other thing you’re buying, like credit cards or bank loan or cell phone plan. These policie sound great for the money you pay, but there is a catch. They only pay out if the accident directly causes your death. So if you go to the mailbox and get hit by a car and left for dead, it pays off. But if you die in the ambulance on the way to the hospital, tough luck - that’s improper medical care, not accidental death. After all, you weren’t dead from the accident, right? (!)
There are a few plans to choose from, which are basically combinations of various riders. For example, you can just get a plan old policy - Pay your premium every month, if you die, the policy pays off, the end. But with a special rider, you can have all of your premiums paid back to you if you survive the term of the policy.
Essentially how this works is the insurance company holds on to your money for all that time and earns interest. They’re happy just to make the interest, and give you your money back. It costs a bit more, but assume it costs $10 more a month on a $30 premium, you can either save $3600 and buy the insurance for 30 years at $30 per month, or you can spend $40 per month and get $14400 back at the end of the term. You can see how you’d never be able to turn that saved $3600 into $14400 just by investing it or putting it into a savings plan. And if you “activate the policy” - an insurance euphamism for “die” - then you get the full insured amount.
The odd fact of the matter is that only 8% of people who buy insurance ever use it. So there’s a pretty good chance that we’d live out the term of the policy and get all that money back.
There is an option to lock in the premium to keep it from changing. So you might normally pay $30 per month for your policy, but that could change after 5 years. With the option to lock in the premium, you’ll pay $70 per month, but that won’t change through the term of the policy. The broker surmised that the companies provide this option so that the insurance salesmen have something to complain about when they look at your policy.
For example, “Look here. Your rate’s not locked in. This could change at any time, we’d better rewrite your policy and get you fixed.” Of course, there’s the alternative, “You don’t need that locked in rate. Rates have never risen in the history of insurance because people keep living longer every year.” We figured that the savings on the monthly payment is worth the minimal risk of the change. Plus, the policy is locked in for the first five years, and we could change it if we wanted to.
Policies have limits with regard to how much they’re willing to insure you without you answering some health questions by means of samples of bodily fluids. The company we looked at was willing to supply up to $180,000 of insurance for people our age without asking for a physical. That’s probably enough for Berta, who gets some additional life insurance through work. But since my work doesn’t offer anything that significant, we’ll need more for me if we intend to pay off the house. So I’ll have to submit to a physical. Yay.
There are certain levels of fitness that let you reduce your premiums. In this case, there are three. Assuming that my bloodwork comes back reporting nothing weird (and I don’t expect it to), and I weigh in on the nurse’s scale as the same weight I weight on my bathroom scale (better ride my bike around a little before she comes), there’s only one thing really preventing me from getting the best health rating: My mom’s health.
The big question: Is there a history of heart problems or cancer in your family? I don’t give them the answer to this question. They look it up in some health profile database. Assuming my mom is in there, I won’t be able to get any discount on my insurance - at all.
So we’ll just have to wait on those tests, and possilby adjust our coverage to bring the payments down to reasonable levels.
In all, the experience wasn’t painful, but it sure did take a long time. I expect he deasl with a lot of clients who don’t understand what he’s talking about and so he has to repeat himself a lot. I think there were several points in the PowerPoint presentation (uh, yeah) that he could have skipped, but he was pretty thorough, and did answer our questions, which were all off-slide.
Hopefully we’ll hear from them soon about scheduling the nurse visit, and we’ll be on track to coverage.
