Buying Life Insurance

I was having breakfast the other day with a friend who is an attorney specializing in estate planning. He was worried about his father, a financial services professional, who happens to have diabetes. They were both upset because his father could not buy life insurance.

“Did he apply?” I asked my friend.

“Why bother?” he replied. “He has diabetes.”

Here were two professionals who advise others on the role of life insurance in financial planning, and they had no idea how to solve this common problem. The fact is that life insurance for people with diabetes can be both inexpensive and relatively easy to find. The key is to prepare your case in the most accurate, complete, and positive light.

Life insurance 101
Life insurance fits many needs. Its primary purpose is to replace the financial consequences of an untimely or unexpected death. For example, it can be used to pay an estate tax or for the needs of dependent children. Discussing one’s own mortality or that of a family member is never fun, and it’s rarely a priority for anyone. But using life insurance to help plan for your financial future often makes a great deal of sense.

The seemingly vast realm of life insurance products can be broken down into two main types: term insurance, and cash value, or permanent, insurance. Term insurance covers you for a period of time, usually from 10 to 30 years. A claim is paid if you die during that term. Term insurance is inexpensive and builds no cash value over time. It can be renewed, replaced, or converted to permanent coverage. For many people, term insurance may be the best fit: It can ensure that there is money for college tuition, for example, or to pay a mortgage if a parent or spouse dies unexpectedly.

Permanent coverage can provide lifelong protection as long as you pay the premiums, and it uses a portion of the premium you pay to build a cash reserve. You can use the cash to take out a loan, make a withdrawal, or pay a premium or for other uses. (However, using the cash may reduce the cash value of your policy or reduce the death benefit, depending on the type of policy you have.) There are different types of permanent coverage, including the following:

• Whole Life, in which the premiums are level and the insurance company decides how to invest the cash reserve. If you live to the policy’s maturity date (usually when a person reaches 100 years), the accumulated cash value will be equal to the face amount, or death benefit.
• Universal Life, which allows premiums to be paid on a flexible schedule and in varying amounts
• Variable and Indexed Universal Life, in which the policyholder directs how the cash reserve portions of premiums are invested (in stocks or bonds, for example), and death benefits and cash values vary according to how the investments perform

Different products fill different needs. It’s critical to consult a professional to find the right one for you. The right agent should spend time discussing your needs and putting together a plan for the future.

Where to look for life insurance
The Internet can be a wonderful source for gathering information, but when it comes down to actually submitting an application, it’s best to use the services of an expert. The experience of an insurance agent who specializes in or has experience in “impaired risk” is invaluable, because he has seen situations similar to yours before and knows where your best options will be. There are insurance companies (carriers) — good ones — who tend to be very aggressive when it comes to assessing a risk like diabetes. In other words, these companies want your business and are willing to make a competitive offer.

If you don’t already know an insurance agent, ask around. Most likely a friend, family member, or coworker does. An insurance agent who doesn’t specialize in impaired risk may know of others who do. You can also check the phone book, look online, or contact the provider of your car or home insurance for leads. It doesn’t cost anything to meet with an agent (he gets a sales commission if you buy a policy through him), so take your time, shop around, and talk to more than one agent before you make any decisions.