Would You Buy a Life-Insurance Policy From This Machine? – Wall Street Journal – 03/12/11

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The Wall Street Journal

Weekend Investor –  March 12, 2011

Would You Buy a Life-Insurance Policy From This Machine?

By Leslie Scism

It is getting easier to buy term life insurance without undergoing extensive medical tests. But if you are relatively healthy, you may well have to pay extra for the convenience.

Buyers of no-frills term-life policies typically have to give blood and urine samples and even undergo more elaborate medical testing, while the insurance company collects reports from your doctors—a process known as underwriting.

Now, in what amounts to a radical change in the way life insurance is sold, insurers are beginning to use computers to assess applications in combination with prescription-drug and other data to determine insurability.

But for consumers, the new products may well not offer the lowest premiums available at that particular insurer or elsewhere. Some companies charge buyers more for policies obtained through computer-based approaches to protect themselves when people slip through with health issues that would have otherwise been detected.

Comments March 12, 2011

You can devote quite a bit of time to researching life insurance and even more time to answering all the questions on a life insurance application.  With our busy schedules, finding that time can be difficult.  Insurance companies are exploiting this opportunity.  With computer based underwriting, insurance companies can complete the normally lengthy enduring process in mere minutes.

But, this convenience can cost you dearly.  With computer based underwriting, $500,000 worth of 20 year term life insurance may cost $650 per year.  With traditional underwriting the same policy may cost $500 per year.  While saving $150 for the convenience of a short application may seem worthwhile, do not forget that equates to $3,000 over 20 years.

Before purchasing a life insurance policy determine the proper level of coverage for your needs.  Consider what the proceeds will be used for, including: replacing income, paying off a mortgage, paying for college educations and paying estate taxes.

Before purchasing determine the proper type of life insurance for your needs.  With traditional term insurance the insurance company returns 0% of the premiums you paid at the end of the term.  With Return of Premium term insurance the insurance company returns 100% of the premiums you paid at the end of the term.  With Universal life insurance you are insured for the rest of your life, as it is a form of permanent life insurance.

Work closely with a Financial Advisor to determine the right amount, type and best value of life insurance.

Aaron Skloff, AIF, CFA, MBA
CEO – Skloff Financial Group

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies.  He can be contacted at www.skloff.com or 908-464-3060.

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