It’s a Good Policy Now to Shop for Life Insurance

If you’re in good health and you haven’t shopped for life insurance lately, you might want to think about it now. Prices have dropped, so there is a good chance you could save money by replacing your current policy, or get more coverage for the same cost.

Just ask Alexander Auerbach, a healthy, middle-aged public relations executive from Los Angeles. In April, Auerbach, who is also a former Times business reporter, discovered that he could save about $3,000 annually on his $2-million term life insurance policy. That’s about a 30% savings.

He’s not alone, says Dallas-based insurance agent Joseph Mintz. Because of a combination of factors, including longer life expectancies and changes in the way life insurance companies underwrite and classify policies, healthy consumers are likely to find that they can substantially reduce their life insurance premiums if they’re willing to shop around.

You shouldn’t, however, expect your agent to come calling to tell you about this. If you buy a cheaper policy from the insurance company you’re already with, your agent isn’t likely to get a commission, says Kenneth L. Ingram, president and chief executive of TermQuote in Dayton, Ohio. Since many agents represent just a few companies, they know they’re unlikely to get paid for the work involved in lowering your rate. But if you ask, a good agent should be willing and able to “shop your policy” and tell you what opportunities are available with your current insurer or other firm.

Mintz, for example, recently went back to a few customers who had purchased whole life policies from him in the late 1950s. It turns out that many longtime policyholders have paid as much or more in premiums as the death benefit. Unless you contact the company, they’ll still collect your premiums (they simply raise your death benefit automatically).

It required one phone call for a 77-year-old client to get the $440 annual premium waived on his $25,000 policy for the rest of his life, Mintz notes. Other people with similar policies should check with their insurer, he adds.

Whole life, also called permanent insurance, costs more in the early years but allows you to build up an investment account in the policy that should help subsidize premiums in later years, when insurance coverage becomes more expensive.

There are risks to shopping a policy, Ingram says. Your health information is updated and made available through a medical information service shared by life and health insurers. If your health has deteriorated since you last obtained a policy, you may be unable to get a new policy and you could face higher rates in the future.

If you have a guaranteed renewable policy, you don’t have to worry about being canceled by your current insurer because of health reasons. But your insurer can hike your annual premium at the next renewal date (unless you have a level-premium policy).

Still, if you have every reason to believe you are healthy and unlikely to die soon, it’s worth seeing whether you could save some money--particularly if the death benefit on your policy is $500,000 or more, since higher benefits mean higher premiums. Those who haven’t shopped for insurance for years are likely to find that rates have dropped from 20% to 40%.

There are two key reasons for the trend. First, because people are living longer, many insurers have updated their so-called mortality tables to reflect your relatively slimmer chance of untimely death. Since the cost of a term policy is directly related to the chance that you’ll die in a given year--in other words, during the term the policy is in force--that change translates to lower rates.

The second reason is equally significant, Ingram says. Insurers have started to slice risk categories more thinly. People used to be more or less categorized as smokers or nonsmokers, good risks or bad. Now, the good risk category is broken into three groups, each with different rates, of course: standard, premium and super-premium or “select.” And there are two categories of smokers: one for those in good health and one for athletes and others who are in exceptional health but insist on an occasional cigarette or cigar.

Smokers and others not in good health are rated individually, which means they usually pay much more.

These multiple categories make it difficult to know which rate you’re going to pay until you’ve filled out a detailed questionnaire and had a physical exam, Ingram notes.

“You have to be careful when somebody quotes a rate,” he says. “They may tell you that your premium is going to be $70 a year, but if you’re 20 pounds overweight or your cholesterol is a little high, you’re not going to get the select rate. Your rate will be closer to $80 or $100.”

A variety of lifestyle and heredity issues affect your life insurance premiums, he says. For instance, you get a better rate if you have a good driving record than if you don’t, since you’re less likely to die in a car crash. If one of your parents died young, you could be precluded from the super-premium or select life insurance category.

Have a drunk-driving conviction or two? If you can get life insurance, you’re almost certain to pay a high price for it.

Other factors that might boost your rate: If you have a dangerous hobby such as recreational flying, scuba diving or skydiving. Dangerous professions also affect your costs, as do tours of duty in the armed forces or military reserves.

Who gets the best rates? People who have maintained an ideal weight, don’t drink a lot or smoke. Those who have normal blood pressure, low cholesterol and no family history of cancer or heart disease. If you pass all those tests, the insurer will check your driving history--more than two recent tickets will knock you out of most super-premium categories--and will want to know if you have recently lived outside the U.S. or plan to do so in the foreseeable future. Living in a Third World country can boost your rate too.

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Times staff writer Kathy M. Kristof can be reached at Personal Finance, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or kathy.kristof@latimes.com.

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Insurance 101

For a primer on how life insurance works, visit The Times’ Web site at https://www.latimes.com/insure101.

Are you likely to qualify for the lowest life insurance rates? These 12 questions, taken from TermQuote’s commonly used questionnaire, and a physical examination largely will determine it. If you pass the physical with flying colors and all your answers are “no,” you’re likely to qualify for the lowest possible rates. Answer “yes” to several questions, however, and your insurability declines, along with your ability to qualify for the lowest rates.

What exactly does a “low” rate mean? If you’re a 45-year-old man classified as a nonsmoking “super-preferred” risk, you could get a $500,000 five-year, level-premium policy for about $375 annually, says Kenneth L. Ingram, president and chief executive of TermQuote in Dayton, Ohio.

Women pay less--as little as $305 for the same coverage, he notes. Similarly situated 50-year-olds would pay $590 and $450, respectively, for five-year, level-premium policies. Lower-rated customers could pay thousands each year for the same coverage.

Level-premium policies guarantee their rates for the term of the deal. In other words, a five-year, level-premium policy guarantees that your rate remains constant for five years, while a 20-year, level-premium policy guarantees the premium rate for two decades.

Do you qualify for the best rates? Answer yes or no to the following questions:

1. Except for vacation trips, have you lived outside the U.S. or do you have any plans to live or travel outside the U.S. within the next 24 months?

2. Have you flown--other than as a passenger--in the last five years?

3. Are you a member of the armed forces or reserves?

4. In the last five years, have you had your driver’s license suspended or revoked or had three or more moving violations?

5. Do you participate in any dangerous activities or hazardous sports, such as scuba diving, skydiving or vehicle racing?

6. Does your family have any history of cancer or cardiovascular disease?

7. Have you ever had any life or health insurance restricted, “rated” (an insurance term for assessing your risk individually rather than as part of a standard group), canceled or declined?

8. Do you have any applications for life insurance pending with any other companies?

9. Within the last five years, have you consulted a physician for any reason other than routine visits or checkups?

10. Do you regularly take any prescription medications?

11. Have you ever been diagnosed or treated for diabetes, cancer, heart disease, alcoholism, drug abuse, high blood pressure or other serious medical problems?

12. Have you ever been convicted of a felony, reckless driving or driving under the influence of alcohol or drugs?