Life Insurance

Life insurance is a contract between an insured ( Life Insurance policy holder) and an insurer (Life Insurance Company), where the insurer promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death of the insured person. The advantage for the policy owner is “peace of mind”, in knowing that the death of the insured person will not result in financial hardship for loved ones and lenders.

In our role of Independent Advisors representing a number of leading Life Insurance companies, TK Insurance has developed a criterion that we follow when selecting a specific Life Insurance product, as well as the Life Insurance Company that will issue your contract.

TK Insurance – Life Insurance Guidelines

  • The Life Insurance carrier must have the expertise to underwrite your policy with the greatest probability of Life Insurance under a “preferred” premium rating. With health style underwriting, quoted rates can be improved with favorable:
    • Family History
    • Vocation
    • Healthy Lifestyle
  • Initial and renewal rates for Life Insurance must be competitive in the industry for similar Term products.
  • If Universal Life Insurance is chosen, the choice of investment vehicle must be clearly defined. With Whole Life Insurance policies, the payout is dependant on dividend performance.
  • If term Life Insurance is chosen, the ability to convert to a cost-effective permanent product (i.e. Term to 100, Universal Life Insurance or Whole Life Insurance) with no evidence of insurability. The Life Insurance carrier must have sufficiently developed permanent products for conversion.

Healthstyle Underwriting in Life Insurance

Healthstyle underwriting was introduced to the market place to meet the challenges of a very competitive industry. Healthstyle is a more refined underwriting process that recognizes each individual’s unique health and lifestyle. Your health style risk is determined by assessing specific factors to provide a more accurate prediction of life expectancy. Insurance costs for each client are based on this assessment; individuals with a longer life expectancy will receive significantly lower rates.

Since the final Life Insurance premium structure is determined by the individual Life Insurance Company, we have made a corporate decision to quote premiums that are indicative of someone that is in good health and by doing so we are not presenting unrealistic expectations of low premium structure. On average, 40-50 percent of our Life Insurance applications are awarded more favorable rates than what was originally quoted. We will inform you which Life Insurance Carriers offer preferred underwriting and where you have the possibility of obtaining lower Life Insurance premiums with good health history.

Longevity of need

In addition to the above, the anticipated longevity of the need will play the largest role in your selection of the optimal Life Insurance contract. When you receive our Life Insurance report, we outline various Life Insurance product designs for your consideration. Further, as important as pricing will be in your final decision, the best value for Life Insurance coverage must also be fully taken into account and flexibility of this Life Insurance contract to meet your future needs.

Market Survey

There are two main types of Life Insurance products in the marketplace, those that are of a short term nature and others that are required for a long term. We complete a survey of the marketplace to examine the Life Insurance pricing structure of top Life Insurance Carriers and from that list together we choose the Life Insurance Company which will provide you with the best value.

“THE PENN STATE STUDY” on payout of large face value Term Life Insurance Policies

In the spring of 1993, Penn State University completed a study regarding the fate of Term Life Insurance policies. This study reviewed 20,000,000 short-term Life Insurance policies with aggregate face amounts of $4,000,000. Included were 5-Year, 10-Year and 20-Year term contracts valid to age 65.

The study brought forward some very disturbing findings that you should be aware of:

  • More than 90% of term Life Insurance policies are terminated or converted.
  • 73% of all the term Life Insurance policies are terminated or converted within the first three years.
  • 45% of term Life Insurance policies are terminated or converted within the first year.
  • The average duration before termination or conversion of Life Insurance policies is two years.
  • Less than 1 term Life Insurance policy in 10 survives the period for which it was written.
  • After 15-20 years of exposure, less than 1% of all Term Life Insurance policies are still in force.
  • Only 1% of all Term Life Insurance policies pay out as a death claim.

Considering the findings of this study, the odds are 100 to 1 against Term Life Insurance surviving to do what it was designed to do.

Issue age
(Male non-smoker)

Probability of paying a death Claim before Age 65

Probability of paying a death Claim before Age 75

25

0.24%

0.31%

35

0.44%

0.62%

45

0.68%

1.21%

55

0.87%

2.03%

“INDUSTRY STANDARDS” on payout at death of Term Life Insurance Policies

If you put higher face value policies into this calculation and focus only on the younger lives (which is where most term policies are sold), you really can get your claims rates down to only 1 or 2 per 1000 policies (i.e. a probability of paying a death claim of 0.1% or 0.2%). If you throw into the analysis all of the term policies sold through banks to provide mortgage or loan insurance, the lapse rate increases dramatically and you get into the 1 or 2 per 1000 claims rates even at the older lives. Term insurance provides you with a good short term solution.