Editor's Note: This post was originally published on the Ash Brokerage blog in 2015. To date, it's the most popular post on our website. Why? We think it's because our underwriters aren’t afraid to discuss a challenging and potentially taboo topic that's becoming relevant to more of your clients every single day. The piece below has been updated to reflect changes since the original was posted. If you have any questions or concerns about underwriting, don't be afraid to ask our team! They'll always find an answer.
Marijuana use is a hot and evolving topic in life insurance underwriting. For those of us who’ve been around the insurance block a time or two, we can certainly remember the days when any type of marijuana use resulted in an automatic decline. Today, the answer isn’t so cut and dry.
To understand the topic, look at today's legal treatment of marijuana:*
As of March 2018, 29 U.S. states, plus the District of Columbia, have laws that legalize marijuana in some form
Nine states – Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Washington and Vermont – as well as D.C., have adopted the most liberal laws, which legalize marijuana for recreation use
Several more states are either considering legislation or potential ballot measures in 2018
In recent years, our industry has increased acceptance of applicants using marijuana recreationally and for medicinal purposes. We have seen offers from best class nonsmoker to decline.
Minimal use is acceptable with some carriers; while moderate to daily use may result in a decline. Multiple factors impact risk assessment for applicants using marijuana, including:
Amount and frequency of marijuana used
Method of delivery into the body
Underlying condition for which marijuana was prescribed
Other potentially related factors: avocations, driving record and occupation
Some carriers will offer smoker rate classes to an applicant who smokes marijuana, while others will offer nonsmoker rates if use is minimal and potentially preferred rates if the client otherwise qualifies.
Applicants with a valid marijuana prescription to treat symptoms of an impairment may be assessed an additional rating for their impairment. Certain impairments or co-morbid conditions will result in an automatic decline, even if the applicant has a valid prescription or lives in a state which has legalized recreational marijuana.
Applicants with a history of alcohol or drug treatments, or applicants currently using multiple recreational drugs, are considered an unfavorable risk. Likewise, applicants with significant mood disorders and past criminal activity are also considered unfavorable.
Cannabidiol, also known as CBD, can be derived from hemp or marijuana. CBD products created from marijuana have very high levels of THC, therefore applicants using CBD products created with marijuana will fall under the carrier’s guideline for marijuana use. Applicants using CBD products produced from hemp will not be considered as marijuana users.
Other things to note for underwriting:
Today’s insurance labs cannot measure quantity of use, nor how the marijuana was delivered into the body
Some carriers automatically test for marijuana, while others will reflex the test as deemed necessary
Most carriers will request an attending physician statement (APS) and/or copy of the valid prescription for applicants being treated with medical marijuana
Marijuana sales remain illegal at the federal level, but the marijuana industry is growing like a very profitable weed. According to Tom Adams, managing director of BDS Analytics, national marijuana sales will rise to $11 billion in 2018, and to $21 billion in 2021.*
With the federal government still viewing marijuana sales as illegal, almost every insurance carrier will not offer insurance on any employee of a marijuana farm or dispensary, or owners of farms or dispensaries. As of today, only a small handful of traditional life insurance carriers will consider select clients on an individual basis for personal coverage only.
Since there are so many variables influencing the underwriting decision for both recreational and medical marijuana users, it’s impossible to recommend a carrier without having all the facts. The good news is at Ash Brokerage, you have a dedicated staff of seasoned underwriters available to answer your questions regarding marijuana usage and assist you every step of the way. We’d welcome the opportunity to talk with you about your client’s specific needs.
Additionally, the Ash Brokerage website has numerous impairment questionnaires, including a marijuana questionnaire, which are useful in evaluating medical, financial or avocation risk. They’ll help you uncover potential issues before collecting a formal application, and ensure your call with your Ash underwriter is productive.
For more than 34 years, Charlie Kuhn has taken a personal interest in every case. To her, it’s more than a file – it’s a person trying to protect the people they care about, and she can think of no better vocation than to help provide financial and emotional security for others. Through her personal commitment to continuous professional growth, Charlie is one test away from becoming an Associate of the Life Management Institute. She is already an Associate of Customer Service with LOMA, has passed all three of the Academy of Life Underwriting exams, and is certified in EKG interpretation.
Ash Brokerage Questionnaire: http://go.ashbrokerage.com/WC2018-04-UW-8151_LP-Content.html
*CNN Money, “The U.S. legal marijuana industry is booming,” Jan. 31, 2018: http://money.cnn.com/2018/01/31/news/marijuana-state-of-the-union/index.html
Sleep apnea is one of the most common, and often underdiagnosed, impairments we see in underwriting. It affects up to 18 million people in the United States alone.1 It can be defined as a disorder that causes someone to have one or more pauses in breathing or shallow breaths while sleeping, lasting anywhere from a few seconds to a few minutes. Typically, normal breathing starts again, sometimes with a loud snort or choking sound. These breaks in the sleep cycle can leave someone tired throughout the day, otherwise known as excessive daytime sleepiness, or EDS.
The most common type of sleep apnea is obstructive sleep apnea, or OSA. It happens when the tongue, tonsils or other tissues in the back of throat block the airway, causing someone to have shallow or paused breathing. Central sleep apnea is less common and happens when the brain doesn’t always signal the body to breathe when it should. Obstructive sleep apnea is most commonly seen in individuals who are overweight, but keep in mind that it can affect anyone.
Sleep apnea can have many negative long-term effects on health and mortality risk, including:
The severity of sleep apnea can be determined by overnight polysomnography (also knowns as PSG, or a sleep study). This test determines an individual’s apnea-hypopnea index (AHI), the number of apneas they have per hour, and it also documents their blood oxygen levels. Treatment is recommended based on the study’s findings. And, the success of treatment is normally documented by a follow-up sleep study.
Basic treatment includes weight loss, the avoidance of stimulants (such as alcohol) before bed, and adjustment of sleep position. A CPAP (continuous positive airway pressure) or BiPAP (bilevel positive airway pressure) machine is considered the “gold standard” of sleep apnea treatment. It prevents the collapse of the airway by pumping airflow during inhalation by face mask or nose cushions. Successful treatment includes regular, nightly use of the machine; however, some people cannot tolerate the device, mask and associated noise.
In recent years, popular alternative treatments have included:
A life insurance offer for clients with OSA is determined by the severity of the disease, measured by AHI and oxygen levels during a sleep study. Favorable client conditions include mild disease (low AHI and minimal low oxygen levels or hypoxia), consistent use of CPAP/BiPAP (or possible alternative treatment), controlled blood pressure, no co-existing heart or lung disease and no risky motor vehicle events.
Favorable cases can sometimes be considered unrated. For example, a client with mild sleep apnea who is compliant with CPAP/BiPAP, and has normal blood pressure with no associated impairments would not be rated, and they may be eligible for all preferred classifications with some carriers. Other cases may range anywhere from standard and up, depending on the severity of sleep apnea and compliance with treatment.
The Ash Brokerage underwriting team leverages our experience, carrier relationships and resources to identify viable solutions based on your client’s individual circumstances and insurance needs. For your next sleep apnea case, use our helpful questionnaire. And, contact us so we can suggest ways to help you obtain the most favorable offers. Let us awaken the possibilities!
Lisa Oleski has been brokerage underwriting for the past 20 years. She is passionate about treating each case she touches as an opportunity to exemplify the Ash difference, with the ultimate outcome of finding the most favorable solutions for advisors and their clients.
1National Sleep Foundation, Sleep Apnea: http://www.sleepeducation.org/essentials-in-sleep/sleep-apnea
If you’ve ever seen the movie “Major League,” you probably remember it was about a baseball team made up of the biggest misfits anyone could put together. It was a team built to fail. (Spoiler alert: No, literally – the owner actually wanted the team to lose so they could move to another city.)
“Wild Thing” Ricky Vaughn had a great fastball, but, unfortunately, it was rarely a strike. Pedro Cerrano could hit a fastball into the next zip code … but couldn’t touch a curve ball. Willie Mays Hayes could run like the wind – too bad he couldn’t actually hit the ball so he could run the bases. Plus, manager Charlie Donovan used to manage a tire store … how could he manage to help this misfit team win?
The better question you may be asking is, “What does this have to do with long-term care planning?” Well, let me explain.
First of all, the players on this team were out for one thing: themselves. Their focus was on what was best for them individually, not what was best for the team. They were blind to their real problems. This was especially true for Vaughn – he was literally blind to the strike zone and needed glasses to focus! When the rest of the team realized they were set up to fail, their focus changed, too. They had to come together, drop their old habits, and start focusing on what mattered.
The same is true when it comes to long-term care planning. Both advisors and clients seem to be blind to what matters. I can understand why clients may be blind – we aren’t giving them the right tools (glasses) to focus on what they should really be looking at. As financial professionals, we have to make sure we’re throwing something they can actually hit, not lobbing in lazy pitches.
If we continue along this path, we’ll start walking in runs, losing games (sales), and the team (clients) may move to another city (advisor). So, how do we pitch so our clients can hit homeruns?
The next time you’re ready to pitch long-term care to your clients, grab your Wild Thing glasses and get focused – you’ll win more games and take your clients to the World Series. If you continue to lob your throws across the plate? You’re only setting yourself up to fail.
Chad Eyrich is proud to help keep families together with long-term care planning. He helps advisors and their clients avoid the potential financial devastation of an LTC event by providing strategies around traditional, asset-based and linked-benefit insurance. In addition to earning his Long-Term Care Professional and Certified in Long-Term Care designations, Chad has a life and health insurance license, and a property and casualty insurance license.
Editor’s Note: The need for efficient retirement planning is evergreen, so we decided to re-publish this post from 2015. We’ve updated the numbers, but the conclusion remains: a few differences may allow high-income individuals to take advantage of Roth benefits through the purchase of cash-accumulating life insurance contracts.
But, has anyone really analyzed these comparisons and their validity? Let’s take a closer look at why life insurance is often compared to Roth IRAs with additional benefits.
To qualify for a Roth IRA, your clients have to fall under income certain limits established by the IRS. If they’re married filing jointly, their income has to be less than $184,000 to qualify for a full contribution. If filing single, their income has to be under $117,000. In addition to income limits, Roth IRAs also have annual contribution limits – currently the limit is $5,500, but people age 50 and over can contribute up to $1,000 extra per year to “catch up” before they retire.
Life insurance, on the other hand, isn’t bound by any IRS income or contribution limits. Instead, it’s bound by insurable interest and medical qualifications.
In a Roth, your clients always have access to the basis without penalty. However, if they’re looking to access cash in excess of the basis before age 59½, they’ll incur a 10 percent tax penalty. There are exceptions for first-time homebuyers and qualified educational expenses, however.
With life insurance, your clients may incur surrender charges in the first 10 to 20 years, depending on the contract. Outside of surrender charges, there’s no penalty for accessing the cash value in excess of basis before age 59½. It’s important that early withdrawals are closely monitored, however, as they could affect the performance of the contract and create a tax liability if the policy lapses.
Life insurance policies are self-completing and provide beneficiaries a tax-free death benefit – which is greater than the account balance – should the client die before retirement. (Please note that life insurance has cost-of-insurance charges to provide this benefit.) With a Roth IRA, the account balance passes to beneficiaries and may be subject to taxes.
Beyond age 59 ½, both contracts allow the client to access the gain without paying capital gains tax. Neither contract requires a minimum distribution at age 70½ like a traditional IRA.
Life insurance and Roth IRAs have several similarities. However, a few differences may allow high-income individuals to take advantage of Roth benefits through the purchase of cash-accumulating life insurance contracts.
It happens all the time. Your client has no serious medical impairments, takes no scary medications, and has excellent build, blood pressure and family history. You sit down to fill out the application and ask a few remaining questions, such as, “Have you been convicted of a DUI/DWI in the past?”
This is when the case can go sideways.
We all know the facts. Driving under the influence of alcohol or drugs places the driver, as well as others on the road, at risk. Yet, people continue to do it. In 2014, 9967 people died in drunk driving crashes – one every 53 minutes.* This is why motor vehicle reports are routinely ordered.
In today’s market, a client with a DUI or DWI will not likely get best rates for five years. Even if the incident was a one-time mistake, as many are, statistics show the average drunk driver has driven drunk more than 80 times before the first arrest.* Insurance companies are statistic driven, so the actuaries tell them your client is indeed a higher risk.
Most carriers will put a flat rating on a client with a DUI during the first few years, but we have carriers who are more forgiving as it relates to a one-time event. One in particular will allow a Table B rating, even if the event is less than one year out, as long as there are no other concerns and the client is over the age of 21.
Of course, not all DUI’s are one-time events. About one-third of all drivers arrested or convicted of drunk driving are repeat offenders.* What should you do if this is the case?
First, remember not all DUIs are looked at through the same lens. If your client had a DUI in his/her 20s, then another 30 years later while coming home from a business meeting, the first incident is often written off as “youthful indiscretion.” Underwriters know the brain of a 21-year-old is not as developed as that of a 45-year-old, so we can be understanding. In these situations, a cover letter is of the utmost importance.
On the other hand, if we see a client with more than one DUI in his/her later adult years, we worry about alcohol abuse and will ask more questions. We will be looking very closely at medical, social, family and work history for any red flags of abuse. We will ask if the client still drinks and, if so, how often. We will want to know if client belongs to any organizations or has undergone any treatment.
Our Alcohol Usage Questionnaire can help you get to the heart of the matter. This form questions alcohol use and/or abuse as well as the driving record. You may feel awkward asking these questions, but it is even more uncomfortable telling a client he/she has been declined after going through the entire underwriting process.
No matter the situation, we encourage you to ask questions and get all the facts. Check out the resources below. If you have a specific scenario you would like to discuss, please reach out to me at laura.dagle@Ashbrokerage.com.
*MADD Drunk Driving Statistics: http://www.madd.org/drunk-driving/about/drunk-driving-statistics.html
Ash Brokerage comprehensive questionnaire for DUI and Alcohol use/abuse: https://www2.ashbrokerage.com/docs/forms/impairment/Alcohol.pdf
Centers for Disease Control and Prevention. http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6430a2.htm
National Highway Traffic Safety Administration http://www.nhtsa.gov/people/outreach/traftech/1995/TT085.htm
U.S. Department of Health and Human Services – Substance abuse http://www.samhsa.gov/data/sites/default/files/NSDUHresultsPDFWHTML2013/Web/NSDUHresults2013.pdf
Laura Dagle has been in the insurance industry for more 35 years, during which time she has been both a producer and an underwriter. As someone who has seen the business from “both sides,” she is keenly aware of your desire to have the smoothest process, easiest underwriting and best possible outcome. As a 20-plus year member of a 12-step program, she has a special interest in alcohol-related cases and an understanding of the complications as a result of its use or misuse.
© 2018 Ash Brokerage LLC.