Do you know that if you are over 70 years old, and you need life insurance, you may be asked to do a memory test? Or if you prefer to use the term fancy life insurance company, then a cognitive impairment test.
Such testing has not taken place around that long, in fact, it is a relatively new kink in the life insurance underwriting rope. Keep reading and we are going to share with you a real-life example, which will remove a raised eyebrow in a very short time.
More recently, I had a new client, who was working with the need for a permanent life insurance solution for the reasons that are stated in the action paragraphs.
To protect the privacy of the innocent, let us call him – Sh. Smith.
Mr. Smith is accurate in his early 70s, 73s. He has a pension from working in a federal government position and chose at the time of his retirement (before I met) to get a “life only” pension payment settlement option.
Choosing a single name is very common among civil service employees, retired teachers, and union employees.
Very simple indeed.
Why choose life only settlement option?
Mr. Smith receives a large check every month to choose a single-life or life-only settlement option.
More money right? Very true, when you retire, shedding more money every month is usually a better option.
But this creates little problem for Mr. Smith or, more accurately, it poses a problem for Mrs. Smith because now when Mr. Smith dies, he is left without income from his government pension. is.
The term “life-only” is clearly represented by the annuity or in this case his government pension, to be paid monthly for the rest of his life. Shockingly I know, an insurance industry term that actually means it — as elusive as Sasquatch to say the least.
but I digress.
When Mrs. Smith dies, Mrs. Smith’s monthly income will decrease by more than 75%.
How does pension maximization solve the problem
Without going into great detail about her plan … because our focus is not here, the solution she chose was to buy a life insurance policy on Mr. Smith’s life and serve Mrs. Smith as a beneficiary.
In this way, when Mr. Smith dies and his retirement income stops, Mrs. Smith will have a lump sum of life insurance death benefits that she can use to create an income stream, paying off her mortgage. Can do, or whatever he wants.
But the goal is to provide some protection to Mrs Smith in the event of Mr Smith’s death and thus a good pension income.
Very easy … right?
Life insurance company asks for a memory test
Mr. Smith is in his early 70s and, like many other Americans, his health is still not perfect. Not to say that his health is poor is simply not right. He takes some prescriptions and has some other issues that life insurance companies may not see as extremely high risk but are conditions that definitely prevent. him from achieving a preferred plus (best) health rating.
These are all things veteran life insurance agents expect to encounter during underwriting. But, to add a new wrinkle to the underwriting equation, many life insurance companies now require anyone to apply and are over the age of 70 to complete a cognitive impairment exam. Which is just a fancy way of saying they want you to take a memory test.
Needless to say, life insurance companies have found some evidence that associates dementia and Alzheimer’s with the risk of dying before your life expectancy.
Originally, since we all know that dementia and Alzheimer’s are degenerative diseases, life insurers now require their older applicants (those over 70) to complete a memory test for insurance. And of course, this is in addition to the specific medical history, blood and urine tests that are always needed.
I know that most of us, myself included, believe that people diagnosed with dementia live long after their diagnosis. Interestingly enough, research suggests that this is only real evidence. Most likely because we all know the horror stories of family or friends who are diagnosed with Alzheimer’s in their fifties and live well into their 70s or 80s.
However, life insurance companies insist that their data suggests that such a thing is rare.
In fact, a study was published back in 2008 by the British Medical Journal (BMJ), which proves that people with dementia have a lower life expectancy.
What is a memory test for insurance?
Unfortunately, insurance companies have adopted the type of test as the “standard to test”.Does this person have a cognitive impairmentThe box leaves a lot to be desired. In Mr. Smith’s case, the insurance company has its own version of the memory test.
What does the test look like as you ask?
The paramedical examiner, in this case, an RN, who came to Mr. Smith’s house to meet with him, discusses his medical history, demonstrates an EKG, collects fluids, and all other common things that An insurance company would request an individual for 73, also performed a “memory test”.
The test consisted of a series of 10 common nouns with him-Chair, book, table, cow, money, balloon,
lowers, picnic, kitten, and bank.
The nurse told him:
“This is a memory test. I am going to read aloud a list of words one at a time and ask you to say the word and then use the word in a sentence. When you have finished using the word in a sentence, I will ask you the next word, until the complete list of words is exhausted. Later in our interview, I will ask you to recall the words. “
He then continued the test, tested his walk, asked him some other questions, and six minutes later he said:
“A few minutes ago I read you a list of words to use sentences. Please tell me the words you remember. Take as much time as you need to remember the words. “
I will not bore you with all the instructional notes in the side column of the form that the nurse was to use from the insurance company. But the instructions are very clear that if you have not spent at least five minutes after executing the first part (list of words and sentences), then go ahead and come back to it.
Mr. Smith recalled four out of ten words.
This was the result of an automatic decline for Mr. Smith due to possible cognitive impairment. You must obtain at least five to meet their minimum underwriting standard. In this case, the life insurance company opted not to look at their medical records, laboratory results, or medical history at all. They simply chose to deny him coverage based on cognitive impairment. Not with an option to reconsider.
Well, this is not completely true. If he can reconsider visiting a doctor and pay about $ 500 out of his pocket to perform a more complete cognitive exam.
thanks a lot.
As far as I know, there were no notes about such a problem in his doctor’s records, no other issue was ever seen by me.
* Sidenote: I had met with Mr. and Mrs. Smith on several occasions because we had discussed their options more than once, when they were deciding which option to pursue. I also spoke with him a few times over the phone.
As a matter of fact, Mr. Smith regularly runs a portable sawmill in his backyard, restores antique automobiles, and operates a backhoe for friends.
Does it sound like he has a memory problem?
Apparently, the life insurance industry has done research on its behalf when there is an increased risk of premature death due to dementia or Alzheimer’s.
However, I have two concerns with this cognitive impairment test:
- What they are doing as a “valid test” for cognitive impairment.
- There is no accepted standard across the board to test insurance for memory.
And besides, I’m willing to bet that most of us will have a hard time on the memory test to which they refer to it.
As a matter of fact, as a control, I tested with my unsolicited wife. She is a perfectly sensible and fast-paced 41-year-old woman who runs her own successful business while running our house with the precision of a Swiss watch.
She could only remember 6 out of 10 words. This would place him best placed in a standard rate class for life insurance underwriting purposes. To give you some perspective, at least three rate classes are better than standard rates with most companies.
For example, Standard, Standard Plus, Preferred, and Preferred Plus are the best rate classes. Keep in mind, my test was not scientific in any way. But neither is tested by a nurse examiner on behalf of a life insurance company.
As it stands today, every company’s memory test varies. In fact, I’ve already seen three different people from three different insurers do some quick searches on Google in the last month.
I know what life insurance companies should do to minimize every potential risk affecting the mortality of their applicants. Nobody will blame them for doing so. As I often tell my clients, “You want to have a policy with a company that is profitable … only profitable companies will be around to pay the claim upon your death”
But perhaps the life insurance industry should use a more comprehensive means of measuring cognitive impairment and be consistent. There is some “off the shelf” memory test which is one of those gimmicky things you can find online to read your palm or your personality type.
So if you are nearing 70 and are thinking about possible changes to coverage, it might make sense to do it well before you get there.
On the other hand, if you are 70 years old, it is best to spend some time with an agent who knows that the companies for testing have the ability to ensure that you have the best risk class possible. And if you’re an agent about to meet with a 70-year-old client for life insurance, you’d better spend some time familiarizing yourself with the various tests given.