X-Message-Number: 20196
Date: Fri, 27 Sep 2002 22:02:53 EDT
Subject: Life Insurance claims for cryonics response

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In a message dated 9/26/02 5:02:28 AM Eastern Daylight Time, 

Written earlier...

> Yet another thing to worry about - hope they don't try to cut costs by 
> denying claims for us....
> Life Insurers Feel the Strain of Shaky Markets
> he nation's life insurance companies are straining under a welter of new 
> financial burdens, even as Americans   shaken by terrorist attacks and the 
> slumping stock market   sign up for life insurance in increasing 
> numbers....

(Rudi Hoffman CFP,  writing from Daytona, FL, USA.)

The point and concerns raised above are reasonable ones.  

It may help to know some salient facts:

1.  Life insurance death benefits are historically some of the most secure 
and irrefutable claims and sources of immediate cash available anywhere.  
Financial planners, rating the relative risk factors of different investment 
options, place life insurance in the virtually risk free catagory, equivalent 
to US treasury notes.

Is it *possible* that the US Government would default on it's notes, and 
Treasury notes and "T-bills" become worthless?  Yes...but, if this were to 
occur, money in banks, stocks, corporate bonds, and virtually any "paper" 
invesment would probably also be worthless or significantly depreciated.

So, T-bills comprise what is called the "risk free" rate of return.  In other 
words, other investments have to provide an additional return over this 
"risk-free" return to justify the potential risk to the investor.

  If a corporate bond, for instance, were to only provide a yield available 
in an equivalent US Government backed bond, it would not be considered a good 
buy and would probably not be widely accepted.  If stocks did not yield a 
substantial return HIGHER than the return generated by T-Bills, people would 
not accept the various risk factors involved in stock investments.  (Recent 
history aside...stocks do provide a long term higher growth.  See 
ibbotson.com for confirmation and quantitive analysis over last 78 years.)

All this to provide a background to the concept of riskiness of investments, 
and to provide the pretty boring and easily researchable case for the safety 
of life insurance benefits.

2.  Nearly all states provide a government BACKING for both the living 
benefits and the death benefits for policies issued in their state.  You can 
go to "yourstate.gov" to research the details.  Florida provides a state 
"Guarantee Fund" which backs the death benefit up to $300,000, the living 
estate up to $100,000 per person per policy.
California's death benefit claim amount is $500,000 last time I checked.

This is similar in concept to the FDIC, but much better funded on a relative 
basis, an administered by the states, not the Federal Government.

3.  Most companies do NOT want the potential Public Relations disaster of a 
denied life policy claim.  Claims, while a cost factor to insurance 
companies, are only one of many overheads, including administrative costs, 
underwriting costs, commissions, advertising, licensing fees, etc.  To lose 
income from premiums based on a perception that the policy might not pay a 
legitimate death benefit is simply NOT in the companies best interest.  

Do any of you know, PERSONALLY AND ACCURATELY, of a situation in which a 
death benefit was denied by a life insurance company?   Most likely you do 
not.  But you almost certainly know of multiple situations where life 
insurance company death benfits WERE paid.  Generally in a matter of weeks, 
with interest from date of death.
(I personally have paid about half a dozen of 'em...one on my own uncle.)   

After the suicide and contestability period expires, generally 24 months (2 
years), if you die, life insurance WILL pay a death benefit.  This is not 
like health insurance.  In health insurance there are multiple 
variables...did you use the network doctors/hospitals/pre-approve your 
proceedure, overstay your hospital stay, use generics where possible...all 
the other "shit" (for lack of better word) that we go through in the health 
insurance claims arena.  (Aside...also why I am out of selling health 
insurance LOL!).

There may be extenuating circumstances.  If you murder your spouse, and are 
the beneficiary of your spouses life insurance policy, you may not receive 
the benefit.  (This exact situation happened in our town.  A dentist, Dr. 
Lazolear, was shotgunned by his son, with the murder planned by the wife.  He 
owned about 3 million of life insurance with wife and kid as 
beneficiaries...but they did not get the money, and are in jail.)

I own about 2.3 million on my life.  But my wife has not killed me yet!:)

3.  Regarding CRYONICS, as far as the life insurance companies are concerned, 
as I write this in 2002, death is considered PERMANENT and IRREVERSABLE.  The 
question is occasionally asked of me by a cryonics life insurance 
"Rudi, what if cryonics *works?  Is North American Company for Life and 
Health going to expect me to pay my death benefit *back?"  

The answer is "no."  As far as the life insurance companies that I work with 
are concerned, if you are pronounced "Dead" by a medical professional you ARE 
dead, and they will pay the claim.

IMPORTANT!  This does NOT mean that companies cannot and will not deny claims 
if there is significant FRAUD on the application, especially if death occurs 
in the first two years.  

AND, if you and your agent were NOT candid and forthcoming about the 
beneficiary being a CRYONICS organization, and there are family members 
contesting, there COULD be claims trouble.

This is WHY it is vital to use only companies that have PUT IN WRITING, ON 
THEIR CORPORATE LETTERHEAD, that they have NO problem with cryonics 
organizations as beneficiaries.  This is different that a mere verbal 
assurance from a local agent or email saying, "Oh, yeah, the insurance 
company does not care who the beneficiary is.  Don't worry about it."  (When 
someone in business tells you "don't worry about it...it is often TIME to 
worry about it! LOL.)

4.  I hope the above observations and checkable facts shed some light on the 
remarkable and wonderful world of life insurance.  Especially as it relates 
to funding cryonic suspension.

Warmly and Professionally Yours...Hopefully Yours For Centuries,

Rudi Hoffman


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