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Diabetes affects more than 9% of the total domestic population. In seniors over the age of 65, this increases to 26% of the population. It is characterized by fatigue, weight management issues, and the potential for life threatening complications. Though in recent years, advancements in medication, procedure and lifestyle management have made this disease much less painful and less disruptive to daily life.

The moral: diabetes is a common condition which can be easily managed with the help of your physician and your support network.

Converse to this, the medical underwriting community and the actuarial practices of life insurance providers still makes obtaining coverage costly, inefficient, and difficult to navigate. To help make this process less painful, Quotes Parade has dedicated this guide to the understanding of diabetes and how to coordinate a life insurance strategy for diabetics.

diabetes-instrumentsWhat is Diabetes?

Diabetes is a medical condition which causes too much sugar (glucose) to be present in the blood stream. Depending on the type of diabetes the root cause is different. However, all diabetics require changes to their lifestyle and possibly medication to keep their condition from affecting their daily lives.

Types of Diabetes

There are a few types of diabetes which are relatively common in the United States and abroad-

Prediabetes

Characterized by high blood sugar but not quite past the Type 2 threshold. Prediabetes affects over 3 million persons in the United States each year. However, it is very treatable and with the correct course of treatment may not develop into Type 2 diabetes.

Prediabetes can be temporary or last a lifetime if left untreated. However, if the condition has not subsided within 10 years it is likely to progress into Type 2 diabetes. The Centers for Disease Control cautions that up to 30% of prediabetics will actually develop Type 2 diabetes within 5 years.

  • Symptoms: Thirst, hunger, frequent urination, fatigue, weight gain; though many people have no symptoms
  • Treatment: Medication- Metformin (Glucophage), Acarbose (Precose)
    Lifestyle change– Exercise, weight loss, diet (low-carb, Mediterranean, low-fat)

Type 2

This is the most common form of diabetes, characterized by the body resisting insulin absorption and/or failing to produce enough insulin to regulate blood sugar. There is currently no true cure and the condition will chronically recur and likely last a lifetime.

  • Symptoms: Thirst, hunger, frequent urination, fatigue, weight gain, and altered vision. Occasionally this condition can present without these symptoms.
  • Treatment: Medication- Metformin (Glucophage), Acarbose (Precose), Insulin Aspart,
    Metformin/Pioglitazone, Glyburide (Glucovance),
    Injections– Insulin, Insulin lispro (Humalog), Insulin detemir (Levemir), Insulin glargine
    (Lantus), Exenatide (Byetta),
    Statin– Atorvastatin (Lipitor)
    Lifestyle changes– Exercise, weight loss, diet (low-carb, Mediterranean, low-fat)

Type 1

The most serious form of diabetes, characterized by a pancreas which produces little or no insulin. This condition is life long but can be managed with proper changes to one’s lifestyle in addition to medication.

  • Symptoms: Thirst, hunger, frequent urination and/or bedwetting, fatigue, weight gain, altered vision, constant sweating, increased heart rate, inability to heal wounds.
  • Treatment: Medication- Metformin (Glucophage), Acarbose (Precose), Insulin Aspart, Metformin/Pioglitazone, Glyburide (Glucovance), Sulfonylurea                                               Injections- Insulin, Insulin lispro (Humalog), Insulin detemir (Levemir), Insulin glargine (Lantus), Exenatide (Byetta), Liraglutide (Victoza), Pramlintide (Symlin)                                                     Statin– Atorvastatin (Lipitor) Lifestyle changes- Exercise, weight loss, diet (low-carb, Mediterranean, low-fat)                                                                                                         Surgery/Invasive– Pancreas transplant, islet cell transplant, stem cell transplant         Miscellaneous– Insulin pump; closed-loop insulin delivery (artificial pancreas)                       Lifestyle changes– regular monitoring of blood sugar levels, insulin therapy, diet and exercise modification

It is important to note that Type 1 diabetics are considered to be an extremely risky health class. Being able to position your treatment plan, medical advisory team and overall health to a life insurance company will give you the best chance of securing coverage.

The Sad Truth

Each year diabetes causes or contributes to 300,000 deaths. In fact, it is the 7th leading cause of deaths in American, ranking among heart disease, cancer, and strokes.

Complications or co-morbid conditions affecting diabetics include:

  • Heart disease/heart attack
  • Kidney Disease
  • Hypoglycemia
  • Blindness/vision problems
  • Stroke
  • Amputations

Statistically, the average diabetic incurs medical costs at a rate of 2.3x that of the average person. The above complications are the driving factors for these increased costs.

Medical Expenses

A study conducted by Harvard University found that 62% of all personal bankruptcy cases are a result of medical bills. What is more shocking is that 78% of those who filed bankruptcy due to medical costs actually had health insurance.

Despite the strides America has made in providing affordable healthcare for everyone, most plans include a high deductible or annual out-of-pocket provision. Even Medicare has limitations. So later in life, when many medical complications tend to arise, paying medical costs becomes even more complicated since most Americans are on a fixed income.

Additional Medical Specialties

The diabetic community also requires additional medical care from specialists in addition to their primary care physician. The role of each doctor is to develop a treatment plan to best manage an individual’s specific type of diabetes relative to their body and physical condition. These include-

Primary Care Physician: diagnosis, general treatment, annual physical, and monitoring of diabetic condition.

Nutritionist: recommendation of diet, exercise, and lifestyle planning to manage a diabetic condition.

Endocrinologist: develop advanced medical treatment for hormone and metabolic issues which present in conjunction with diabetes

Ophthalmologist: monitor vision and develop plan to prevent macular degeneration, blurred vision, and blindness which can present with severe diabetic cases

Cardiologist: monitor cardiovascular health, assure exercise routine is appropriate for fitness level, and provide additional medication for those patients also presenting with heart disease or other issues. (primarily needed for elderly patients, those with a history of heart disease, smoking, or emphysema)

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Insurance Planning for Diabetics

The old adage of “not leaving a burden for your loved ones” certainly rings true for the diabetic community due to its increased lifetime medical expenses. However, when seeking treatment, individuals, and their families deserve to focus on the quality of life, not the cost of that treatment.

Through careful planning, a life insurance policy can both reimburse a family for money spent during a lifetime of treatment as well as cover any outstanding medical bills which have not been satisfied.

Like any other medical condition, treatment plan, medication, and prior medical history are part of the underwriting process. The younger and healthier you are the more coverage options are available and the better your rating. For diabetics, obtaining coverage during the prediabetic stage or even with Type 2 diabetes will be easier to place than if you have Type 1.

How Do Life Insurers Make Money?

One of the reasons that life insurance is hard to place for any medical condition is that it affects the actuarial tables by altering life expectancy. Life expectancy is the basis of all life insurance products and rating. A life insurance company seeks to take in premium each year over the length of a policy term and have the money received exceed that which will be paid out. By being able to accurately predict how long a person lives insurers can price their products to be profitable.

The main ways insurance companies can generate a profit include

  1. Underwriting Income; taking in more money in premium dollars each year than they pay out
  2. Investment Income; investing free cash flow (premium dollars minus overhead costs) and receiving a return, typically through stocks, bonds, or any other interest bearing account.
  • Lapsed Coverage; when a policyholder takes the cash value out of a policy before it has matured (and obviously before paying a death benefit) the insurer retains a portion of the cash value

The Effect Of Diabetes On Life Insurance Pricing

As previously touched upon, diabetes is the cause of over 300,000 deaths each year and results in average life expectancy being reduced by 15%. While these statistics illustrate the need to incorporate life insurance into your final planning, it also demonstrates how much of a challenge it is for life insurers to accurately predict expectancy.

Basic math makes it appear that, with an average life expectancy reduction of 15%, you can expect life insurance policies to be 15% higher in cost. However, actuarial tables are much more complex and account for a variety of things which affect persons who have chronic conditions or disease, such as:

  • Increased chance that you will require emergency medical care
  • Risk of complications from interactions between medications or treatments
  • Effects of current treatments and medication on life expectancy
  • Increased chance of financial hardship due to medical expenses

By helping an insurer understand your specific course of treatment you may be able to qualify for a better rating table and thus realize a better annual premium, particularly for term life insurance.

What Type Of Policy Is Best?

Depending on the strategy and your planning needs, coverage may still be relatively inexpensive despite your diabetic condition. Though a variety of factors must be considered, including:

  • Age
  • Weight
  • General fitness
  • Type of diabetes
  • Additional medical conditions
  • Medication / treatments
  • Prior surgery
  • Anticipated lifetime medical expense
  • Anticipated tax liability

Each type of life insurance, illustrated below, has different pros and cons. Depending on your life insurance goals, there may be one type of policy which is a better fit. We recommend engaging a planning expert to guide you through the decision-making process and assure the policy will deliver the coverage, pricing, and tax advantages you are looking for.

Term Life Insurance

Utilization of a term policy will generally have the least impact on cash flow for medical expense and provide significant coverage during life. In addition, the underwriting of these policies is more flexible than a permanent alternative, making this a great tool for those with Type 1 diabetes.

[insert table of healthy person vs. type 1 vs. type 2 vs. prediabetic]

Permanent Life Insurance (Whole, Universal, Indexed)

Certainly a permanent policy will always have more cash value than term life insurance (which has none). Though for diabetics incurring the costs of insulin, testing strips, and prescriptions, dedicating a significant portion of their income to a permanent life insurance product is not always feasible.

In some instances, you may have already purchased a permanent product prior to your diabetes diagnosis. In these cases not only should you maintain coverage but it may be in your best interest to reinvest the dividend (if applicable) and make over-payments if your budget allows. The reason–you will most likely be unable to find a better rate on a permanent policy if you have Type 1 or Type 2 diabetes.

In many instances, you will want to obtain a term life insurance policy to supplement your permanent policy. After all, the reason the permanent policy was rated so well is that you were projected to incur little medical complications and expense. The secondary term policy will have a much higher death benefit to help assure that your anticipated expenses are covered.

[insert table of healthy person vs. type 1 vs. type 2 vs. prediabetic; consider using different types of permanent insurance as well]

Single Premium Life (aka fully-funded policy)

While technically a permanent policy, the fully funded approach needs to be considered as a separate class due to its usefulness as a tool in managing risk for individuals with medical complications, chronic illness, disease, or cancers.

For the pre-diabetic or those with a family history of diabetes this tool can be a powerful way to hedge against pending diabetic conditions affecting the underwriting or availability of future life insurance.

The other appealing thing about a single premium policy is that you can easily liquidate a policy in the event you do incur a substantial medical bill or are affecting by another life event. Most policies will allow you to take up to 90% of the cash surrender value as a loan.

There are also tax advantages. The investment income from a single premium policy grows tax deferred and is not taxed unless you withdraw this income as cash. For this reason, it is a great tool for use with estate planning–you may deposit funds which were intended to be left to your heirs, still have them available should an emergency arise, and pass the funds to your heirs with impunity from tax.

Another benefit to the single premium strategy is to fund a policy for a child. In the case of a diabetic family, this will either hedge against the child developing diabetes and being unable to obtain affordable coverage OR allow you to lock in a strategy for children with childhood diabetes.

Ultimately, the full-funded single premium policy strategy is ideal for those who have a lump sum of cash and wish to remove the tax liability while still having an emergency fund.

[insert table of healthy person vs. type 1 vs. type 2 vs. prediabetic; use fully funded options at $10k; $25k; $100k investments]

Life Expectancy and Diabetes

The United States of America only ranks 34th in terms of global life expectancy, with men averaging 76 years of age and women 81. This number is drastically reduced for those living with diabetes.

According to the Journal of the American Medical Association, men living with Type 1 diabetes lose 11 years of their lives while women with the same condition lose an average of 13 years of life expectancy.

Further complicating life expectancy, this same study found that those diabetics under age 50 tended to die most often from complications related to their management of the disease. Most common complications included ketoacidosis and diabetic comas.

With a statistical reduction in life expectancy ranging between 14% – 16% (depending on gender), one can begin to see how actuaries and underwriters at life insurance companies are hard pressed to offer low-cost policies.

How Does Treatment Affect Coverage Eligibility And Rating?

When underwriting for life insurance, each company will conduct a medical history review of a patient. This typically happens during the binding period where an individual has agreed to a price and a policy type/term. Though for diabetics there will be additional underwriting before an insurer will agree to terms or provide a rate.

Below we have provided the most common questions life insurers look to answer during the initial underwriting period:

  • Date first diagnosed
  • Date of last visit to primary care physician
  • Frequency of visits to primary care physician
  • Method of controlling diabetes (diet/exercise, oral medication, injections, etc)
  • Additional medications not related to diabetes treatment (allergy treatment, blood thinners, erectile dysfunction, etc)
  • Who monitors blood sugar? How often?
  • Last blood sugar reading
  • Most recent glycohemoglobin (BhA1C) or fructosamine level
  • What other health conditions are present?

Be sure to have truthful answers to each of these questions as your responses will be checked against medical records. Truthful applications are the best way to begin the relationship with your insurance company. It will lead to much more trust and, generally speaking, may affect an insurer’s decision to offer coverage.

Tips For Planning/Negotiating

Aside from being honest and truthful throughout the application process, one of the best tools in your life insurance planning arsenal is simply to ask for help. Going at it alone, working directly with an insurance company, and having to take the “best offer on the table” is only going to benefit the insurance company.

By engaging an expert consultant, such as those services provided through QuotesParade.com, you can have someone in your corner who understands your specific set of needs, treatment regimen, and family history. This person will be able to take your story to a variety of insurance companies and let them fight over the privilege to be your insuring partner.

Another great reason to utilize an independent consultant is for economies of scale. Taking your needs to market alone will yield a few options. However, working a life planner who places thousands of policies allows you to gain access to insurers which are only available through large brokerages. You may also be able to negotiate a better price as the independent advisor has a relationship with the insurance company underwriters.

Advanced Planning Strategy

Typically the term “advanced planning” refers to utilizing a complex web of policies, irrevocable life insurance trusts (ILIT), insuring grantor retained annuity trusts (GRAT), corporate ownership, and other vehicles to take advantage of modified taxation. Due to the costs associated with setting up and maintaining the ownership entities, these strategies are usually reserved for corporations or high net worth families whose estates are projected to exceed the current federal estate tax exemption threshold ($5.45 million as of 2016).

There are still many ways in which a person may take a more sophisticated approach to their life insurance strategy:

  • Accelerated death benefits payments – If terminally ill a policy may begin paying out cash value prior to death. This is generally negotiated as a policy addendum (rider) at binding.
  • Assignment of a policy as a gift- you can transfer ownership to another party with the new party now responsible for continuing payments. Useful if you wish to maintain coverage but need to have more free cash flow. Typically transferred to an heir and may not be subject to the annual gift tax exclusion ($14,000 as of 2016).
  • Life Settlement (viatical settlement)- surrendering (selling) the policy to a viatical settlement company in consideration of a higher payout than simply surrendering the policy back to the insurer for its cash value.
  • Term policy to permanent insurance conversion- some term policies allow you to convert the policy to a permanent policy without having to undergo a medical exam. Very useful if you have an immediate insurance need but inadequate funds for a permanent policy. May also be useful near term policy expiration to assure coverage can continue.
  • Conversion of coverage to long term payments- a solution to cover the costs associated with an assisted living community, nursing facility, or a home care provider. A third party will purchase your life insurance policy, taking on all benefits of the contract, in exchange for making payments to your care provider.

Takeaways And The Plan For Moving Forward

Diabetes is a serious medical condition which, in addition to health complications, can pose many financial challenges to an individual and their family. The combination of increased medical costs, reduced life expectancy, and disruption to daily life is something which causes stress and worry.

Life insurance is one part of the financial plan which can help manage costs and give back some quality of life. However, due to increased health concerns, it is recommended that you do not attempt to navigate the complex life insurance market alone.

Engaging a broker with expertise in planning for diabetics will yield both more coverage options and an overall better rate. More importantly, it will help make the conversation about you and your life; not the insurance company.

We encourage you to contact QuotesParade.com to learn more about life insurance planning for diabetics. Our team of advisors will take the time to learn about you, your goals, and your health to deliver the best life insurance policy which fits your needs.

Quotes Parade- Come learn how we put the life back in life insurance.

Sources:
National Diabetes Statistics Report, 2014 (release June 10, 2014) – See more at: http://www.diabetes.org/diabetes-basics/statistics/#sthash.EFrwkjdg.dpuf

Centers for Disease Control Statistics, 2015 – See more at:
http://www.cdc.gov/nchs/fastats/leading-causes-of-death.htm

Journal of the American Medical Association, 2015
http://jama.jamanetwork.com/article.aspx?articleid=2088852

Mayo Clinic
http://http://www.mayoclinic.org/

Joslin Diabetes Center
http://www.joslin.org/

National Center for Biotechnology Information
http://www.ncbi.nlm.nih.gov/

World Health Organization
http://www.who.int/en/

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