Bloomberg reported earlier this month that MetLife, the largest life insurer in America, is going to be selling prepaid life insurance on the shelves of Walmart. The article explains the transaction and prices pretty simply,
A one-year policy, providing a $10,000 death benefit, is advertised at $69 for people ages 18 to 44. Those 60 to 65would pay $429 for $25,000 of coverage lasting a year. Customers purchase a prepaid card that holds enough value to cover the policy’s cost and then call MetLife to answer health questions and activate the coverage. Those who don’t qualify can return their purchase or use the card to shop for other products.
Basically, the product is a paid up one year term policy sometimes referred to as an Annual Renewable Term Policy or a Yearly Renewable Term Policy. The negatives associated with buying this type of product in this type of manner is that there is no guarantee that the product will be on the shelves the following year, so one’s misplaced trust that “I will just go buy another unit next year” may not work out and if a health event were to occur that person would be unable to obtain insurance.
I am not sure whether it is a well placed fear or not, but whenever there is relaxed (or no) underwriting standards I just assume the product is going to be more expensive in terms of whole dollars. It would be logical because the insurance company, whose sole job is to manage risk, is unable to fully assess that risk and thus they shift more of the burden to the customer.
I loaded up my company’s illustration program to see some comparison. Few things to take note of before looking at the numbers:
- The name of the company I work for is irrelevant as it is a well known AAA rated insurance company.
- Our term product is usually considered as expensive so you could get cheaper prices elsewhere
- I can only illustrate $100,000+ Death Benefit in our one year term product so I will provide that number and then as a unit of $10,000
|Male – Standard||Male – Preferred|
|18 Year Old||$175.00||$17.50||$127.00||$12.70|
|25 Year Old||$151.00||$15.10||$115.00||$11.50|
|30 Year Old||$143.00||$14.30||$114.00||$11.40|
|35 Year Old||$143.00||$14.30||$114.00||$11.40|
|40 Year Old||$174.00||$17.40||$128.00||$12.80|
|44 Year Old||$209.00||$20.90||$146.00||$14.60|
Some interesting points:
- WOW THIS PRODUCT IS EXPENSIVE
- These prices go up almost every year from 18+ these are not set prices
- The product has to be expensive as they are treating a 44 year old like an 18 year old and a male like a female (female prices are even lower than above).
Notwithstanding all the negatives above, I think this is a fantastic product to help those individuals who would due to either socioeconomic factors or technological limitations would not otherwise have the ability to purchase life insurance.