#4: Introduction to life insurance for cryonics

post by mingyuan · 2021-01-22T20:58:05.529Z · LW · GW · 10 comments

Contents

  Introduction
    Why life insurance?
    What is life insurance?
    Process overview
    Terms & definitions
  Coverage amount
    Minimum coverage
    Accounting for inflation
    Additional overfunding
      Potentially switching from neuro to whole-body
      Other potential cost increases
      Life insurance as financial investment
  Before you get started
    Personal & medical history
    Visa status (USA)
None
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This is post 4 of 10 in my cryonics signup sequence [? · GW], and the first of five posts on life insurance. I know that sounds like a lot. It's gonna be okay. 

Introduction

Why life insurance?

There are multiple ways to fund your cryopreservation, but most people use life insurance "because it requires no sizeable up front assets." So I'll be focusing on life insurance, which is a likely-unfamiliar bureaucratic labyrinth. Be aware that most people who buy permanent life insurance are using it as an investment vehicle, and as such, a lot of the advice out there just doesn't apply to you.

For information about alternative payment options for Alcor and CI – particularly relevant if you have enough cash to fund your cryopreservation in full right now – see Appendix B [LW · GW]. If you are using KrioRus you can skip the next five posts, since KrioRus has its own payment structure.

What is life insurance?

In brief, when you take out a life insurance policy, you pay an insurance company a monthly fee, in exchange for them paying out a lump sum to someone when you die. In the case of cryonics, this sum is paid to your cryonics provider, in order to cover your cryopreservation.

The moment you make your first payment, your beneficiary is entitled to the full death benefit amount, even if you die the next day.

Process overview

The process of obtaining life insurance can be daunting, so I want to lay it out in excruciating detail, roughly divided into three subsections:

1. Decision process (~4 to 20 hours)
   1. Read my posts on life insurance to get a basic understanding of the landscape
   2. Contact a life insurance agent who's familiar with cryonics
   3. Provide the agent with your personal health information
   4. Talk with the agent to understand your options based on your insurability, financial situation, and personal preferences
   5. Look over quotes/illustrations from your agent
   6. Make a final decision on your policy type, carrier, and death benefit amount
2. Underwriting process (~6 to 10 weeks)
   1. Tell your agent you'd like to begin the underwriting process
   2. Submit an application by meeting with your agent
   3. Complete a phone interview about your health with someone from ExamOne
   4. Submit to a brief medical exam if your health is in question
   5. Wait
3. Final steps (~1 hour)
   1. Look over the final policy with your agent
   2. Sign your policy 
   3. Send your policy to Alcor/CI

In this post, I'll cover the basics – including how much life insurance you'll need, what information you'll want on hand, and what to do if you're not a US citizen. I have four other posts that look more deeply into types of life insurance [? · GW], cryonics-friendly insurance carriers [LW · GW], cryonics-friendly life insurance agents [LW · GW], and the underwriting process [? · GW], respectively. 

Terms & definitions

There's a lot of jargon in the field of life insurance that I'll be using pretty indiscriminately in the coming posts. So here's a glossary (partially via Policygenius, mostly via me):

Beneficiary	The person(s) who are selected by the policyholder to receive the death benefit. In our case, this is the cryonics provider.
Carrier	The company through which you obtain life insurance.
Cash value	A tax-deferred savings account that is included in some permanent life insurance policies.
Contingent beneficiary	The person(s) who are selected by the policyholder to receive the death benefit in case the original beneficiary is deceased, refuses the death benefit, or cannot be located.
Coverage amount	The amount paid to beneficiaries when a policyholder dies. This is the same as death benefit.
Death benefit	The amount paid to beneficiaries when a policyholder dies.
Illustration / Policy illustration	A non-binding document detailing a potential insurance policy, including premiums, term, and (if applicable) projected performance. Similar to a quote.
Insurance agent	A middleman between you and insurance companies; helps you navigate bureaucracy. Employed by a specific insurance company.
Insurance broker	A middleman between you and insurance companies; helps you navigate bureaucracy. Employed by an independent/third-party firm.
Overfunding	Taking out more coverage than the minimum needed.
Owner	The person whose name is on the insurance policy and who is able to access information about it and control it.
Premium	The regular payments made toward the insurance policy. These are typically monthly.
Rider	Something you add to your insurance policy. Probably don't worry about this; I didn't.
Surrender	Cancelling your policy, e.g. if you can no longer afford the premiums. For our purposes, you want to avoid this.
Term	The amount of time for which your policy is in force.
Underwriting	The approval process for life insurance.

Coverage amount

How much coverage you need depends on the cost of the preservation you decided on. It also depends on how much inflation you expect there to be between now and your legal death.

Minimum coverage

Currently, Alcor's minimum required funding for neuropreservation is $80,000, while the minimum funding for full-body preservation is $200,000. Alcor recommends overfunding your life insurance policy by at least $25,000, so that's $105,000 for neuro and $225,000 for full-body. This will be your starting coverage amount when seeking life insurance. This is conveniently enough overfunding that your standby fees are automatically waived!

CI charges $28,000, so life insurance costs will be proportionally lower. Remember that you may also want to pay $30,000 to CI for stabilization and transportation, and $30,000 to Suspended Animation for standby, which brings you to a total coverage amount of about $90,000.

Accounting for inflation

As mentioned in my last post, Alcor's costs have historically risen in tandem with inflation. CI's have remained the same since 1976, but I don't expect that to be sustainable forever. So ideally you should plan to have available not the minimum funding amount, but instead, that amount compounded by the general rate of inflation. [LW(p) · GW(p)]

Let's assume [LW(p) · GW(p)] that costs double roughly every 20 years. If you're in your 60s, like my mom, there's ~one doubling time before the end of your natural lifespan, so you should plan on neuropreservation being ~$160,000 and whole-body being ~$400,000. If you're in your 20s, like me, there are three doubling times, making neuropreservation ~$650,000 and whole-body ~$1 million. 

There are three broad ways to handle the inevitable cost increases that come with inflation:

1. Overfunding your life insurance policy – i.e. taking out a policy with a larger death benefit
2. Purchasing additional life insurance in the future
3. Doing nothing – Alcor can handle cost increases on their end by just charging you extra fees (CI hasn't yet needed to implement a system for this)

I opted for #1, taking out more life insurance from the outset. I also chose a policy with a death benefit that increases over time and that's somewhat adjustable depending on how much money I pay into the policy. I'm hoping this will give me enough flexibility that I won't have to buy additional life insurance or pay extra fees to Alcor.

I recommend against #2, since life insurance gets more expensive the older you are, and waiting to purchase it is always a gamble since you may suddenly become less healthy. I don't really know how the fees are structured in #3, but my guess is that this method is probably more expensive than just taking out additional insurance from the outset would have been.

Additional overfunding

Potentially switching from neuro to whole-body

If you – like me [LW · GW] – are signing up for neuropreservation, but think you might want to switch to whole-body in the future, then you should have a high enough funding level to cover whole-body from the outset. The reason for this is that life insurance gets more expensive the older you are, so it's risky to plan on taking out extra life insurance in the future, if and when you decide to switch to whole-body.

Other potential cost increases

I was repeatedly warned by insurance agents of 'potential cost increases' in cryonics, which they told me would be due to advancement in cryonics technology and medical-specific inflation rates. But when I looked into this, I only found cost increases in line with global inflation. It's not impossible that some radical new technology will drastically change the cost landscape before it comes time to cryopreserve you, but one can't make a strong argument that that will happen just based on historical data.

Here's how I see it:

• Factors driving costs down: Economies of scale; some potential technological advances (e.g. ones that make the process quicker and easier)
• Factors driving costs up: Inflation; some potential technological advances (e.g. extra step in preservation, or new more expensive cryoprotectant)

My recommendation is to ignore anything your agent (or anyone, unless they have insider knowledge) says about process-based cost increases, and plan only for global inflation.

Life insurance as financial investment

If you opt for a policy that involves cash growth at all, you should think of any overfunding beyond the required amount as a financial investment. Basically every single article I've read about life insurance as an investment vehicle has screamed THIS IS A BAD INVESTMENT!! So I strongly caution you against being attracted to overfunding your policy just for the extra cash value – you'd do better to just put that extra money into index funds.

Before you get started

Personal & medical history

You'll want to have your medical history handy before you begin the process, for convenience's sake, since your insurance premiums are calculated based on actuarial projections of your likelihood of dying. Factors that go into that are your age, gender, health history, location, and whether you engage in hazardous activities. Hazardous activities include extreme sports (such as BASE jumping), dangerous occupations (such as logging), and drug use (especially smoking). Insurance companies seem to care a lot about what medications you're on and whether you specifically use tobacco. If your risk factors are too high, some insurance carriers might deny you entirely. Others will just charge you high premiums.

Insurance companies also want to know your income, but this will not affect your premiums.

Visa status (USA)

It's very difficult to be approved by a US insurer if you're not a US citizen, unless you can show that you're on a path to citizenship or permanent residency – and apparently it's only gotten harder with COVID and the Trump administration. The reason these laws exist is to prevent non-citizens from using insurance as a means of money laundering, which does make sense but is kind of a bummer for our purposes.

There do exist life insurance carriers that will approve non-citizens, but they aren't the same as the cryonics-friendly carriers. Luckily, your cryopreservation can be funded by life insurance underwritten in another country! I'll cover this in a bit more detail in the next post.

If you have a Green Card or an H-1B or L-1 visa, you're fine – you should be able to get coverage because the government sees you as being on a path to citizenship or permanent residency. It also helps to have assets in the US (not just cash but physical assets such as real estate) or to have family here.

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