What you need to know!
Perhaps you currently own or you may be considering the purchase of a large life insurance policy. Or, you may be reviewing an existing policy with hope of lowering the cost and/or improving the terms. Either way, this information will help make the best decision possible.
High net worth consumers have a better understanding than most about the value of permanent life insurance. They understand its value because of the superior net cost and because it is versatile and flexible. When purchasing large amounts of life insurance, you should be aware of all the advantages that were specially designed to make it competitive.
First, not all insurance companies specialize in this market. The ones that do may have specially priced premiums and they will have dedicated underwriting teams.
The rate class is a major factor for:
- Jumbo term insurance.
- Jumbo whole life.
- Large Permanent life insurance policies.
Getting the best underwriting class for jumbo policies should be the top priority any agent representing you. This means the agent is willing and experienced to work with underwriters for the best possible rate. This often requires us to be well prepared in the medical and/or financial issues that arise. For example, assume there is a premium difference of 10% between a preferred and standard rate for a $2 Million term policy. That 10% difference may amount to just $150 per year because of the low face amount and low premiums for term insurance.
But take that same 10% difference in a $20,000,000 permanent policy and the savings may be $25,000 per year, or more. The best rate class always matters and it should be the number one objective in underwriting!
A skilled agent understands what it takes to get the best underwriting offer. The intangibles do matter. Experienced agents are advocates for their clients, always acting as a fiduciary working in their best interest. Getting the best rate class can be a contentious process and this is something in which I take great pride. Undoubtedly, every agent wants a shot at placing a $50,000,000 policy but most are simply not experienced or knowledgeable enough in this market. Clients win by working with an experienced professional. Contact me for a jumbo life insurance quote.
Management of information is also important in jumbo cases:
Insurance companies can share information with other insurance companies, either directly or through the MIB. Of course, all of this should be properly disclosed and authorized by the applicant of the life insurance policy. The chances of future underwriting problems can increase if the underwriting process is not managed properly, each and every time.
Tips for buying large life insurance or jumbo life policies:
- Clear up previous underwriting history. It is important to start the underwriting process by outlining a 5 year health history. An inventory or report detailing how much coverage is currently inforce on each applicant, how much will be replaced and what the total amount of coverage will be at the end of the process is great information for underwriters to know.
- Identify the right insurance company for each insured. There are hundreds of insurance companies vying for these policies. A brief conversation with a life insurance professional is time well spent. Quickly, we are able to rule out the companies that don’t make sense and zero in on the ones that do. Consumers are not being served properly by spreadsheeting life insurance rates on websites. Trying to put all the important variables on a spreadsheet in an attempt to compare “apples to apples” is shortchanging life insurance buyers, especially jumbo life insurance policyholders. It is done because it is easier for agents and it allows for volume sales.
- Prepare each case with a cover story, including health history. This is an agent drafted summary that helps underwriters justify the best possible rate for the new coverage, including any current and past health issues. We recently helped a 66 year old woman acquire a jumbo policy for succession planning purposes. She had been on lithium for 15+ years without incident. Suddenly, she developed a lithium tolerance that created unique health issues and significant underwriting challenges. By providing this history, it helped the underwriters realize it was an uncommon medication problem which led to a reasonable offer.
- Product consideration. This is different than company selection. The underwriting classes within each company are often different for permanent and term insurance. Some companies may be more competitive for permanent coverage while others are well known for term policies. Selecting the right product can be complicated and that decision should always be driven by the client’s goals and objectives.
- Write a strong cover letter for the underwriters. Ask any life insurance underwriter and they will tell you how much they appreciate a thorough cover letter with every new case submission. This helps them understand the case goals and objectives. It helps the underwriting team get to know the client a bit and it gives the agent an opportunity to present all information in the best light possible. When jumbo life insurance purchases involve premium financing or corporate loan structures, the cover letters become necessary.
Please contact me at 561-869-4500 or email me about a complimentary consultation.
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