Life insurance policies are considered to be jumbo policies when the amount of coverage exceeds $10,000,000 but there is no hard and fast rule about this. Both term and permanent life insurance qualify. Jumbo life insurance policies are typically bought by high income earners and high net worth individuals. Underwriting these policies is completely different than underwriting policies with smaller face amounts and lesser premiums. Many insurance companies have special underwriting teams dedicated to jumbo policies and the agents who specialize in them.
What are the Advantages of Buying Jumbo Policies?
If you currently own or if you’re in the market for a jumbo life insurance policy, you should be eligible for the best policy rates. Whether you are considering term insurance or a permanent policy, our knowledge and experience in the jumbo market will help you secure the best coverage possible.
High net worth consumers and ultra high net worth consumers are more likely to need permanent life insurance, which is the most cost advantageous way to purchase life insurance. Permanent life insurance has superior net cost, versatility and flexibility. When purchasing jumbo insurance coverage, you want to take advantage of the special policies and programs for the jumbo market. Not all insurance companies specialize in this market. The ones that do may have special rates for larger face amounts. The ultimate rate class is crucial in this market where the difference between a preferred and standard rate could be as much as 20% annually.
The policy’s final rate class is a major factor for:
- Jumbo term insurance.
- Jumbo whole life.
- Large permanent life insurance policies.
- Premium Financing arrangements.
As such, the underwriting class for jumbo policies should be the top priority for the agents representing you. This means the agent should be knowledgable, experienced and demonstrates success working with underwriters who also specialize in these policies. Agents must be experienced in the medical and financial underwriting issues, which are a big part of these cases. For example, a $2,000,000 term policy might cost 10% more for a standard rate as opposed to a preferred rate. That difference might only be $150 per year because of the low face amount and low premiums for term insurance. But, when comparing that same 10% difference for a $20,000,000 permanent policy, the annual savings may be $50,000, or more. The best rate class always matters and it should be priority number one!
Agent’s Role in Jumbo Life Insurance Underwriting.
A skilled agent working in the jumbo life insurance market understands what it takes to get the best underwriting offers. Experienced agents are advocates for their clients while simultaneously acting as a fiduciary working in their best interest. Fighting for the best rate class is usually a contentious process. Undoubtedly, every agent wants a shot at placing a $50,000,000 policy but most are simply not experienced or knowledgeable enough to provide the level of experience and professionalism that is required to get these policies placed. Clients win by working with us. Contact me for a jumbo life insurance quote.
Management of information is also important in jumbo cases:
Insurance companies often share information with other insurance companies, either directly or through the Medical Information Bureau (MIB). Of course, this is typically disclosed and authorized by the life insurance application. The chances of future underwriting problems can increase if the underwriting process is not managed properly, each and every time you submit an application.
Tips for buying jumbo life policies:
- Clear up previous underwriting history. It is important to start the underwriting process by documenting a 5 year health history. An explanation detailing how much coverage is currently inforce is critical. How much existing coverage will be replaced and how much total coverage will be inforce at the end of the process is helpful information for underwriters.
- Identify the right insurance company for each insured. There are hundreds of insurance companies vying for these policies. Quickly, we are able to rule out the companies that don’t fit and focus on the right ones. 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 to commoditize insurance products for the insurance companies. Think of insurance companies as product manufacturers.
- Prepare a cover letter, including health history. This is an agent drafted story of the case 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 information to the underwriters, it helped them realize it was an uncommon medication problem, enabling them to make a reasonable offer.
- Product and company consideration. The underwriting classes are often different for permanent and term insurance. Some companies may be more competitive for permanent coverage while others are well known for low term rates. Selecting the right product from the right company can be complex.
Please contact me at 561-771-4647 or email us for more information.
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