Does Your Life Insurance Application Need Special Handling? The Key Role Played by Prequalification and Underwriting

Life insurance is a product that almost all of us need. Regardless of whether we purchase policies for the benefit of our family, business, or favorite charity, life insurance can be difficult to acquire. Even those of us in perfect health can run into roadblocks during this process due to the complexity of the mortality assessment. Other factors that affect eligibility for coverage include complications in the underwriting process itself, as well as business standards that must be met.

In this new series, I will identify the various trouble spots that you may encounter in your quest to purchase life insurance and walk you through ways to avoid them. This information will help those with special considerations or people who are considered “high risk” navigate the process successfully. In Part One, we will explain how the processes of prequalification and underwriting are the key to helping people buy the policy that best meets their needs and goals.

What Is Your Objective When Buying Life Insurance?

In my experience, consumers typically have one of three objectives when they buy life insurance. They want to:

1. Spend As Little Money As Possible

To meet this objective, many people buy cheap term insurance. They also will buy smaller whole life, universal life, indexed universal life policies, or variable policies “just to have some permanent coverage without spending a lot of money.”

2. Target A Specific Living Or Death Benefit

Here, the product is used to accumulate a specified amount of cash for retirement or some other purpose. It could also be used to maintain a specified survivor benefit for estate or business planning.

3. Get An Offer, Period

People who pose a high underwriting risk due to a medical or lifestyle issue just want to get

an offer. But even if it’s difficult to obtain coverage, they want to make sure the premium or cash potential is still the best the market has to offer.

Prequalification And Underwriting As The Solution

When you think about it, life insurance underwriting is what makes it possible to meet each one of these objectives. To qualify for the lowest premium, you have to get the best rate class. To accumulate a lot of cash inside your policy, or to maintain a certain death benefit over a long period of time, the cost of insuring you has to be relatively low. Otherwise, the premium would not be worth it.

To get a policy when you have diabetes or when you climb mountains, you have to get underwriting that will favorably assess that condition. Once you consider the multitude of factors that are weighed in life insurance underwriting, you can see why it is possible for many people to be considered higher risk. These factors include current health, medical history, family medical history, vocation, hobbies, lifestyle, travel habits, and legal/financial/motor vehicle record.

Prequalification Tells You What Underwriting Is Available

Most people want to confirm the buying price before they make a major purchase, and this is true with life insurance as well. This is where prequalification comes in. Through this process, your underwriting challenges are identified before you go through formal underwriting. Carrier assessments of your risk are obtained so that tentative pricing can be determined. At that point, you can apply for coverage reasonably confident that your application will be approved at the rate quoted and your overall strategy for the product can be realized.

Prequalification is especially important for applicants who pose a higher risk. In this case, underwriting can be more complicated because atypical or abnormal health or lifestyle factors must be considered. It is critical that preliminary rates are solicited from the carriers who specialize in underwriting these types of risks and that the solicitation is made with thorough, accurate, and favorable information. This way your mortality risk can be assessed fairly and the rate quoted can be considered fair and reliable.

How I Can Help

Have you ever felt completely overwhelmed by the thought of purchasing life insurance? Maybe you’ve started the process but gave up when things got complicated. Many people don’t even pursue life insurance because they think their application will be denied. This is where I come in. I am here to help you overcome the obstacles and find a policy that is right for you. Ask me anything at skobrin@stevenkobrin.com.

Stay tuned for our next installment, where we will identify the other challenges you will face when purchasing a policy.

About Steve

Steven Kobrin is a life insurance expert with 25 years experience. He serves high net-worth individuals and business owners as well as high risk and uninsurable “impaired cases.” Steven offers concierge life insurance process to ensure the policy is approved as it’s quoted. To learn more, visit his website, read his blog, connect with him on LinkedIn, or request a policy audit today by calling his office at (866) 633-1818 or by email at skobrin@stevenkobrin.com. Steven is a contributor to Investopedia, view his profile here.

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

What is a tax-free 1035 Exchange?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

If I surrender this life insurance policy and take the $40,000, are there any tax consequences?

Here are a few things you to think about: Anything above your cost basis – the total premiums paid – would be taxable as ordinary income. Call the carrier and… Read More

 

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Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Honoring Your Parents: Accepting the Death of a Loved One

When someone close to us dies, it turns our world upside down. Whether it’s a friend, a coworker, or a neighborhood acquaintance, death often evokes upsetting emotions. These emotions can go to the extreme when it’s a parent’s death you are facing. As our parents reach the end of their life, it can be excruciatingly difficult for us to deal with the fact that their days are numbered. Why is that?

Facing The Reality Of Death

The death of both of my parents was long and drawn out. I accompanied both of them in the final stage of their journey, and I have other family members who are also getting close to the end. In my community, I have known and loved many people who passed away. You will have to face and deal with death when you are involved in the lives of others.

To go even further, the life insurance business has exposed me to death over and over again. Isn’t that the purpose of life insurance – to make sure your loved ones receive benefits when you die? Once you have been in the field long enough, you can’t help but get involved in processing claims and often end up creating close relationships with some of your clients.

Every death hurts, some more than others. The death of a close relative can be devastating, while others may be less painful, but nonetheless sad. As I continuously work to process both the small and significant traumas, I’m attempting to identify what I have learned so I can handle the next one a bit better. I have had the good fortune of getting my hands on beneficial books, both practical and spiritual, and have a network of friends and advisers who offer valuable guidance. These resources have assisted me in forming a perspective that, as it turns out, helps me deal not only with death but with life as well.

Here are three lessons I have learned that I want to share with you:

1. Life Is Precious

Both my mother and my father fought hard to get something out of their last days. They knew the end was near but still wanted to make their last bit of life worthwhile and meaningful. They wanted to be surrounded by loved ones, even if just for a few minutes, and savored the last sips of their favorite tea or enjoyed the final strains of their preferred music. But they also desired to be left alone to make their final preparations.

Their actions taught me that no matter what stage of life you are in, you can’t give up. Even if you are nearing the end, you should desire to go out with a warm spot in your heart and a smile on your face. Our job is to gift our parents with these humble yet significant things that make all the difference in the world: the moments of pleasure, small joys, or peaceful solitude. They may not seem like much, but they mean everything to those who are dying. When we focus on how precious each moment of life is, it helps us to keep a smile on our face too, even amidst our tears of grief.

2. Fight The Good Fight For Them

When people are incapacitated due to illness or injury, they become dependent on others for their care and welfare. This can be an incredibly humbling and disheartening time for those in this position, so you need to step up and be an advocate for their needs. Many resources are available, including doctors and nurses, home healthcare aides, and facilities such as nursing homes, adult day care centers, and dialysis centers.

Like every other business, the healthcare industry includes the good, the bad, and the ugly,  especially when it comes to dealing with seniors. We have capable doctors and poor doctors, great aides but also inept or even downright abusive caretakers. I became personally involved in making sure my parents received the proper care and I continue to do so today for other family members who are ailing. Doing my part was and is cathartic. While it’s challenging to know what people need when they are dying, don’t just be a bystander. Find tasks to complete that will help them retain their dignity.

3. It’s Not About You

In a time of intense emotions, it’s easy to take things personally or become too invested in issues that shouldn’t be taking up your time and energy. If you are on the front lines of your parents’ care, you are often exposed to more of their pain and suffering, which can stir up your own feelings of remorse, guilt, empathy, or denial.

It’s easy to take out your emotions on the various care providers you come in contact with throughout the ordeal. The slightest mistake or act of neglect can seem like the crime of the century. You may become angry when the medication arrives thirty minutes late or when a nurse acts too rough.

The solution is not an easy one, though. You need to look inside and work on yourself, processing and filtering your own feelings so you can control and channel the whirlpool of emotions inside of you. Good caregivers also deal with some level of grief in this situations, and the best reaction for everyone involved is to step back, let go, and never forget the main purpose: doing what’s best for the patient. If we can be strong enough to let go, then your parent will feel the freedom to let go when it’s time for them to take their last breath.

These are heavy issues, but unfortunately, they are a fact of life. The older we get, the more likely it is that we will face this situation, so it’s wise to prepare yourself now and obtain the right perspective for those difficult days. Have you seen these principles in action? Do you have any other tips or advice that helped you through a similar situation? I’d love to hear your stories. Contact me at skobrin@stevenkobrin.com.

 

About Steve

Steven Kobrin is a life insurance expert with 25 years experience. He serves high net-worth individuals and business owners as well as high risk and uninsurable “impaired cases.” Steven offers concierge life insurance process to ensure the policy is approved as it’s quoted. To learn more, visit his website, read his blog, connect with him on LinkedIn, or request a policy audit today by calling his office at (866) 633-1818 or by email at skobrin@stevenkobrin.com. Steven is a contributor to Investopedia, view his profile here.

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

The Role of a Life Insurance Super Specialist

Life insurance super specialists are experts in finding policies regardless of mortality risk. Read More

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should I get rid of my long term care insurance?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should I continue to max out my 401(k) contributions or diversify with a whole life insurance policy?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

What type of life insurance policy should a 20 year-old be looking for?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How are capital gains determined on the surrender of a whole life insurance policy gifted to me by my parents?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should I convert my 529 Plan into a whole life insurance policy?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should I list my ex-spouse as an In-Trust-For on a life insurance policy that has my children listed as the beneficiaries?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How does a wash loan work?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How can I get out of my IUL policy without surrendering a significant portion of my investments?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How can I best use the cash value of my life insurance policy to invest near retirement?

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

What Qualifications Should Your Life Insurance Broker Have? Part Two: The Role of the Super-Specialist

Life insurance is not something to mess around with. It is an integral piece of your financial puzzle, without which the rest of your finances could be in danger. We recently discussed the reasons why your life insurance broker should be a specialist, both in the product itself as well as the planning and purchasing process. Now that you know how important it is for the person selling your life insurance to be qualified, we’ll turn our attention to the necessity of a “super-specialist,” or “impaired-risk specialist.”

An Expert In Risk

The life insurance super-specialist is an expert in underwriting all varieties of risk. It doesn’t matter if you are perfectly healthy, being treated for a serious illness, love mountain climbing, or are fresh out of bankruptcy. Your super-specialist should be able to give you both competitive and reliable quotes and get your application approved at the rate quoted with no surprises.

What Is Risk?

The life insurance industry gives a rating to all types of risks and determines where you land on the risk scale. If providers don’t use risk factors to determine premiums, they could lose money down the road.

What the industry considers higher-risk or impaired risk includes a wide variety of medical conditions affecting every organ and system in the body, from the neurological to the orthopedic. It also includes multiple lifestyle issues, from smoking to drug use to alcohol use to foreign travel. They also consider your past. People who have a criminal conviction or multiple motor vehicle violations typically represent a higher risk than those who don’t.

Risk And The Super-Specialist

How does the super-specialist handle risk? The key to their mastery is the capability of getting people underwritten who represent higher risks. The logic is simple: if they can obtain policies for people who have heart disease or diabetes, they can easily get policies for those who are lucky enough to be disease-free.

A broker who gets the job done with these harder cases has an easy time getting it done for the simple cases. Remember our homebuilding analogy in part one of this series? The master builder who constructs your dream home will have a straightforward job of building an addition. But what sets the life insurance business apart from the construction industry is that it won’t cost you any extra to do business with a master broker because the premium for the product remains the same regardless of who sold it to you.

An Understanding Of The Personal Side

There is another reason why the impaired-risk specialist is ideally suited to help you purchase life insurance. It has to do with the very personal nature of life insurance underwriting. As we have discussed, virtually your entire life and history are assessed for mortality risk when you apply for a policy. Full disclosure is required to qualify for the best rate and to get your application approved without a hitch.

Everything must be put on the table: your discomfort with your Crohn’s disease, your bouts with depression, your prior and even current marijuana use. You can’t hide your treatment for anxiety and stress during your divorce, your recent job change, or the time you fell off the wagon and went into rehab. All these experiences are extremely personal and highly sensitive and must be handled appropriately. When you work with a life insurance broker, you need to feel that you are being treated with consideration and respect. And it’s not just about getting the details down. Your story must be presented to underwriters in a way that sheds the best possible light on your insurability.

The Highest Level Of Service

Consumers who pose a higher risk realize they need to deal with an impaired-risk specialist. They know that people who pose special risks need special care. Imagine you have a particular medical condition, such as a kidney ailment. To get the best care, you would go to a nephrologist. This is true for the legal field as well. You would go to an estate planning attorney for your will and trust and to a criminal attorney for legal representation.

The difference is that the impaired risk super-specialist isn’t pigeonholed into just the high-risk cases. They’ve mastered the complex so the simple becomes even easier. This is why the impaired-risk specialist is positioned to provide excellent service regardless of the mortality risk posed by any given client.

My Role As A Super-Specialist

In my many years of experience in this industry, I have obtained the expertise needed to specialize in helping people who represent a higher risk in multiple risk areas. Regardless of if you feel you have a unique, challenging situation or if your circumstances are straightforward, I can help you get competitive quotes for your life insurance. I’d love to hear your story. Ask anything at skobrin@stevenkobrin.com.

About Steve

Steven Kobrin is a life insurance expert with 25 years experience. He serves high net-worth individuals and business owners as well as high risk and uninsurable “impaired cases.” Steven offers concierge life insurance process to ensure the policy is approved as it’s quoted. To learn more, visit his website, read his blog, connect with him on LinkedIn, or request a policy audit today by calling his office at (866) 633-1818 or by email at skobrin@stevenkobrin.com. Steven is a contributor to Investopedia, view his profile here.

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Transform Small Donors into Major Donors

Your not-for-profit organization is making a profound difference in the lives of those served. You are busy, your staff is busy, your staff is busy, and it’s time to put the pedal to the floor and launch a Major Gifts campaign.

The organization has a strong fan base, and there are those who would like to really leave a legacy. But not everyone may be in a position to part with legacy-level dollars…

…while they are alive.

The answer: Life insurance.

Here’s how it works: A person can make a small or medium-sized donation to the charity of their choice. That charity uses those funds to purchase a life insurance policy on that donor, with the charity as the beneficiary. (The charity also creates a budget line item for the premiums in case the donations to cover the premium stop coming for whatever reason.) Upon the eventual passing of the donor, the benefit that the charity receives will be many times the sum donated over the years.

If it’s so straightforward, why aren’t I hearing about this all over the place? I hear you ask.

Certain institutions do this all the time, notably charities that promote medical research, United Way, and Jewish Federations. It’s also a common practice in estate planning. The word is spreading.
Life insurance is, plainly put, an underutilized way to help people leave a legacy.

A cautionary note: It is better for the not-for-profit to own the policy so that after years of paying premiums, the beneficiary doesn’t get changed by the policy owner. Make sure to run it past a lawyer because it has to be done in a certain way, to the benefit of everyone.

So help someone to hit the Good Deed button, they can make a difference in the lives of the people who will benefit from your organization!

To learn more, contact us today. Visit our website, read our blog, connect with me on LinkedIn, download our free ebook, The Guide to Buying Life Insurance, or request a policy audit today by calling our office at (866) 633-1818 or by email at skobrin@stevenkobrin.com.

We thank Jaime Campbell for her co-authoriship of this blog. Jaime is a CPA, CGMA (Chartered Global Management Accountant), MBA, and co-owner and CFO of Tier One Services, LLC. Jaime’s passion is to combine her analytical, proud-to-be-a-geek mind with her creative, musical side to deliver accounting information in such a way that clients see their business future in a whole new light. She enjoys creating and nurturing fulfilling relationships with clients that help them achieve their dreams. You can reach Jaime at (704) 837-0185 or jcampbellcpa@tieroneservices.net.

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

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Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should we delay paying the annual premium for our parents’ Second-To-Die policy if we feel we can’t afford it at its due date?

A tough situation. I hope that property damage is all you have to worry about! This is a common dilemma. When people take out flexible premium life insurance policies, it… Read More

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Can I recover my retirement savings after losing it all due to the market crash and a failed business?

As I see it, you have three objectives: To retire at age 60; To retire comfortably; And to prepare for emergencies. You haven’t specified this third objective, but I think… Read More

 

Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.