Getting declined for life insurance is very serious
While a decline doesn’t necessarily mean an insurance company believes you are going to die very soon, it does mean they have concerns about your statistical life expectancy or personal history, or activities. And a decline by one insurance company can generally be seen by other insurers. So a decline “on your record” might just make it that much harder for you to be seen positively by another company. So let’s talk about how to avoid a decline as best as possible.
Working with an experienced life insurance agent is crucial
If you have known health issues, chronic or otherwise, engage in potentially dangerous activities, or have a personal history that involves trouble with the law, you may find yourself an unacceptable risk to many insurance companies, and therefore a candidate for a decline. Does this mean you shouldn’t try to get coverage? Well no, not without consulting an agent who is experienced and knowledgeable and who can first assess your potential “problems”, speak to underwriters about the information they need to make an informed decision, and then follow through to present the best and most accurate information possible to the underwriters.
Many times it is incomplete, or even erroneous information about a prospective insured that leads underwriters to decline an application. Unfortunately, blame can usually be shared by an agent’s inexperience to ask the right follow-up questions, and an applicant’s attempt to tell the most favorable story about themselves that they can.
So when you get declined you, here’s what you need to do:
- Write to the company representative who sent you the decline letter, and ask for specifics about why you were declined.
- Follow-up with your agent when you hear from the company that declined you.
What can usually be fixed:
- Erroneous information in a medical record.
- Personal history that has not been updated.
- Personal history that is not yours.
- Incorrect information on the application.
If you have been declined and don’t think there is any hope in being issued a policy by any company, you should speak with one of our affiliated agents and get an understanding of what other options may be available.
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How term insurance can protect your business
Term insurance can protect a business, its’ owners, and management in a variety of ways.
Keyman coverage with life insurance is generally a life insurance policy that is owned by a business entity, which gives that business the life insurance proceeds upon the passing of a keyman in the business, for the purposes which include: giving the business time to find and hire a replacement, keeping creditors satisfied that the business has enough operating capital in a time when there may be grave concerns about the business’ future and the debt the business may be carrying, and pay-off any accrued compensation owed to the keyman’s estate.
The policy design of this type of coverage is more complex than an individual owning his own coverage for his family’s protection. An experienced life insurance professional should be sought to make sure the policy structure achieves the desired goal for the need. There may also be issues around taxation and tax deductability of premiums or proceeds.
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How to use term insurance to protect your business in buy-sell arrangements
A buy-sell arrangement is a formal contract between parties that have, or could have, an interest in a business. These arrangements are generally designed by attorneys to suit the specific needs and goals of the interested parties. Many times, should a provision of the arrangement be triggered by the death of an owner, partner, shareholder, or otherwise, the life insurance death benefit on the individual who passed away, is used to buy-out that person’s interest in the business.
These arrangements can be fairly complex when it comes to designing the life insurance coverage and “funding” the arrangement with life insurance proceeds, as there are several ways the coverage can be structured, depending on a variety of factors, including how many interested parties there are involved, the funding structure of the policies, the beneficiary designations, the need to be able to change insureds as the interested parties change over the years, and so on.
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Whole life insurance can be a great executive bonus to help your your business attract and retain top talent
Using a life insurance policy as an executive bonus arrangement and/or as “Golden Handcuffs” is a great way to have a have a discriminant method of offering a bonus to select individuals . The purpose is of course to attract and retain top talent in your business. By offering a life insurance policy as part of their employment contract, you provide a valuable benefit that can be contractually restricted over a certain period of time — a time period you define in the arrangement agreement.
A built-in, self-vesting schedule of the available cash-value within the policy which should increase over time makes the life insurance policy more valuable over time and harder for the executive to walk away from. Any other timed restrictions that were agreed upon at the time of the arrangement contribute to making this a great enticement tool — thus being like “Golden Handcuffs” — keeping them personally financially invested in your business.
Getting Roth IRA style benefits from a whole life insurance policy
Generally speaking, this type of arrangement can also be very attractive because the possibility of the cash-value growth being tax-deferred, and the eventual tax-free use of the cash-value within the life insurance policy. This creates a scenario that mimics the tax advantages of a ROTH IRA but without any of the income, earnings, or contribution limitations.
Life insurance policy design is critical
For these type of strategies, permanent cash-value insurance is required, and the type of policies, and the policy design are crucial. As with any financial strategy using life insurance, an experienced life insurance professional should be sought to make sure the policy structure achieves the desired goal.
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Deciding which life insurance company to choose
Buying term insurance doesn’t have to be complicated, but it isn’t as simple as getting the best quote. Term life insurance [aka “temporary insurance”] like all life insurance, is a contract between the policy-owner (usually the insured) and the insurance company.
The first thing a consumer must keep in mind, is that the company they choose may be apart of their financial life for up to 30 years. This is a very long time in the business sense, as a company’s financial situation could change dramatically over that period of time, also, while a company being bought by another company shouldn’t change the premium or death benefit protection, it may change some of the opportunities you may have been given as a policyholder with the company that originally issued the policy.
These concerns don’t usually seem like a big deal to most people when they are young and they feel they have all the time in the world to make adjustments and change, and that may be partly true, but soon after most people take a life insurance policy, they believe they won’t have to think about it for a longtime, or even, ever again. And then there may come an unexpected event in the policyholder’s life, and suddenly they find out that the policy they chose, doesn’t have a provision they might have gotten with another company, or they misunderstood, or were never informed of an option they could now use.
Working with the right agent is crucial to optimizing your life insurance coverage
This is why it is crucial to work with an experienced, knowledgeable agent, someone who can tell you the pros and cons between different companies products, and through understanding your personal circumstance, advise you on what features, and which companies to choose from. The last item to worry about is the quote a premium based on a guess. Areas your agent should be able to explain to you are the differences between companies and products with regard to:
- Waiver of premium provisions
- Accelerated Benefit provisions
- Term to permanent policy conversion options and rules
- End of term options
- Reduction of face amount options
- Lapse and reinstatement provisions
- Rating improvement provisions
All of these things listed above, and more, are not usually on the mind of consumers in the beginning, but are important to know and understand before you commit to a particular company’s product, especially since this policy could be a part of your life for decades, and you may find yourself in need of a benefit that should have been included in the policy, but you were never given complete information about your product choices.
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