How To Recover from a Decline

How To Recover from a Decline

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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Keyman Coverage

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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Buy-Sell Arrangements

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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Executive Bonus/Golden Handcuffs

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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Income Replacement Coverage

How would your family survive if you could not work and earn an income?

Income replacement coverage is just what the term implies, covering the future income, for those who are counting on it, family, business partners, creditors, etc. 

However, the income replacement calculation can be tricky because of the need to calculate project into the future and make some assumptions about future projected earnings, inflation, changing financial obligations and other items. 

Due to these variables, one could be looking at an increasing need, a decreasing need, or a static need. This must only be calculated with the help of an experienced, knowledgeable professional, as this calculation is too important to guess about.


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