Convergent Sales Idea: Combine A Life Policy With A Casualty Policy

On the other hand, though, since premium financing loans usually have to be renegotiated periodically, such as every five years, the borrower has the additional consideration that the cost of the casualty insurance may increase when the loan terms are renegotiated. Such an increase could materially affect the viability of the transaction, such as by then causing high-earning assets to be pledged as collateral.

Nevertheless, the combination of a life insurance policy with a casualty policy probably can be utilized in many other situations like this one, to insure against an unfavorable financial result. The main effect on the transaction is that the overall profitability would just be less.

Another recent example comes from the life settlement market. When a viatical company buys a policy, one risk assumed is that the insured will outlive life expectancy, in which case the viatical company may incur a loss on that policy. In the recent case, the viatical company purchased a casualty policy to protect against this unfavorable result. The casualty policy thus works like a life insurance policy in reverse.

Interestingly, the result is that both the life insurer and the viatical company base the transaction upon life expectancy but with different products involved.

Using a casualty policy in the premium financing market at first appeared to be a novel combination of products. But, following review of the viatical situation shortly thereafter, I started to feel the way I do when learning about a new use for technology. That is, ones mind races to consider the possibilities, and then stops thinking usually because the possibilities are endless and thus overwhelming.

Reading through that viatical transaction had just that kind of impact.

Further review suggests that many more such instances of a convergence of life and casualty products will emerge. The uses would seem limitless, as well as natural.

Therefore, insurance professionals who work at the cutting edge of the business should expect to see a continuing evolution of sales ideas that combine life insurance with products (i.e., casualty policies) that previously had been considered to be unrelated to the life insurance market.

Douglas I. Friedman, a partner in the Friedman & Downey, P.C. law firm of Birmingham, Ala., is national counsel on estate and business planning for insurers. His e-mail is [email protected].

Reproduced from National Underwriter Edition, December 3, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.