Have you had a case declined because of a lack of insurable interest or insufficient financial justification? If you answered yes, you have experienced the other hurdle to getting your case issued–namely, meeting the financial underwriting factors established by the life insurance carrier.
An underwriter’s review of a case file includes an assessment from both a medical and financial standpoint. While a favorable medical rating is an important first step to getting your case issued, you can still lose a case during underwriting by failing to meet the carrier’s financial underwriting requirements.
The Big Picture
The purpose of financial underwriting is to determine if the amount of insurance requested can be justified based on the need for the insurance. Before a policy is issued, an underwriter wants an affirmative answer to the following three questions:
o Is there proof that, at the death of the insured, there will be a financial loss to the beneficiary?
o Is the face amount of coverage requested appropriate for the financial loss expected to be incurred?
o Will the individual or business be able to meet premium payments out of normal available income after meeting normal living or business expenses?
The key to financial underwriting success can be found in four words: “Does it make sense?” As within any repetitive process, underwriters and their carriers develop guidelines that reflect what they think makes sense for a given need for insurance. These guidelines provide the parameters used in determining the amount of insurance that will be placed on an individual.
So for any case, the starting point is a clear understanding of the parameters that a carrier will apply to a particular situation. Familiarize yourself with the carrier’s financial underwriting guidelines before you submit the case. You can use these guidelines to help identify financial data to supply an underwriter for a particular scenario.
If the requested amount applied for falls outside the guidelines, realize that you will need to provide additional supporting facts to win the case. A detailed explanation needs to be provided to help the underwriter understand why this case is different.
Once you have an understanding of the guidelines for the given insurance needs, present a clear, consistent explanation. The time you take to ensure that the application presents an accurate picture is time well spent.
Where necessary, add a cover letter to explain the case. The cover letter should include:
o The purpose of the insurance.
o The policy structure (insured, owner, and beneficiary) and their relationship to the insured.
o The requested amount of insurance coverage and how the amount was determined.
o How much insurance the insured currently has in force.
o What the purpose of the current coverage is and whether it will be replaced.
o How the owner plans to “afford” the insurance.
When the insurance is for a business purpose, the cover letter also should include a company profile. This should embrace its tax structure, the identity of owners, the percentage ownership of each, and a short history with details on what the business does and its track record.