23 July 2013 0 Comments

An Upside Down Approach To Purchasing Life Insurance: Part 2

teachingIn my previous entry I discussed the use of an Informal Inquiry in lieu of a formal application when proceeding with the purchase of life insurance where there is a medical history that might create a challenge in obtaining the best premium.   Now I’ll discuss a potential problem with this approach and situations other than medical histories where it might be used. 

Submitting an Informal Inquiry might produce no offer from any insurance company acceptable to the applicant.  It is even possible that all companies will decline to make any offer.  The fees doctors charge to release information in their client files can get costly ($35 to $200 for a single application) and since this cost will only be reimbursed to the agent by an insurance company after a formal application has been submitted to them, agents may be reluctant to pursue this approach.  They will likely only use it if the medical history presents a risk that is insurable, but too complex to project the premium—and—the potential annual premium is at least $5,000.

If the agent is reluctant to obtain the medical records, the proposed insured can ask his primary physician for copies of pertinent data such as lab results, surgical reports, pathology reports and ECG’s.  Doctor’s will normally provide this service directly to their patients without a charge.  These copies should then be given to the agent with a multiple company authorization signed.

Another situation in which the Informal Inquiry is often used is for the high profile personality or upper echelon executive that is just not about to proceed with any formal application until there is more certainty of an acceptable offer.  In these cases the business manager often insists on this approach in order to avoid any egg-on-the-face scenario…”What do you mean I need to take another exam???”

In addition to medical history, there are other factors that might suggest the Informal Inquiry approach.  Drug or alcohol abuse, criminal involvement and driving records are potential areas of concern.  With histories such as these, although medical records may be important to indicate history of substance abuse, other records might be even more important.  The additional information needed might best be provided by the applicant or their financial/legal advisors before proceeding with a formal application.

I was involved in one case where I was able to obtain a policy with no extra premiums charged even though the applicant had recently been convicted of a white collar crime.  This was done by carefully building a file with the help of the attorney before submitting it to the insurance company.

Testimonial letters from clergy or other respected advisors verifying abstinence, sobriety and acceptance of responsibility will help immensely where there has been a history of substance abuse.  Obtaining DMV records and providing  any extenuating circumstances about  a bad driving  record might help.

An applicant for life insurance who is aware of any history that might negatively impact the premium to be charged should ask their agent about the advisability of proceeding with an Informal Inquiry.  Remember, this should be an inquiry to be reviewed by more than one insurance company, so ask what companies are used.  The authorization form signed should bear the names of all insurance companies to whom the inquiry might be submitted.  Look for this to make certain a multiple company approach is being taken.

Turning the process upside down with an Informal Inquiry might speed up the application process and result in the best premiums.

Coming up…what good agents do and what not so good agents do…watching your backside.

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