Your feasibility study
By Steven Kobrin
Steven H. Kobrin, LUTCF
Consumers often treat life insurance as a commodity. They go to a Web site or a local agent and pick a product to purchase. Too many times, however, they end up with the wrong product. Worse, they end up getting rated for extra premium or declined altogether.
Shopping for life insurance is not as easy as buying a bag of groceries, nor should it be.
The underwriting process is purposefully thorough. The goal is to accurately and fairly assess the risk posed by each applicant. It is necessary and proper that all risk factors be evaluated. In this way, applicants can receive the most accurate and fair price, while the company can sustain its reserves to ensure claims will be paid.
In essence, the process of purchasing life insurance is a feasibility study. When you go to market to obtain the life insurance product most appropriate for you, you are testing your own insurability.
You represent a specific risk profile. You have a unique combination of past and present health conditions, family medical history, vocation and lifestyle risk factors, legal and financial records, and so on.
The challenge for you is to find a broker who can represent your risk profile in the most thorough, accurate, and favorable light.
The challenge for your broker is to find the carrier who would be the most aggressive in underwriting that risk.
This effort will involve making progress, overcoming obstacles, and moving on. You may receive one assessment from one underwriter, and a completely different assessment from another. Each assessment serves as feedback, which your broker should use to better present you to other companies. Along the way, you will develop and fine-tune your insurability.
The prequalification process ends when you can determine the company, the product, and the price of your life insurance coverage, before making the actual purchase.
Sometimes, even though prequalification is performed as carefully as possible, a surprise can arise during the formal underwriting process after the application is submitted.
For example, the underwriter might discover contradictory information in your medical records. Your doctor's office might have accidentally commingled another patient's records with yours. Perhaps a typo was made, or misinformation has slipped into your file another way. Any of these innocent errors can result in an unexpected rating or declination on your life insurance application.
In this case, your feasibility study is still in progress.
The challenge for you is to work even more closely with your broker than before, to revisit problem areas.
The challenge for your broker is to work even more closely with the underwriters, to resolve problems in your favor, and to make you as credible as possible.
A variety of techniques are available for improving your insurability. For example, letters from your doctors, as well as your own personal testimonial, are often useful. Sometimes additional medical testing is needed to address unanswered medical questions. Input from financial advisors can be obtained.
Your broker's skill and experience in advocacy is essential in order to identify the most effective technique, given the particular circumstances in your case.