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The Art of Applying for Underwritten Insurance

The Art of Applying for Underwritten Insurance

November 15, 2021

Believe it or not, there is a right way and a wrong way to obtain insurance. Whether it be life insurance, long-term care insurance, disability coverage, etc. there are certain universal things that you should and shouldn’t do. Over the course of my 36 years in the insurance business, I have seen many clients do the things correctly, but unfortunately, I have seen more than my share of applications go sideways due to avoidable errors. So yes, you can consider this piece self-serving as it will hopefully make my job as your insurance agent easier, but rest assured following these guides your application process will be tremendously easier.  So lets review the process of obtaining insurance and then discuss how to do it to minimize delays and confusion.

The first step in the process is determining that you NEED insurance. If the policy that you are applying for is not feeling a need or at a bare minimum, a want, then you should not even be considering that particular policy. Most of you who have dealt with me know that I will always say that I can tell you what you need, but have to tell me what you want. Realizing that I need life insurance while I am working for my family who depends on my income is a rather glaring need and one that easy to quantify (most of the time). There are times; however, when the need for insurance either bleeds into a want or is just a flat out want (think family or charitable bequeaths, etc). Just understand that every insurance policy you think about purchasing should be solving a problem that can not be solved without said policy. If the policy is not solving a problem, then that will create one with the underwriter who will be determining the financial necessity of the coverage that we are asking for. Think about how many TV shows focused on the life insurance on dear Aunt Edna ( a greedy beneficiary who thinks his life with Aunt Edna’s life insurance money is better than having Aunt Edna in his life).

So now that we have determined that we need an insurance policy and for this example we will assume that it is a life insurance policy (just to make things clearer). Now we have to figure out the best way to obtain the policy in question. In my opinion, the best place to start is with an independent broker/agent. An independent agent is one who can represent a large number of insurance carriers is not just tied to one carrier who may or may not have the best policy for your situation. So now you and independent agent begin the process of determining which company would be best for the particular policy that you are looking for. The agent should hopefully being asking you about your health history, current medications, current build, family history, driving history among other things. The reason that the agent is doing this is not because they are nosy, but rather different companies are different rates classes and ultimately premiums based on those answers. It is critical, that you disclose EVERYTHING accurately to the agent BEFORE a company is selected. More times than I care to remember I have started underwriting with a company only to find out that there was a material known fact that wasn’t disclosed to me and that my premium will go from X to 3X because of that fact. If I know about the fact prior then I can select the company who will best for that situation. For example, sleep apnea with many carriers will get you an automatic standard offer, but there are a select few who will offer their best class with sleep apnea. Knowing this in advance enables the agent to not only select the most competitive company from the start, but is also why you go to an independent agent who has the ability to compare a larger number of carriers so you can obtain the most competitive policy for your situation.

Now that the policy application has been submitted to the insurance company the process becomes a little more automated and sometimes things go exceptionally smooth and then, there are times when it seems that the application will never get approved. So what is the difference between the smooth process versus the bumpy road. Many times, it is getting the medical records from your doctor. With so many doctor’s offices using copying services the process that at times could be done in days now can take up to 30 business days or longer. That being said I can not stress this next point enough so it will be in all caps and if you remember nothing else remember this next sentence. DO NOT GO TO THE DOCTOR WHILE YOUR POLICY IS BEING UNDERWRITTEN!! Ok yes if it is life threatening then by all means go, but if you have a routine colonoscopy scheduled or a routine physical on the calendar and you apply for insurance, I would suggest that you delay that appointment until your policy is issued and in force. Here is an example of why.

Here's a hypothetical situation for you: Let's say I had an older female client who wanted to obtain life insurance for her heirs as opposed to her original stretch IRA idea (see my last blog entry about this). In this hypothetical, she had just been approved by the insurance six months earlier in Dec. of 2019 when we applied for additional coverage in May of 2020. What I thought would be done quickly, turned into a nightmare because of, dare I say it, COVID. Due to her age the insurance company (and almost every other insurance company as well) postponed her application until the COVID numbers improved. Finally in May of 2021 the insurance company says that they ill accept her application. We apply and just as the application is about to get approved, she goes to her doctor who suggests that she go for her annual mammogram since she did not have one in 2020 due to COVID. She schedules the mammogram ASAP and you guessed it, she has a lump in her breast and there went her chance for the long-awaited policy. The bottom line is that I know what is wrong with you now, but once you go to the doctor all bets are off.

Finally understand that the policy rate you are offered may or may not be the same as the one presented to you due to the underwriting offer from the insurance company. This is normally due to one of two reasons. Either something is a surprise in the lab results from your exam or there is something in your medical records that has concerned the underwriter. So hopefully you had heeded the earlier advice and seen an independent agent, who will then see if there are any other companies who will offer a better contract based on this new information. Sometimes that works and other times it doesn’t. So now you have to decide if the extra premium being charged for your new policy is worth the cost or do you attempt to modify the coverage to fit the insurance budget. If you decide to modify your coverage to fit the budget, I would strongly encourage you to modify the duration of the coverage as opposed to the amount of coverage. For instance, instead of getting the 30-year term life insurance policy you get the 20-year policy with the same death benefit, or for disability income you change the benefit period from to age 67 to age 65, etc. The key here is to have the proper amount of coverage and revisit the situation down the road to see if there exists an opportunity then to improve the policy and/or its rate.

I am certain by now that you see why I said that this piece is rather self-serving as it will help me immensely as to best prepare you for the insurance application process. Ultimately, making my job easier and your application go as smooth as possible. This way we both save time and money and that is a win in my book. Until next time, take care and be well.