At least once a week we get a call from a business that is about to lose a loan opportunity, sometimes even a chance to sell or merge the company, but they’ve been declined for life insurance that would be collateral. They are out of time and can’t afford to go through a whole new underwriting process. The bank or the buyer are ready to close and the life insurance needs to be in place at the time of closing.
Even though we are impaired risk specialists and turn declines into approvals as a business model, to do that with traditional life insurance takes a little time. First we have to determine the real meat of the reason that a client was declined and get all of the documentation, labs, tests, etc, that address the impairment. Then we shop it to a large number of life insurance companies so we can get the broadest possible review of the situation. When we find a company that looks likely to approve the life insurance, the process of applying and obtaining medical records is still going to take 3-6 weeks. That doesn’t fit with “ready to close and have to have it now”.
We do have access to business life insurance that from our first discussion to in force can take less than a week, and usually does. It isn’t a long term fix to the issue as it is a one year term policy, but it will satisfy the bank or the buyer requirement for in force life insurance. It buys time and honestly at reasonable rates. It can buy time for the shopping process described above and since it can be renewed in one year increments it can buy time for those times when traditional life insurance company’s underwriting stance is that they won’t approve a policy until a client is X number of years out from an event. A few examples.
An executive client is morbidly obese and is scheduled for gastric bypass surgery and to complicate matters he is also in the middle of a business acquisition that requires him to have $5 million of life insurance. It is just a fact that traditional companies definitely postpone any offer of life insurance until after scheduled surgeries and in the case of gastric bypass, best case they will offer an approval after the surgery and after the weight loss and at least six month’s stability at the new weight. A good rule of thumb would be 1.5 to 2 years after surgery. The business life insurance described above can put a finger in that hole in the dike until you qualify for a longer term of traditional coverage. We helped a urologist who was 4 days from closing on a loan for a clinic that was already being built. He had applied for life insurance and was found to have an elevated PSA. He was diagnosed with prostate cancer just a week before the loan closing. While he would ultimately be eligible for traditional life insurance, in this case he hadn’t even had time to consider his treatment options, let alone complete treatment. We were able to get the coverage in force in four days allowing him to move on without missing a beat. We then replaced that with traditional life insurance when he had completed prostate cancer treatment.
There are just times in business when waiting might be an option, but it will be a costly and destructive option, and there are times when waiting really isn’t an option. So, if someone wants to give you $1 billion for your company and wants you to come up with $100 million in life insurance next week, you’ve got an option. If you have questions or need quotes, call or email us. We can help.
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