You can figure I would take off on a subject like this because of some recent interaction with a life insurance underwriter who obviously has a desk somewhere out in left field, but the truth is there is never any shortage of questions that are completely irrelevant to anything. Some who show a real lack of understanding about a specific subject, like,

1. A question to a United Airlines pilot wanting to know if he was instrument flight rated. All airline pilots are instrument flight rated. The recent crash in San Francisco kind of begs the question about how many pilots with the rating really know how to use it, but any underwriter working on private or commercial pilot life insurance case shouldn’t have to ask that question.

Or an inability to connect, or separate the dots,

2. I’m currently working with a real estate agent who also happens to own a paddle wheel river boat. He is securing a loan to refurbish the boat and they are requiring life insurance as collateral for the business loan. I get this email question from the underwriter just this morning, “How is the paddle wheel boat essential for the real estate company? Please advise.” There is always an enormous temptation to make up some crazy story and send it to them. The paddle wheel boat is essential because he holds prospective clients hostage on it until they sign a real estate contract….

Or asking questions that are really irrelevant.

3. Again, a current client. CEO of a large company who has already purchased one life insurance policy through his irrevocable trust. As his estate size has increased he is seeing the need for additional life insurance which will be owned by the same trust. The application was approved medically but per the underwriter, “before final approval, we understand that the trust will be the beneficiary, however, please advise who the ultimate beneficiary of the trust and how the proceeds (death benefit) will be used?Excuse me? Are you asking my client how the proceeds of his trust will ultimately be used? Don’t you think that’s just a little, no, a lot none of your business?

This client makes enough money to qualify for that amount of life insurance. The fact that he is smart enough to have a trust as beneficiary means he is getting good financial advice. If that’s not enough the life insurance company knows his net worth. Simple math tells them that even with the generous estate tax exemptions currently in place he is going to need money to pay estate taxes. Most rich folks have irrevocable life insurance trusts that are funded with life insurance just for estate tax purposes. But, if his trust says to throw it off the Empire State Building, that is not an underwriting or life insurance company issue.

And the also out of bounds life insurance financial questions,

4. I can see where a personal policy might be large enough to warrant a little more financial scrutiny than the normal income and net worth asked for on most life insurance applications, but when an underwriter comes back and insists, “Need unearned income, and assets and liabilities used for the net worth“, on a replacement of income policy, that isn’t anything they really need. If your net worth is $1 million what business is it for a life insurance underwriter to know how that breaks out? A lot of customers think it’s out of bounds for them to ask about their net worth unless the amount of insurance applied for will be for estate tax purposes. I never push a client, and tell any of them that balk at the question that $ZERO is a perfectly acceptable answer.

And the just too nosy questions about other applications,

5. Every life insurance application asks about other life insurance applied for in the recent past. We have been told (us agents) for years that this question was ostensibly to keep people from buying large numbers of policies, essentially over insuring themselves. Noble enough but the question from the underwriter isn’t how much do you intend to put in force. They now want to know “what companies applied with, how much applied for and the life insurance underwriting outcome of the other applications?” If they are going to underwrite based on their own guidelines with the knowledge that they gather, what business is it of theirs if someone applied with ING and got declined because the underwriter got it wrong? That’s a daily occurrence at ING so why let it sour the milk going in?

Bottom line. This is just the tip of the iceberg of stupid flowing out of life insurance underwriters minds every day. Without agents who will take a stand and call companies on this kind of perverse life insurance interrogation, these questions and the ensuing answers can derail an application. And then you have to explain to another company why that application didn’t work out and do you intend to put it in force even though it was declined….If you have any questions or believe you are the victim of underwriter abuse, call or email me directly. My name is Ed Hinerman. Let’s talk.

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