So here you are. You’ve made up your mind that you need life insurance to protect your family or your business. You’ve found an agent that you are comfortable with, an agent that seems knowledgeable about different types and reasons for life insurance, maybe seems to have a grasp of some health issue that is going to play into the equation, or sounds like they may be on your side rather than just trying to rack up another sale.

You get to that point in the conversation where they ask how much life insurance you are looking for and you really haven’t nailed that down. The truth is that, especially with health impairments, the amount of life insurance you ultimately put in force may be driven by budget and budget is should be a big player in your decision. So you say something like, “Maybe $500,000, although it would be nice to have $1,000,000”. So the agent advises applying for the $1 million. At this point maybe some bells go off and red flags wave and you wonder if this agent/salesman is trying to get you to commit to an extended cab pickup with dual rear tires instead of the plain work truck you came in looking for. Does this agent have your goals in mind or the size of the sale in mind?

The truth is there is some valuable logic to applying for the upper limit of what you think you might need or might want if the price turns out right. Let’s flip that scenario around and say that you (thinking you are being over sold) tell the agent to apply for $500,000 so you complete an application, go through the exam and underwriting and it gets approved at the rate your agent said it should. This is good news because it means you can afford the $1 million. So you ask the agent if you can get it changed to $1 million. Standard operating procedure if someone asks for an increase on approval is for the file to go back to the underwriter for review. It almost never changes anything, but there can be some pitfalls.

There is a complex (not really that complex) chart that agents and examiners use to determine what type of exam they need for age and amount combinations. For instance this case for $500,000 might have called for a paramedical exam with blood and urine specimens and that is what was completed. At $1 million it might add an ekg which means that to increase it to $1 million you have to have an examiner come out and administer an ekg. That delays putting coverage in force. It could be that on second review they see something that needs more documentation in your medical records, maybe a test that was recommended but not completed, so again there is a delay. It could be that the reason you didn’t do the test is that your insurance didn’t cover it and it is expensive so you are stuck completing the expensive test or being declined for insurance.

Bottom line. You aren’t bound to accept the amount you apply for so I always recommend applying for the upper end of what you might want and at approval, if reality is that you are more comfortable downsizing, an email goes out and we have them issue exactly what you want. If you have questions or need help determining how much life insurance works for you, call or email me directly. My name is Ed Hinerman. Let’s talk.

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