The life insurance process is by law and by practice a confidential transaction. Life insurance agents shouldn’t be telling anyone about who they are working for and life insurance examiners shouldn’t be telling anyone about who they have examined and home office personnel shouldn’t be telling friends or family whose buying life insurance through their company.
Court ordered life insurance is something I’ve talked about in the past on other issues, but confidentiality when it comes to court ordered life insurance or some types of business related life insurance can be absolutely critical. I might not care if the world knows that I’m applying for life insurance for income protection for my family, but what if
1. I’m court ordered to provide life insurance for my ex wife and children after I’ve been abusive and had to go through alcohol and anger management treatment or
2. I’m very well known and I don’t want word leaking out that I have to carry $50 million of life insurance ordered by the court as part of a divorce or
3. I am finally closing in on the end of a business transaction that has required very tight lips and because acquiring a life insurance policy is part of the deal I’m concerned that conventional methods of buying life insurance could provide a potential leak or
4. As part of a lawsuit settlement I have been court ordered to provide a large life insurance policy and just like the rest of the settlement, it has to be done confidentially.
I don’t want to plant the seed that purchasing life insurance the traditional way isn’t confidential and safe, but there are times when it’s important to you and others that as few people know about the transaction as possible. Whether it’s to save face or protect the anonymity of the partners in a huge business deal, if it can be put together and completed in just a few days without being exposed to multiple agents, examiners and home office underwriters and admin people, why take the chance.
Lloyds of London provides that vehicle with Confidential Failure to Survive policies. What it is and isn’t is covered in some Lloyds Q and A’s.
Question #1: Are there minimums or maximums that I can purchase on the insured?
Answer #1: Benefits can range from $100,000 to $20,000,000 or more.
Question #2: Can I purchase coverage on my spouse?
Answer #2: No, the moral risk of insuring a spouse is to high. We are able to insure an
ex-spouse to cover any alimony or child support payments.
Question #3: How long does underwriting take?
Answer #3: Underwriting normally takes 2-3 days.
Question #4: Can I purchase coverage on anyone?
Answer #4: No, the coverage can only be purchased where there is clear financial
justification such as a contract.
It is a way, as long as there is a written agreement, to buy life insurance on an individual who wouldn’t necessarily agree to carry it. Ex husbands that aren’t paying child support and either won’t or aren’t able to purchase life insurance? The ex wife has a written agreement in a divorce decree that would allow her to confidentially buy a policy. A lender could purchase a life insurance policy on the person that owes them money as long as the amount of insurance doesn’t exceed the amount of the loan. If a person provided the start up capital for a new business that involved multiple individuals, because they have all signed the agreement to pay the loan back, a venture capitalist could carry life insurance to make sure they are paid each individual’s portion of the loan upon a death or if a death would cause the whole thing to fall apart, pay the loan in full upon the death of any of the individuals.
There absolutely has to be an insurable interest but this avenue can overcome or pass over any road block that stands between life insurance and its’ legitimate use. It is also closely watched by making it an annually renewable product so that the review of the insurable interest and amount is reviewed every time it comes due. It can be done confidentially because there is no exam required.
Bottom line. I know the idea of insuring someone without their knowledge or consent may seem to fly in the face of prudent underwriting, but carefully considered and monitored by Lloyds, it can be a means to solving a difficult situation. If you have any questions about court ordered life insurance, or want to know if a situation you are involved in meets the threshold for confidential life insurance, call or email me directly. My name is Ed Hinerman. Let’s talk.