Reviewing the process that an insurance broker went through to select a life insurance policy for an individual became an eye-opener.
There are lots of decisions to make and many product options to consider.
The individual's attorney and tax advisor had outlined the client's insurance needs. Now in his 70s, the man needed a policy that's guaranteed to pay $20 million at time of death. He didn't need cash values, nor was he interested in ever selling the policy in the secondary market.
It was refreshing to work on a project in which the client simply wanted to buy life insurance for the death benefit and nothing else. (This is in contrast to the dominant focus today, which is on trying to enhance products in ways that complicate matters, such as adding different crediting rate strategies and a plethora of riders.)
The step-by-step process that emerged should be helpful to anyone facing such requests.
Step 1: The first step in the agent's process was to select the right type of insurance. Considering that one criterion was to obtain the lowest premium to buy a guaranteed death benefit, the obvious choice was a secondary guarantee universal life policy (SGUL). However, the agent considered other products too–e.g., whole life with a level term rider and traditional UL–to make sure the SGUL was the right choice. The WL with level term rider tended to have slightly higher premiums; as for the traditional UL, while it allowed for lower premiums in the early years, the premiums in the later years more than offset them.
Step 2: Next, the broker made sure that the client received the lowest premium rate. A quick check of several rankings of SGUL premium rates produced the initial list of companies. Then the agent discussed the client's medical information with company underwriters to ascertain expected underwriting class. When several insurers responded that the client was either uninsurable or substandard according to their guidelines, this further reduced the field of possible candidates.
