It is always disheartening when we receive an application for life insurance submitted as a preferred rate classification and, after gathering the appropriate medical information, we find the client has health risks that will reduce their life expectancy. The case may end up coming back as a Table 2 or Table 4, and once the client is presented with the rates they do not take the coverage at a time when they need it most!
They do not take the coverage because of cost or pride, but the worst part is they lose sight of the reason they went through the process in the first place. This was to protect their loved ones in case they are to pass unexpectedly, to which having a health impairment of some kind could contribute.
Having a rated case is not a reason to give up. As an advisor, you should be pleased to be able to provide your client with coverage. Attitude is important. To be effective in the delivery of a rated policy, it is extremely important that you have a positive attitude regarding the rate. The insurance carrier’s underwriter goes into great detail to assess risk on an individual basis and assigns a specific rate, so you should be confident that the rate given to your client is fair and equitable.
Here are some facts to take into consideration to help you be successful in placing a rated policy. Basically there are three things that can happen:
- Your client could die prematurely. If that happens, the family will be infinitely better off and will certainly not ask if the case was rated.
- Your client’s condition could grow worse. If they have a questionable health condition, they could be in their best health right now. As they get older and their health deteriorates, life insurance will become more expensive or they may become an unacceptable risk to the insurance carriers.
- Your client’s condition could improve. Perhaps they were able to improve their condition by having surgery or changes in health habits. If that happens, your client could request a reduction in premium. The carrier would happily review the client’s improved medical history and, perhaps, lower the rates.
So what should you do when you are in this situation? First assure the client that you have gone out to several carriers to make sure you have the best possible cost (we always do this on a rated case). Let them know they do have the opportunity to protect the ones they love and, with their health history, how important it is that they do it now before the opportunity to purchase life insurance is no longer available to them.
If cost is still an issue, talk about looking at other products or face amounts. Let’s look at an example. Joe is a 55 year old wanting $500,000 of 20 year level term coverage. At a preferred rate classification, the premium would be $135.33 monthly. Unfortunately, Joe was rated a table 2 because of his undisclosed insulin dependent diabetes, which takes his rate to $295.31. Yikes! But Joe has options, so let’s look at them:
Option 1
250,000 10 year level term – $91.87
250,000 20 year level term – $152.59
Total cost – 244.46
Option 2
500,000 15 year level term – $226.98
Option 3
200,000 20 year term – $141.34
These are just of few examples of what Joe could do to help control the cost of the benefit. You must also help Joe not lose sight of what the insurance is for in the first place—he wants to make sure his family would be taken care of if he died unexpectedly—and how important that is.
