Applying for life, disability or long-term-care insurance can be a daunting task. You are being asked to tell someone about your family health history, your personal medical history and the details of your overall financial condition. The process can turn into a game when underwriters become suspicious when agents and applicants do a poor job of completing the application.
Applying for life, disability or long-term-care insurance can be a daunting task. You are being asked to tell someone about your family health history, your personal medical history and the details of your overall financial condition.
The process can turn into a game when underwriters become suspicious when agents and applicants do a poor job of completing the application. For example, who do you know that has income, investments and weight that are all represented by round numbers? It is virtually impossible for these numerically driven questions to all be round numbers.
The game gets tougher when applicants fail to disclose certain medical events, such as a visit to a specialist or a serious medical condition. I once had a prospect who failed to disclose a heart attack. He later stated that it was just a small one, and didn't think that it mattered.
That little heart attack may not matter much, assuming there have been no further incidences and the applicant is under regular medical care with a clean bill of health. But from the underwriter's perspective, you have opened the game with a feeling of mistrust, so the underwriting turns into a higher-profile investigation into medical records to see what else you may not have disclosed. This is exactly where you do not want to go.
Insurers use a service called the medical information bureau. This service provides fraud detection data, risk management tools and assistance with actuarial analysis for insurers. It also stores information about virtually every health issue you've had if it was paid for by your health insurance. The bottom line: Do not omit any medical information regardless of how immaterial that you feel it is.
In many cases, a well-written cover letter from the agent is also recommended. In the letter, an agent can talk about the relationship with the applicant, how the decision to apply was determined and some sort of back-up for the amount of insurance requested. This subtle step in the process can give you an edge if the underwriter understands more than the factual information provided on the application. In this cover letter, you can also discuss certain medical issues or family history that may be of concern to the underwriter.
Procrastination in applying for needed coverage is a major issue for many. But there is rarely any benefit to waiting: As we all know, bad stuff can happen at any time, rendering any one of us uninsurable.
John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at firstname.lastname@example.org.